Public Policy Group Rings In On SBC/AT&T

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Greg Galitzine

Public Policy Group Rings In On SBC/AT&T

I just received this Media Advisory from the Competitive Enterprise Institute. Somewhere in between my cascading deadlines, I thought I'd share. Here goes:

SBC Buyout of AT&T Helps Consumers

Washington, D.C., January 31, 2005 — Statement of Braden Cox, Technology Counsel, Competitive Enterprise Institute:

SBC Communication Inc.’s offer to buy AT&T, announced today, is a pro-competitive development in a rapidly changing industry. In an environment where cable, telephone and wireless companies all compete against each other, the combination of these two providers is the natural progression of a communications market working for consumers.

While some critics will no doubt fall back on the same antitrust and consumer welfare rhetoric used to attack every other industry merger, the bigger news is why this sale should not incur strict regulatory scrutiny – intermodal competition. The increasing ability of consumers to substitute different modes – landline telephone, wireless, Voice over IP – for another means an expanding marketplace that transcends the public utility model of the telecommunications industry. Network integration, such as we will see in a combined SBC/AT&T, is a requirement in order to compete effectively with other communications networks.

This merger may be just the beginning of the changes we need to see in the telecom world of higher bandwidth and digital content delivery. As we revisit the 1996 telecom act, there may be even more shakeups. Regulators need to reassess the role of antitrust in the modern tech world and allow market institutions rather than yesterday’s regulatory policy to guide tomorrow's tech world.

CEI bills itself as a non-profit, non-partisan public policy group dedicated to the principles of free enterprise and limited government. For more information, check out the Competitive Enterprise Institute online.

Feedback for Public Policy Group Rings In On SBC/AT&T

1 Comment

Because an organization is a non-profit, that does not mean that they are not partisan. In fact, you have inserted the "non-partisan" verbiage into the blurb about the CEI, something that the organization does not do in its boilerplate. From their website:

"The Competitive Enterprise Institute is a non-profit public policy organization dedicated to the principles of free enterprise and limited government."

Which is, by definition, a political mission. CEI is a right-wing group that is arguing for the re-creation of a monopoly because it faces competition.

I won't go into the underlying economics of monopolies and the market solutions to which they lead. There is no dispute among economists that monopolies lead to higher prices and chronic under-production. To make the case that a monopoly will be more competitive with these so-called "intermodal" competitors is ludicrous.

I would like to point out that SBC is partners with BellSouth in Cingular Wireless, which is the largest wireless operator in the United States. Also, SBC has attempted to quash the VoIP industry with the recent TIPToP filing.

In fact, the only reason for this monopoly is so that SBC will actually have less competition in the long run. To give a better understanding of SBC's modus operandi, in SBC's leading states (Texas, Missouri and Ohio), Intra-LATA tariffs are two to four times higher than the tariffs in states where SBC has a reduced corporate presence and does not control the state Public Utility Commission.

I support VoIP and its future. If organizations like CEI had their way, there never would have been a breakup of Ma Bell, or the '96 Act for that matter. Had this been the case, there would not have been a dotcom boom, and we would not have the IP network infrastructure in place to support IP telephony services.

Historically, AT&T (pre-breakup) fought all attempts at deregulation, including the attachment of non-AT&T hardware to the network. The Carterphone decision was the one that allowed for third-party PBXes and subsequently data communications devices like the routers that have been Cisco's bread and butter for the past two decades.

Only a knee-jerk partisan would dust off an old argument to justify an ideology. For those of us who support VoIP and competitive markets for technologies and telecommunications services, that ideology fails to agree with history.

And that's a history that has led us to where we are today. Knowing what we do today, I find it hard to argue for large, vertically-integrated telcos. In general, such companies fail to innovate at the rate that we have come to expect, and they resist all forms of competition from every quarter.

If you need proof of the way SBC plans on behaving, they are already a monopoly in the local telephone market in more than a dozen states, including Texas, California and Illinois. In these markets, they have already proposed an onerous tariff for competitive VoIP providers. This tariff is known as TIPToP. Were companies like Vonage or Skype to use this tariff, there is an incredibly high likelihood that both companies would be bankrupt within six months of signing and interconnection agreement rules by TIPToP.

But CEI is governed, not by facts and history, but a mission of "free enterprise and limited government." This mission has oddly led them to a very self-serving conclusion about this proposed merger.

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