OPINION
SBC and AT&T: One Marriage San Francisco Opposes

SBC and AT&T (NYSE: T) announced plans to merge in February, but some states are hesitating to approve the marriage and some advocates want the relationship to end. This uncertainty is bad for consumers because if technology companies can't control their business plans, freedom and choice will suffer.

Out of the 21 states that need to consent before the merger can go through, 14 have already approved it. In the others, regulators seem to be weighing the political issues and potential kickbacks. California is an example.

Public Utilities Commission (PUC) Chairman Michael Peevey not only asked SBC and AT&T to provide a supplementary filing, but he extended the protest period to 15 days after the filing was submitted. The responses included almost equal numbers of supporters and detractors. One of the more interesting was from the City of San Francisco, a city that supports all kinds of marriages -- aside from the corporate type.

No Incentive

On April 14th, the City and County of San Francisco filed a protest with the PUC saying that without a separate AT&T, SBC will have no incentive to provide good service, product upgrades, or reasonable rates. This argument might have made some sense back in the days when the only way to get communications services was over a landline, but things have changed -- and San Francisco knows it.

Indeed, San Francisco is currently in the midst of planning to start and run its own broadband network -- a network that could carry Voice over Internet Protocol (VoIP), otherwise known as Internet telephony. If the SBC/AT&T merger goes through, the new entity will be competition for the network San Francisco bureaucrats are planning to hatch. And that competition would be on top of other alternatives in this space.

Broadband consumers have a choice of DSL, cable, wireless, satellite, and soon broadband over power lines. And once one has broadband, one doesn't need the local phone company anymore. There are a number of different providers from which one can purchase phone service. Vonage and 8X8 are two popular providers or one can even get it free with Skype. This makes fear-mongering statements from groups like Consumers Union an insult to any intelligent person who knows the facts.

Deep Impact

In a hearing this week before the Senate Judiciary Committee, Gene Kimmelman, senior director for public policy and advocacy for Consumers Union, said that the SBC/AT&T merger "will have a deep impact in important telecommunications sectors like the local and long distance residential and business markets." Mr. Kimmelman has either never used VoIP or he's doing some very creative fact spinning.

Anyone who uses VoIP knows that the distinction between local and long distance doesn't matter anymore. Instead, as with a cell phone, long distance within the U.S. is free and it's all about the minutes (unless one buys a fancy unlimited minutes plan). Then, of course, there's the non-government competition in the communications space that also recently appeared to oppose the merger.

Carl Grivner, CEO of XO Communications, a telecommunications company, said that he was against both the SBC/AT&T and Verizon/MCI mergers because if they are approved, "SBC and Verizon will control nearly 80 percent of the business wireline market, more than 63 percent of ILEC lines, and more than half of all wireless subscribers nationwide."

False Argument

Again, this argument relies on the false idea that old copper lines still matter and that there is no competition from other broadband providers like cable, wireless, satellite, and broadband over power lines. The reality is that competition in the communications space is fierce. Perhaps that explains Mr. Grivner's angst. If his corporation can use government to hamstring SBC -- and Verizon while they're at it -- then so much the better for their bottom line. But that's not what's good for consumers.

Consumers need a marketplace that allows for flexibility, quick innovation and true competition free of government control. The communications space is a dynamic and evolving sector, making it time for the phrases "phone company" and "command and control regulation" to follow the dinosaurs into extinction.