Merger Bell Rings, but Not for Customers
The proposed merger between two giant phone companies - SBC and Ameritech - means that America's experiment at providing a choice in local phone service has been put on hold.
Most consumers are still stuck with the same local phone company they always had, despite sweeping deregulation. And these local carriers are gobbling up potential competitors.
The carriers promise that by getting bigger now, they'll compete more effectively in the future. But critics charge that the legislation designed to spark competition may reduce it.
"We will have three or four companies, but each with a dominant virtual fortress in a region of the country," says Gene Kimmelman, co-director of Consumers Union's office in Washington.
One point of agreement: Two years into legislation that blurred the lines between local and long-distance companies, consumers see little change.
"I haven't been approached by anybody to change our local [service]," says Francoise Gibson of Bolton, Mass.
She knows that if her long-distance bills are too high, she can look elsewhere. "I don't pay much attention to the local stuff," she says. "I haven't got anybody to compare it to."
One likely competitor would have been Bell Atlantic, which operates to the south. But instead of entering Massachusetts as a competitor, Bell Atlantic last year gobbled up Mrs. Gibson's local carrier, Nynex.
Now, SBC Communications Inc., based in San Antonio, proposes to do the same with Chicago-based Ameritech Corp. If the $62 billion deal announced last week goes through, the new company (to be called SBC) would control phone operations in 13 states, spanning the nation's midsection from Canada to Mexico, plus California, Nevada, and Connecticut.
SBC would become America's largest local phone company, connecting a third of American homes.
That's a first step, some say, toward the return of the old AT&T monopoly before its 1984 break up.
"It's going the wrong direction," says Mike Dandino, senior public counsel for Missouri's Office of Public Counsel, which represents consumers in utility matters. Congress shouldn't concentrate on deregulation, he adds. "It should be demonopolization."
Here in Missouri, for example, 61 companies have filed with the state to offer local phone service, and 16 have won approval. But newcomers have grabbed only about 20,000 out of 3.2 million customers statewide (most of them SBC customers), state officials say.
Ameritech had filed to compete against SBC in St. Louis. Now, of course, that plan is on hold.
SBC and Ameritech claim their merger will bring the scope needed to compete in other markets. "It will transform us from a regional company to a new kind of company ... to focus on 'national-local' and global markets," Edward Whitacre Jr., chief executive of SBC, said in a statement.
The company says it will expand to the top 30 markets outside its region, competing with local carriers in New York, Philadelphia, Boston, Washington, and Miami-Ft. Lauderdale.
Many analysts say the industry must continue consolidating until global telephone companies emerge.
"There'll be three to seven of those around the world," says Herschel Shosteck, president of a telecommunications research firm in Wheaton, Md., then "down to three to five."
The SBC merger must still pass muster with federal and state regulators, and William Kennard, chairman of the Federal Communications Commission, says the companies "must show us that this merger will serve the public interest and enhance competition."
"Consumers are kind of at the end of the line on this one," says Gary Arlen, president of Arlen Communications in Bethesda, Md. "They're being asked to wait and be patient for a lot of services that they haven't seen."
Under deregulation, the old local monopolies are merging, not competing with one another.