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One Less Bell to Answer

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The problem with unfettered capitalism is that it puts itself out of business.

Big fish eat little fish, until there's only one fish. And that's called monopoly, which is not only the opposite of competition -- the "invisible hand" of a truly free marketplace, keeping companies honest and innovative -- but also a dire circumstance for consumers and workers (as if workers weren't consumers as well): If there is only one store selling and hiring, then they can set prices as high and wages as low as they darn well please.

That "take it or leave it" situation might be acceptable for luxury items or frivolous wants; but when it comes to providing services vital to the rest of the economy, a monopoly amounts to a stranglehold on the nation. Even in the most innocent of scenarios, a lack of competition flirts with extortion.

And no sector of the economy is more vital to our Information Age than the communications industry. The announcement this weekend that AT&T Corp. has agreed to buy BellSouth Corp. is, thus, not only newsworthy but also historic, in terms not only of its sheer size (At $67 billion it is one of the largest deals ever) but also of its social impact: If the merger is approved by the shareholders -- those of BellSouth are being offered a premium price by AT&T -- and regulators -- and the Bush Administration (very much like the Clinton Administration) never met a trust it wanted to bust -- then this union of the nation's largest and third-largest phone companies would reduce the seven regional "Baby Bells," which the government created in 1984 by carving up the original AT&T monopoly, to just three telecom giants: the new AT&T (incorporating BellSouth as well as the current AT&T, itself the product of SBC just recently acquiring the previous AT&T), Verizon Communications (which recently bought MCI), and -- smallest by far -- Qwest (in the west, probably now targeted for acquisition by Verizon, trying to consolidate its uneasy second-place position).

The final word in this alphabet soup is that just two companies -- the new AT&T and Verizon, a "duopoly" -- would control almost all of the local residential wireline service, most of the long-distance telephone service, most of the cellphone and other wireless service, and most of the DSL wires -- as used by competitors to carry Internet phone calls and broadband TV -- across the USA. That's a lot of power in a very few hands ... with some 10,000 fewer pairs of hands actually doing the telephone work, as the consolidation of companies would result in the "cost efficiencies" of massive layoffs.

But the telecom environment is far more complex than in the days of the old AT&T monopoly, as any web-surfing, music-streaming, video-downloading, Voice-over-Internet-Protocol-calling teenager could testify.

We find ourselves caught not just in some big-fish-eats-small-fish food chain but in an elaborate food web, if you will, of intricately competing and supporting relationships, which if thrown out of balance can threaten the economic existence of any or all concerned. Consider the interests involved:

Major (Wireline) Telephone Companies

The major telephone companies may be stifling competition from smaller telecom companies, but they are facing stiff competition from cable companies. The telecoms claim that this will stimulate innovation and keep prices low; although it can be argued that if such benefits do indeed accrue, it will be in spite of, not because of, the monopolization now taking place within the telecom industry itself.

It is also worth noting that merged companies often succumb to "unrealized synergies": failures to realize proposed efficiencies and other goals because of problems encountered when trying to integrate two different corporate cultures and structures, in an ever-changing market.

Bundling phone, Internet, and video services, telephone companies are trying to become "one-stop shops" for all our communications needs.

Because such services as live video feeds are clearer if their bits of digital information are transmitted rapidly and together, the telephone companies want to charge Internet content providers (See below) a premium for delivering videos with "routing priority" over generally less time-sensitive transmissions, such as e-mail. The telecoms claim that they are simply providing consumers with additional choices and recouping some of the billions of dollars they have invested in their networks, as for fiber-optic lines, even as they have cut the price of their broadband service, in competition with cable providers. As John Chambers, CEO of Cisco, recently told analysts, "very soon, all TV will be broadcast over the Internet."

The big telephone companies are lobbying Congress to rewrite the landmark Telecommunications Art of 1996, which deregulated the communications industry, allowing telephone and cable companies to directly compete. In particular, they want to make it easier to provide television service without having to negotiate a new agreement with each city they wish to serve (An indirect but inevitable consequence of this would undoubtedly be the end of funding for uniquely, locally valuable community access television).

Wireless Telephone Companies

Owned jointly by AT&T and BellSouth -- and, thus, having helped to pull the two corporations together -- Cingular, the largest cellphone company in the country, competes directly with Verizon Wireless, the second-largest (jointly owned by Verizon and a British telecom), and Sprint, the third-largest wireless company, which recently bought Nextel; and wireless telephone companies in general compete at least indirectly with wireline telephone companies (See also Cable and Satellite Companies, below).

To support the new technology of high-speed wireless communications, and to thus make wireless providers more competitive, there are calls for more government auctions of unused portions of the wireless spectrum and for the release of other frequencies for unlicensed utilization.

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Doug Drenkow is a writer, editor, webmaster, and producer. A fourth-generation Democrat, Doug has produced the political talk shows "Barry Gordon From Left Field," on radio, and "NewsRap with Barry Gordon," on cable TV, featuring top (more...)

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