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Consumer groups vow to fight AT&T deal

Several of the nation’s largest consumer groups said Monday they would oppose AT&T’s purchase of BellSouth Corp., arguing that the deal will reduce competition and drive up prices in the telecommunications industry.
/ Source: The Associated Press

Several of the nation’s largest consumer groups said Monday they would oppose AT&T’s purchase of BellSouth Corp., arguing that the deal will reduce competition and drive up prices in the telecommunications industry.

Consumers Union and the Consumer Federation of America said they would urge the Justice Department to block AT&T Inc.’s $67 billion offer.

The consumer groups also asked their members to contact the Federal Communications Commission, which must approve the acquisition, and to petition their congressmen to try to prevent the deal from going through.

If approved, the combined company would become the largest telecommunications operator in the world and include Cingular Wireless LLC, the nation’s largest wireless operator. Cingular today is jointly owned by AT&T and BellSouth.

The consumer groups warned that increasing consolidation in the telephone industry would boost the prices for local, long-distance and cell phone services. They added that more-limited choices for phone service — along with a similar merger trend in the cable industry — threatened to reduce the variety of broadband Internet services available to consumers.

“If approved, this merger will lead to higher local, long-distance and cell phone prices for consumers across the country,” said Gene Kimmelman, a vice president of Consumers Union, which is headquartered in Yonkers, N.Y.

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.”

Mark Cooper, director of research for the Consumer Federation of America in Washington, D.C., said consumers should be worried that the promise of broadband Internet technologies was being compromised by consolidation in both the telephone and cable industries. Those companies control the circuits on which data, television and phone communications move.

“We’ve been through a series of mergers that have reconstructed most of the old Ma Bell system,” Cooper said, referring to the historic 1984 government breakup of the old AT&T monopoly into seven “baby bell” telephone providers.

The phone companies have argued that they face growing competition from cable companies, which have been getting into the phone market and offering an increasing array of broadband services, such as high-speed Internet access.

Randall Stephenson, AT&T’s chief operating officer, told analysts Monday that AT&T already was feeling competitive pressure, saying the phone company has to tailor its prices to reflect those of local cable companies.

“We’re finding that we’re having to be far more targeted in our pricing based on who the competitor is in a particular market,” he said. “I don’t see that effect changing as we bring BellSouth into this equation.”

But the CFA’s Cooper said consolidation in both the phone and cable industries meant “that when consumers wake up in the morning, they have two choices for a full-service broadband network, telephone and cable.”

He called it “an unregulated duopoly” and added: “Every consumer knows that two is not enough for real competition.”

Jeff Chester, executive director of the Center for Digital Democracy in Washington, D.C., which promotes democratic access to broadband, fears that companies the size of a merged AT&T-BellSouth will have the heft to become “a virtual toll booth” on the Internet.

That’s because the communications industry is moving to broadband, which allows voice, data, video and mobile communications to move over a single wire.

“The cable industry and the phone industry have the same business model, which is to begin charging increasing fees to consumers for using broadband communication,” Chester said.

At the same time, he argues, they have the ability to give priority on their circuits to “premium” services or to companies with which they have alliances. This will make it harder for new technologies to emerge, because they will have trouble getting access to the delivery system.

“We need to make a stand today,” Chester said. “If we allow them to turn today’s Internet into a digital dirt road while only they and their partners can run lightening-fast operations, you won’t see competition.”

Bill Hardekopf, chief executive of the long-distance search site, said the sheer size of the combined AT&T-BellSouth company was likely to be a red flag to federal regulators.

“This company will have a tremendous amount of market share and say as to what goes on in the industry,” Hardekopf said. “To have that much of a share and that much of a voice in one company cannot be healthy for consumers.”

In fact, the merged company would have 70 million local-line phone customers, 54.1 million wireless subscribers and nearly 10 million broadband subscribers in nearly two dozen states.

“This is not a done deal,” Hardekopf said. “Regulators can still block it for competitive reasons.”