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BellSouth AT&T Merger Alarms Consumer Groups, and Prepaid Providers
By Gene Retske |
Consumer groups are lining up against the proposed acquisition of BellSouth by at&t (formerly SBC, see sidebar). If approved, the combined company would become the largest telecommunications operator in the world and would include Cingular Wireless LLC, the nation’s largest wireless operator. Consumer groups, including Consumers Union and the Consumer Federation of America, are fearful that the merger could result in decreased competition and ultimately, higher prices for local, long-distance and cell phone services.
“Congress and federal regulators need to look carefully at the lifeless ‘competition’ their flawed policies have created and reject this merger,” said Gene Kimmelman, vice president for federal and international affairs for Consumers Union. “The government has been deceived before by promises that somehow more concentration would produce more choices and competition, when the result has been just the opposite. It shouldn’t be fooled again.”
Consumers Union and the Consumer Federation of America are asking their members to contact the Federal Communications Commission, which must approve the acquisition, and to petition their congressmen to try to block the merger.
Consumer Federation of America joined Consumers Union in calling on the Department of Justice to reject the merger.
“Telecommunications has now gone from a regulated monopoly to an unregulated duopoly with just two major players,” said Mark Cooper, director of consumer research for CFA. “Consumers know that is not enough competition to lower their prices and drive innovation, especially when the two companies providing Internet access have a long history of anti-competitive, anti-consumer behavior.”
Kimmelman said that the merger would lead to “higher local, long-distance and cell phone prices for consumers across the country.” At the very least, Kimmelman said, federal regulators should “require the merging companies to sell their Cingular wireless business to create more opportunities for competition between wireless and wireline services.”
Impact on Prepaid Services
The merger has the potential to impact prepaid services as well. AT&T continues to be one of the largest providers of prepaid calling card services and Cingular is one of the biggest providers of service to MVNOs. With the merger, at&t’s market footprint will increase greatly. SBC and BellSouth already offer prepaid calling cards, and, over time, it is likely that they will shift towards a more exclusive use of AT&T calling cards.
AT&T has made extensive use of resellers to distribute its prepaid calling cards, but with the greater presence the merger creates, it could decide to eliminate some of the intermediate layers and use its marketing power to sell products directly. AT&T has significant national distribution already; Wal-Mart and Sam’s Club sell AT&T calling cards in all their retail locations.
Cingular, which is not only the nation’s largest cellular network operator, is also the biggest provider of network services to MVNOs. This will give at&t considerable control over the provisioning of prepaid mobile services. Most carriers, like Cingular, view resellers, MVNOs, with a jaundice eye anyway, seeing them as more of a potential competitor than an alternate channel.
The at&t/BellSouth merger makes Cingular a wholly owned subsidiary, not a joint venture, as it is currently operated. This would give at&t the ability to closely control MVNO rollout, even shut it off without any outside consultation needed. Should at&t decide that MVNOs are more of a threat than an opportunity, it could throttle MVNO rollout at any time.
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