updated 3/6/2006 3:51:08 PM ET 2006-03-06T20:51:08

AT&T Inc.’s planned acquisition of BellSouth Corp. comes at a complex time in telecommunications. The traditional telephone business is under assualt by cellular and Internet-based calling, and the distinction between local and long-distance phone service is fading. In response, phone companies are investing heavily to start selling subscription TV and bolster their wireless and Internet services.

A summary of what the AT&T-BellSouth deal could mean in some key product areas:

Local phone service
The rationale for SBC Communications Inc.’s acquisition of AT&T last year also is in play here for BellSouth: Carriers can offer more compelling packages by linking local and long-distance services. Overall, AT&T and BellSouth could save on some costs by eliminating redundant operations. But since their local service territories don’t overlap, the deal likely would have little impact on phone bills — unless state regulators try to condition their approval for the merger on holding down rates for basic phone service.

Cell phones
AT&T and BellSouth jointly own Cingular Wireless, the nation’s No. 1 carrier in terms of subscribers. Now AT&T could return its brand to the scene while making it easier to offer bundles of wireline and wireless services. Cingular had acquired AT&T Wireless in 2004.

Internet
The deal would make AT&T the nation’s largest broadband provider, surpassing cable-modem leader Comcast Corp. by more than 1 million lines. AT&T also operates a key Internet data backbone, raising questions about whether AT&T can manipulate traditionally neutral data flows to its advantage.

Subscription TV
Cable TV providers have had success offering phone service, but phone carriers are behind in turning the tables and offering subscription TV. To differentiate their video service with multimedia, interactive features, the phone carriers are laying new fiber-optic cable. Now AT&T could take advantage of extensive fiber that BellSouth has deployed in new housing developments where old copper phone wires didn’t have to be torn out. Once TV service is ready to be widely offered, a heftier AT&T might have an easier time cutting deals to buy programming than it and BellSouth would have faced on their own.

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