SBC Communications Inc. chairman and CEO Edward Whitacre said Wednesday that his company is combining with AT&T Corp. to fend off competition from cable companies.
“The cable companies we would view as our primary competitor in the future. They are offering this broadband path, if you would, which can handle voice and data and voice over IP [Internet protocol],” Whitacre said. “Cable companies will offer phone service to two-thirds of American homes this year.”
Whitacre appeared with AT&T chairman and CEO David Dorman before the House Energy and Commerce Committee to rally support for the $16 billion deal.
Some lawmakers applauded the merger, saying that it would enhance competition in a rapidly converging market where voice, video and data are offered on the same platform.
“I believe the companies before us today are creating such players and that U.S. economic growth and consumers will benefit as a result,” chairman Rep. Joe Barton (R-Texas) said.
The panel also heard testimony from the CEOs involved in two other telecommunications mergers -- Nextel Communications Corp.’s $35 billion deal with Sprint Corp. and Verizon Communications’ $7 billion deal to acquire MCI Inc.
Because AT&T is pulling out of the local-phone business, the merger won’t reduce competition in that market, Whitacre said.
But Rep. Edward Markey (D-Mass.) had doubts, saying that the two Baby Bell mergers were made possible by new Federal Communications Commission rules that raised the prices the Bells could charge to rent their facilities to competitors.
“It was not technological change that brought about the Bell-company mergers before us today. Rather, it was an unwise change in government policy by the [FCC] which led to these mergers,” Markey said.
Markey asked whether the SBC-AT&T merger will lead to higher residential-phone rates.
Whitacre said it wouldn’t, but “I can’t pledge that forever.”
Asked the same question, Verizon chairman and CEO Ivan Seidenberg said the trend has been that technology and competition were driving prices down. But he added that the rate issue was not solely a matter for Verizon.
“If you want to ask that question, then we need the cable companies at the same table. We need everybody who is providing these services,” Seidenberg said.