Subject: GTE/BA merger
James Love (love@cptech.org)
Date: Wed, 29 Jul 1998 10:59:48 -0400
Message-Id: <35BF38E4.80DAD92A@cptech.org> Date: Wed, 29 Jul 1998 10:59:48 -0400 From: James Love <love@cptech.org> To: Roundtable <roundtable@cni.org> Subject: GTE/BA merger
Here are a few comments on why the mergers of local monopolies
GTE/BA/Nynex and SBC/PacBell/Ameritech mergers are bad ideas.
1. When there is more concentration of economic power, it leads to
undue influence on the regulatory process. One aspect of this is the
geographic footprint of the company. Boeing was a powerful entity in
Congress because it had plants in so many different states. One reason
to break AT&T up in so many pieces was to avoid a similar problem. At
one point Bell Atlantic had offices in six states plus the District of
Columbia. After the merger with NyNex, Bell Atlantic had a presence in
13 states plus Washington, DC. If GTE is added, it will have a presence
in most states in the U.S. This will enhance Bell Atlantic's power in
any major regulatory dispute that concerns Congress and the FCC.
2. The increased economic concentration deters other profit making
companies from appearing and funding opposition in regulatory
proceedings. In the various ISDN rate making proceedings, Intel
intervened in PacBell, US West and SBC proceedings, but made a corporate
decision not to intervene in Bell Atlantic proceedings, for business
reasons. Compaq also did not intervene in the Bell Atlantic region,
because of interlocking board problems. 3Com was interested in the
proceedings, but was deterred because it wanted to sell networking
equipment to the LECs. GTE did intervene very aggressively in the
MCI/Worldcom merger, particularly in the Internet backbone issue, and
GTE's BBN networking people at least informally, have been very helpful
for those looking to get better interconnect rulings for new data
services (positions that Bell Atlantic opposes in a major way). As the
industry becomes even more concentrated, it is more and more difficult
to find firms who will jump in a promote positions which are aligned
with consumer interests.
3. If you have several local monopoly companies, you see some
innovation, and you have the benefits of benchmarks. Hey, look what
they did over there! When you have a monopoly in your back yard, that's
an important issue, knowing what could be done differently. In the ISDN
proceedings we benefited from the fact that Ameritech had filed several
flat rate ISDN tariffs below $35 per month, that PacBell's off peak rate
was pretty good, and that Bell South had a $30 flat rate Tennessee
tariff. Not only were the rates lower, but there was the opportunity to
find out what the experience was in terms of usage, etc. With only a
couple of big players, you have little or nothing to compare. The
disappearance of innovations in strategies, choices of technology,
pricing, etc. are harmful in a world where you have a monopoly in the
local market.
4. Fred Goldstein of BBN has been CPT's expert witness in various ISDN
tariff proceedings involving Bell Atlantic. First BBN was purchased by
GTE, making him an employee of a company that owned a local exchange
telephone service. Now BA wants to buy GTE. BBN and its staff can
hardly be a thorn in the side the ILECs when it is owned by Bell
Atlantic.
5. In the absence of the merger, Bell Atlantic and GTE were competitors
in data services, including internet access, and in the future, probably
long distance service. This eliminates that current and future
competition.
Jamie
-- James Love Consumer Project on Technology P.O. Box 19367, Washington, DC 20036 love@cptech.org, http://www.cptech.org/ 202.387.8030, fax 202.234.5176
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