Subject: GTE + Bell Atlantic: "Dinosaurs Mating?"
Curt Priest (cpriest@juno.com)
Date: Mon, 10 Aug 1998 16:05:04 EDT
To: ROUNDTABLE@CNI.ORG Subject: GTE + Bell Atlantic: "Dinosaurs Mating?" Message-Id: <19980910.160412.7799.2.cpriest@juno.com> From: cpriest@juno.com (Curt Priest) Date: Mon, 10 Aug 1998 16:05:04 EDT
GTE + Bell Atlantic: "Dinosaurs Mating?"
Precis of "Critical Time" Talk Show by WMNF, Tampa FL
Mabilii Shelby with Dr. W. Curtiss Priest, CITS
Saturday, August 9th, 1998, 6:00 PM
While one immediately thinks of GTE as a long lines carrier, GTE
sold Sprint and they look remarkably like another "Baby Bell." If one
examines the percentage of revenues from various operations ("Baby
Bell's game plan calls for going short, long: Bell Atlantic desire to
offer more than local service drives deal," Boston Globe, July 28, 1998,
p. D1), one immediately notes that "local services" is 29% of revenues
(compared to 43% for Bell Atlantic). So, one major reason for this
acquisition is for Bell Atlantic to expand its geographical coverage
to places such as Dallas (Texas, 2.3 million lines), and California
(5 million lines).
It is true, however, that other operations distinguish GTE over
Bell Atlantic in such areas as video services, wireless, technology &
systems (mainly government sales), and GTE Airfone. And, with GTE's
recent acquisition of BBN (Cambridge, MA -- "inventors" of the
Internet), GTE stands out, as one commentator on the Internet pointed
out, as more technologically advanced than Bell Atlantic.
In addition to expanded geographical territory and better
technology, Bell Atlantic adds one other important dimension to their
portfolio -- GTE's foreign country experience. For example GTE is
a major provider in the Dominican Republic and in Puerto Rico the
State announced a GTE acquisition of a controlling stake in their
government-owned telephone company (WSJ, July 21, 1998, p. B7)
While one Cambridge Internet commentator (in response to CITS
questions on the net) indicated that the Communications Workers of
America were generally pleased with the NYNEX/Bell Atlantic merger in
terms of jobs, a graduate student at Princeton University suggested
that the impact on jobs, over the long run, may be negative as GTE's
experience in hiring workers in, say, the Dominican Republic, might
substitute for high wage workers in the U.S.
There was general agreement among several Internet commentators
(and several newspaper accounts) that a major reason for the merger was
for increased operating efficiency. And these efficiencies will come
with the elimination of jobs among middle management and central office
planning workers.
As for competition, it is not clear that this merger will increase
competition, and, if anything, bring us closer to the monopoly Judge
Greene attempted to eliminate by the divestiture of AT&T. The markets
are basically saying -- "perhaps it was a mistake to break AT&T into
eight "Baby Bells" and the various Baby Bells are scurrying to see who
can buy whom? The merger of SBC and Ameritech will create a firm of $62
billion in total revenues, and the merger of Bell Atlantic and GTE will
produce the second largest one at $55 million ("Bell Atlantic Said to
Agree to Buy GTE for $52 Billion: Dial M for Merger," New York Times,
July 28, 1998, p. C6)
But believers such as Bill Tauzin, House Telecom Subcommittee
Chairman, think these mergers are leading to greater competition as
Tauzin said "This only points out what I have been saying all along: If
the FCC won't allow the regional Bell companies into the long distance
market, they are going to merge their way into it instead." Meanwhile,
Jon Van of the Chicago Tribune (July 27, 1998) quotes Jim Freeze, a
senior analyst with Forrester Research (Cambridge, MA), about whether
these telecom giants are gearing up for competition or just trying to
get big enough so no one can compete with them, said, "The answer is,
nobody knows. There's a basic fallacy in the law. These mergers do
nothing to facilitate competition, and nothing will, until Congress
address this fallacy. The monopolies must be split into a regulated
wholesale business and unregulated retail business to make competition
occur."
And Mark Cooper, spokesman for the Consumer Federation of America
said, "There comes a point where too big is bad, and this is it." And he
suggests that local phone mergers are creating "regional giants that
ultimately control Internet access as well as phone service."
(Washington Post, July 27, 1998, p. A1, A8)
Finally, as for the significance of the merger for innovations,
the general opinion of commentators on the Internet was negative.
One NY telecom lawyer said, "You won't see innovation in any fundamental
sense from either of these firms, either with or without the merger.
In that sense the merger is another example of dinosaurs mating (e-mail
on CYBERTELECOM-L, July 30, 1998) And a Tampa-based industry consultant
said "Telephone companies seem to think innovation is changing the
starting time of evening rates or other innovations in billing.
Innovations in service offerings that impact bandwidth or the number of
simultaneous transactions per pair seem infrequent and remote (e-mail
on CYBER-SOC, July 30, 1998).
In summary, the distinction made by Freeze between the "wholesale
business" (of moving bits and bytes) and the "retail business"
(providing services) is a useful way to understand what is happening.
What is unclear is whether advanced telecom services provided by the
Telcos can be separated from the day-to-day operation of providing
lines and basic services such as line repair.
In this spirit, the current interest of the FCC in Section 706
of the Telecom Act is timely, as this addresses these very issues,
distinguishing basic services from "advanced telecommunications
services."
W. Curtiss Priest, Director, CITS
Center for Information, Technology & Society
466 Pleasant St., Melrose, MA 02176
Voice: 781-662-4044 BMSLIB@MITVMA.MIT.EDU
Fax: 781-662-6882 WWW: http://www.eff.org/pub/Groups/CITS/
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