What AT&T Breakup?
The telecom industry sure moves in strange and mysterious ways in light of the Wall St. Journal report that AT&T will unveil the purchase of BellSouth for $65-billion. It was only 22 years ago, that the old AT&T was split into seven “Baby Bells” in wake of the Department of Justice's anti-trust suit. You can't help but ask what the AT&T break-up exercise was really all about now that Humpty Dumpty has been put back together again. If this mega-deal - a foregone conclusion says Om Malik - is completed, you'll essentially have AT&T and Verizon as the last guys standing what with AT&T/SBC having snapped up Ameritech, Southwest Bell, Pacific Telesis Group and BellSouth, while Verizon acquired Bell Atlantic and NYNEX. (Qwest bought U.S. West). So what does it mean from a competitive standpoint? It certainly sets the stage for an even more consolidation in the industry as Qwest could become the next (and last) big carrier to fall. It will also create an even more fierce carrier-cable war as they wage the “Battle of the Bundle” for consumers. Perhaps it will prompt some consolidation in the cable industry if some cablecos start to believe they need to become even bigger to compete effectively with the carriers. The deal will also have an impact on the already-fragile telecom equipment market as yet another large customer gets taken out of the picture. And another angle to the deal is it will allow AT&T CEO Ed Whitacre and BellSouth CFO William Smith to continue their crusade against Net Neutrality in an even more united way. At the end of the day, the question is whether the deal is good for the U.S. telecom sector. Will it allow carriers (well, at least Verizon and AT&T) to become more efficient and competitive with cable rivals? Will this be good for residential and business consumers? Only time will tell.
From a Canadian perspective, telecom consolidation has also been in progress with several carriers (Sprint Canada, GT Telecom, 360 Networks) acquired in recent years. The question is whether there's an indepedent future for small carriers such as Manitoba Telecom Services and SaskTel? Will the market eventually be BCE, Telus and a handful of small, rural exchanges?
Update: IP Democracy highlights the combined access and DSL lines of AT&T and BellSouth, and wonders if this is what the federal government had in mind with the 1996 Telecom Act.
March 6th, 2006 at 10:41 am
If you look at MTS' Feb. 28 “re-alignment”, they are now structured exactly like TELUS. Blouin will likely want to stick it to the very people who fired him from Bell and see if he can find a way to strengthen TELUS with MTS' weak assets. Bell and Aliant will consolidate in some greater fashion. The sooner someone takes SaskTel out, the better the national industry will be. The Canadian market will be dominated by Bell, Rogers and TELUS (notice no mention of Shaw).
The US will have 3 large integrated RBOCs (Verizon, AT&T and Sprint (who will buy Qwest)) and a couple dominant Cablecos (TW, Comcast/Cox - who will buy T-Mobile for wireless))
When the artificial border between the US and Canada enables true North American integration will be the next spate of growth for the US carriers.
This, of course, will be followed by a new round of small, non-facilities-based start ups who try to grow a customer base in order to be acquired in the subsequent round of acquisitions.
Here's the wildcard thought of the day. Canada could use a second national GSM cellular provider to give Rogers a run for their money. Verizon buys out Vodafone's stake in the US. They use that money to invest in TELUS. TELUS runs both networks for a short period then joins the rest of the globe on GSM.