Hold Them to Their Deals, FCC
Three years ago, Congress passed legislation to spur competition in the local phone business and, through deregulation, stimulate the development of new telecom technologies. That law set off a merger frenzy among telecommunications companies. People are having a hard time making sense of the result, and some consumer groups are furious about government approval of the mega-mergers. On balance, however, the news isn’t all that bad. If regulators enforce the deals they have made with the industry, consumers stand to benefit.
The latest irritant was a pair of Federal Communications Commission decisions this month, approving the merger of two regional phone companies, SBC Communications Inc. and Ameritech Corp., and easing restrictions on cable ownership. This will make it easier for AT&T; in its stated intent to acquire MediaOne and become a powerhouse not only in the phone business but in cable as well.
As a result of the mergers, the number of regional phone companies, the Baby Bells, has shrunk from eight to four. But that did not affect competition. The Bells operate in separate markets and have never competed against each other. Under the merger terms, they will have to do so by allowing others to enter their local phone business and themselves offering phone services outside their regions. Moreover, they are prohibited from entering the long-distance phone market until they meet a set of stringent requirements. Consumers are right, however, in complaining that the FCC isn’t aggressive enough in forcing the Baby Bells to meet the conditions of the mergers.
The Oct. 8 cable ruling, which could allow one company to own cable serving nearly 37% of American subscribers, also poses legitimate questions about competition. In effect, the FCC has accepted AT&T;’s argument that, in order to be able to enter into competition with local phone and Internet service providers, it must own a lion’s share of cable subscriptions. True, investments in new technology to provide all telecom services via cable are high, but so is the earning potential. Concentrating cable ownership in a few hands limits the distribution outlets for video programmers and exacerbates the problem of access to cable by competing companies.
In all recent mergers, the FCC has accepted the companies’ argument that they need to get big to be able to offer a bundle of telecom services--including phone, Internet, video and wireless--through one connection. The FCC envisions a half-dozen super-carriers competing with one another, offering multiple services through different delivery “pipelines” such as telephone wires, cable, microwave, satellite or even railroad communication lines.
One-stop shopping for telecom services is something consumers say they want. The challenge for the FCC and the antitrust authorities is to make sure the convergence process does indeed lead to greater competition. They must step up the enforcement of the merger conditions and rigorously enforce the rules of competition.
