Mergers aren't a threat to the nation's telecom service
Recent news headlines underscore the radical changes taking place in telecommunications. SBC is acquiring AT&T, Verizon is merging with MCI, and Sprint and Nextel are combining.
While some fear that such consolidation spells trouble for consumers, the likely result will be improved service as companies shed the artificial barriers of regulation and become more competitive with new entrants in the industry.
Ohio Consumers’ Counsel Janine Migden-Ostrander is one of the doubters. “We’re always concerned when you see competitors merge,” she states, “that there are less options available for consumers.” [1]
Is this true? Perhaps such concerns were warranted in the last century when we depended on our wireline telephone to communicate. But now we communicate using wireless technologies, through satellites, over cable and even power lines.
In fact, these latest mergers are merely a response to a landscape of service provision that is shifting in unprecedented ways as firms struggle to remain competitive in a market environment that now includes cable companies, global competitors and even municipal governments. We live in an era of consumer choice that is unrivaled and in little danger of being jeopardized by improvements in efficiency through mergers.
As a product of intense competition, the recently announced mergers should yield dividends for businesses and consumers. Companies that have up to now been relegated to small enclaves and forced to stand by as new global and internet competitors ate away at their business can now develop a fully-realized business model. The result will be the ability to more effectively meet the needs of consumers.
A recent Wall Street Journal editorial said: “Long after technology had eliminated any meaningful distinction between local and long-distance phone calls – let alone the need for separate companies to handle them – telecom regulation kept artificial barriers in place. So the Bells' absorption of MCI and AT&T is a useful market corrective, come what may. With these regulatory artifacts no longer in the mix, we'll have real companies with real networks competing on a more level playing field.” [2]
This is exactly what government agencies have been trying unsuccessfully to achieve for years through onerous regulations. Even now, these developments are at risk of being shelved should the handwrenchers spread enough fear of change.
Through the Public Utilities Commission of Ohio, the state one of several that can stand in the way of the above-mentioned mergers moving forward. One concern is that the agency will use this veto power as a bargaining chip to saddle companies with new mandated obligations. Such a tactic would negate the very efficiencies created through merging in the first place.
In the face of an industry that is perhaps for the first time becoming a truly competitive provider of consumer services, the burden of proof must fall on the regulatory agency that preventing mergers from taking place or imposing any other new interference in the marketplace will not harm consumers.
Regulators must recognize the benefits that come from free-market competition and begin to understand that mergers are merely part of this process. New technology is fueling greater competition in the communications industry with each passing day, and companies need to be unfettered by arbitrary roadblocks to progress.
Notes
[1] Associated Press, “Telecom giants to merge,” The Daily Herald, 1 February 2005. Available at: http://www.heraldnet.com.
[2] Editorial, “Telecom Shootout,” The Wall Street Journal, 22 February 2005.
