Policy

The 'Heartbreak’ of Telecom Mergers

6/09/2006 8:00 PM Eastern

Last Monday was the cutoff for filing comments to the Federal Communications Commission regarding AT&T Inc.’s proposed acquisition of BellSouth Corp.

Among the 11,000-plus comments were many that simply forwarded a two-page form letter opposing the merger or at least urging six conditions on it, including ensuring access to competitive Internet-service providers, no discrimination against Web-content providers, broadband access sold separately from video and phone service and continued support for local public-access programming.

The oldest comment on the FCC’s Web site, though, was no form note. Posted March 13, the three-paragraph letter expressed “total opposition” to the BellSouth sale and concluded, “This merger, if allowed, will not encourage local phone-service competition, it will deal it a disastrously heavy blow.”

The writer was R. Adam Kane, president of Aspire Telecom Inc., a six-year-old Woodfin, N.C., competitive local-exchange carrier (CLEC). Aspire resells telephone lines leased from BellSouth, Verizon Communications Inc. and Sprint Corp. Most of its customers are “credit-disadvantaged” individuals who buy pre-paid landline local and long-distance phone service from Aspire that they mostly couldn’t buy directly from BellSouth, Verizon or Sprint, according to Kane.

Kane told me last week his biggest competition comes from prepaid cell phones, a service he can’t match but which, he said, costs users two to three times as much as what Aspire sells. BellSouth and the other local exchange carriers are Aspire suppliers more than rivals — but the bigger those suppliers get, the less interested they are in Aspire’s business.

Kane has firsthand experience with what happens after regional phone companies become “megopolies,” to quote him.

He used to deal with Carolina Telephone (now part of Sprint) and GTE (now Verizon). I asked him how different it was dealing with Verizon than GTE.

“Before the mergers, I could make a telephone call and talk to a human being,” he said. “I had an account manager person. Post-merger, the whole division that was supporting CLECs became a Web site. And a convoluted, unbelievably complex Web site at that. Can I get answers? No. The best that I can get is a hint to where in the Web encyclopedia that I could look. That’s the best that I can get from Verizon.”

Mark Marchand, director of media relations for network and technology at Verizon, said, in response, that his company has “whole call centers” that serve CLECs and other wholesale customers, a $10 billion business line. “It’s a thriving, important business for us and we take care of our customers. The Web site is one part of it, because some customers want to do business with us on the Web 24-7.”

Lawyers and consumer-group officials, part of a group opposed to the merger, said last week there might be enough anti-consolidation public sentiment to persuade the FCC to impose some conditions on this merger. At minimum, AT&T-BellSouth is “likely to be a litigated merger, more so than the ones last year,” according to Jonathan Rubin, senior research fellow at the American Antitrust Institute. Rubin and others who discussed their views on a press call said the FCC might force BellSouth to sell off licenses to use spectrum in the 2.5-GHz band that could be used for wireless broadband services. They also spoke of requiring an enlarged AT&T to continue providing access to their networks to CLECs, such as Aspire.

Kane can cite statistics about the declining number of CLECs (down 80% over the past five years, the trade journals say). He said the survival of companies like Aspire might well lie in going around the phone companies and partnering up with voice over Internet protocol providers. He wouldn’t say who he’s talking to. VoIP service remains unregulated, the feature possibilities (such as e-mail tie-ins) are interesting and providers are more interested in selling capacity wholesale than the “megopoly” carriers are, he said.

“The real heartbreak is that, in order to be a candidate for these alternate products, you have to have a high-speed Internet connection,” he said. “So that helps everyone but the lowest-tier customers, and they have been the heart of my business.”

Kane didn’t say all that in his letter to the FCC. But that’s the story behind the story of the first of the 11,078 comments filed concerning AT&T and BellSouth.

At last count.

November

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