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Press Release October 15, 1998 |
Contact: In Washington, Mark Cooper, CFA |
(WASHINGTON, D.C. and AUSTIN, TX) -- There is nothing in the recent corporate behavior of Southwestern Bell Communications (SBC) and Ameritech to indicate that allowing them to tie the knot would result in anything less than additional barriers to competition and less choices for consumers, two of the largest consumer organizations in the country said today.
Consumers Union, publisher of Consumer Reports, and the Consumer Federation of America, warned that San Antonio-based SBC has a "particularly bad record on local competition" and yet will be in the driver's seat calling the shots in one-third of the country if the merger goes through. In comments submitted Thursday to the Federal Communications Commission (FCC), the groups argued the merger would violate antitrust laws as well as the FCC's "public interest" standard for promoting competition.
While consumers were told that the federal Telecommunications Act of 1996 would bring about competition in local phone service, competition for residential customers is virtually nonexistent in most parts of the country. "Despite Congress' promises and the FCC's efforts, the local telephone monopolies have actively blocked competitors by charging excessive rates for access to their local networks, delaying delivery of services to those customers who do switch local phone service, and often failing to mediate disputes with competitors," said Dr. Mark Cooper, Research Director at the Consumer Federation of America.
The market for telephone service has grown more concentrated, rather than more competitive with a flurry of mergers and proposed mergers. In essence, the giant MaBell phone monopoly dismantled by court decree under anti-trust law in 1984 is starting to reappear, one merger at a time.
"It is critical for regulators at the federal and state levels to begin to take a comprehensive view of the emerging structure of the telecommunications industry," said Janee Briesemeister, a Consumers Union senior policy analyst. "The continuation of a deal-by-deal, piecemeal view will allow the industry to slip into a thoroughly anti-competitive structure. We are urging regulators to look at the cumulative effect of individual deals on the prospect for competition."
The groups pointed out that local phone service remains a monopoly in most areas -- local phone companies still have a 99 percent market share for business customers, and almost 100 percent for residential ratepayers. "To date competitors have taken less than 1 percent of the market from the Bells," said Cooper. "Claims that easy entry will discipline the market power of the merged incumbents are ludicrous."
CU and CFA said the SBC/Ameritech merger will create unique regional problems and have an impact on the national telecommunications market. The greater the market power at the regional and national level the less the likelihood that competitors will break through in the local market. The new merged company would have a vast geographic scope reaching from Michigan to Texas, and on to California. In addition to size the new, larger SBC will have unmatched financial resources that would make it more difficult for competitors to enter local markets.
For example, Ameritech had begun competing in St. Louis for SBC customers. In theory, the two companies have the facilities and expertise to go head-to-head against each other. But a merger would effectively stop that from occurring, according to CU's Briesemeister. "Consumers lose actual and potential competition in local telephone markets as a result of the merger," she said.
"If past conduct is any indicator of the prospects for local competition, these companies fail that test, too," Briesemeister said. "They have thrown every barrier imaginable to competition, in particular with SBC earning a national reputation as the Baby Bell most hostile to competitors."
