Teletruth News Analysis: August 9th, 2010

On the web:  


We created a separate report outlining the SBC-Verizon mergers through 2005.


A list of our filings, data and analysis pertaining to the mergers.

  • Why Allow Comcast-GE-NBC-Universal to Merge?
  • AT&T and Verizon  Mergers Harmed Broadband, Customers and the Economy.
  • The FCC & DOJ have been and will continue to be useless in creating meaningful commitments or enforcement.  

(There are two parts—Part One: AT&T-Verizon Mergers and Outcomes. Part Two: Why the Comcast-GE-NBC-Universal merger is a bad idea.)


Part One: AT&T-Verizon Merger and Outcomes:


• AT&T:(SBC)      Southwestern Bell, Pacific Telesis, SNET, Ameritech, AT&T, BellSouth

• Verizon:        Bell Atlantic, NYNEX, GTE, MCI, Alltel


Who are all these companies? A short history:       


The history of AT&T and Verizon’s mergers should be a clear warning that America should not allow the Comcast-GE-NBC-Universal merger.

  • The companies can say anything they want to the public about anything that will help a merger go through, then walk away from all stated commitments and never be held accountable.
  • The companies never fulfilled most of their stated obligations to compete with each other, expand broadband infrastructure or even lower rates.
  • The FCC can not create enforceable commitments. The FCC’s commitments are usually voluntary and full of loopholes,  stripped of anything resembling what was told to the public. In short, they have been a model of regulatory capture where the phone and cable companies are in control.
  • Making the companies larger and allowing them to consolidate harmed the economy, increased monopoly controls, eliminated most competition and raised rates, including harvesting, i.e.; massive rate increases on loyal customers.
  • Most Important: The mergers eliminated the balancing-forces to stop or slow  down the corporate-created-bad deregulation and/or protect the public interest.  

Some Vital Facts about the Previous  Mergers.


At the break up of AT&T in 1984, seven Bell companies were formed to handle the 22 local phone companies, including New York Telephone and Illinois Bell. AT&T and MCI were separate companies focusing on long distance service while GTE, SNET and Alltel were independent local phone companies. By 2010, 11 companies merged into 2 through mergers.


The Mergers Harmed Broadband Deployment and America’s Competitive Edge.


America is currently 15th in the world in broadband. Why? The mergers closed down fiber optic upgrade plans, which would have kept America in the lead.  Note; While some critics will argue that the other countries that offer 100 mbps services, (which is 20 times faster than the American standard) such as Japan, Korea or France are smaller and easier to upgrade, each US state had its own fiber-optic-based broadband plan -- and in the “United’ States’, in all states the mergers closed whatever was committed to be built, not to mention paid for.


There have been 8 Mergers of Interest:


·        SBC-Pacific Telesis (now AT&T) (merger 1997), California

·        In 1993, Pacific Bell had committed to spend $16 billion and rewire the state of California with fiber optics, completing 5.5 million homes in California by 2000. By 1997, the merger closed all previous broadband commitments prematurely, with only a fraction of the money spent and no finished fiber-based homes deployed. State law had been changed to give Pacific Bell billions in added profits to pay for these upgrades.


·        SBC-SNET (now AT&T) (merger 1998), Connecticut

·        SNET had stated it would spend $4.5 billion and deploy “I-SNET” to the entire state to be completed by 2007. SNET rolled out cable services, which were closed post-SBC merger; the networks were abandoned and competitors were blocked from using them. State law had been changed to give SNET billions in added profits to pay for these upgrades.


·        NYNEX-Bell Atlantic (now Verizon) (merger 1997) 13 east-coast states, from MA and NY, to PA through Virginia, including District of Columbia.

·        Bell Atlantic had stated it would spend $11 billion on 8.75 million fiber optic-based upgraded homes by 2000. NYNEX claimed it would have 1.5-2 million fiber optic-based homes completed. Post merger, all projects were canceled in all states, even though state laws had been changed to give the companies billions to do the upgrades.


Competition and Broadband:  


The SBC-Ameritech and Bell Atlantic-GTE (Verizon) mergers were both predicated on the commitments of the companies to compete outside their own territories with all of the other Bell companies, as well as bring in fiber optic-based broadband.


·        SBC-Ameritech (now AT&T)  (merger 1998) Illinois, Indiana, Ohio, Wisconsin, and Michigan)

·        SBC 2001 Annual Report: “Out-of-Region Competition: We are required by the FCC to enter 30 markets (out of region) as a provider of local services to business and residential customers by 2002.”

·        The company also committed to Project Pronto  to spend $6 billion serving ”80 percent of SBC's United States wireline customers in three years”. The plan: “moving many customers from the existing copper network to a new fiber network.”

·        Ameritech had previously committed to 6 million homes upgraded by 2000. Ameritech, in all 5 states, received financial incentives to upgrade the homes, schools, libraries and hospitals and started rolling out fiber optic-based cable services. SBC closed down virtually all projects and sold off what was built.

·        Outcome: There was no serious competition outside the companies’ territories. The FCC’s commitments only required “at least 3 unaffiliated customers” in a market. Project Pronto was never completed.


·        Bell Atlantic-GTE (now Verizon) (2000) GTE had 28 territories nationwide.

·        Verizon claimed: “Spend a minimum of $500 million to provide competitive local service, including traditional local telecom services and advanced services outside of its service areas or will provide competitive local service to at least 250,000 out-of region customer lines".

·        GTE had stated: “In 1994 we announced plans to build video networks in 66 key markets in the next 10 years. When completed, the new network will pass 7 million homes and will provide broadcast, cable and interactive television programming.

·        Outcome: The company never seriously competed outside its region either in local service or ‘advanced’ services, and there are questions if they actually spent the money. The company sold off some of the GTE properties, including the cable properties, even though GTE had received billions throughout the US in state deregulatory financial incentives – i.e., raising rates.


Buying the Long Distance Competitors: AT&T-SBC and Verizon-MCI.

  • SBC-AT&T (now called AT&T) (2005)
  • Verizon-MCI (2005)
  • The FCC wrote: “The mergers should result in substantial cost savings, which should benefit consumers throughout the country.”
  • Outcomes: AT&T and MCI were the two largest competitors and both were sold; their previous long distance clients have been 'harvested', receiving massive rate increases, as did the incumbent local service in the majority of states. According to the last FCC documents published an estimated 1/3 of US households in 2005 had AT&T or MCI as a long distance company.
  • The two almost simultaneous mergers reduced competition as well as the political-balance as AT&T and MCI acted as a competitive voice balancing the incumbents.  
  • AT&T-BellSouth,  (2006) BellSouth had 12 states including FL, MS, and GA. AT&T-BellSouth:
  • Committed to: “Internet access service at speeds in excess of 200 kbps in at least one direction) to 100 percent of the residential living units in the AT&T/BellSouth in-region territory”. The company also committed to sell DSL service for $10.00 to new customers.
  • Outcome: Most customers were not offered $10,00 DSL and the company never fulfilled providing 100% of their territories (in 22 states) with broadband capable of 200kbps in one direction.


The FCC’s Own Words for Granting These Mergers: Out of Region Competition and Public Interest Benefits.


"This will ensure that residential consumers and business customers outside of SBC/Ameritech’s territory benefit from facilities-based competitive service by a major incumbent LEC. This condition effectively requires SBC and Ameritech to redeem their promise that their merger will form the basis for a new, powerful, truly nationwide multi-purpose competitive telecommunications carrier. We also anticipate that this condition will stimulate competitive entry into the SBC/Ameritech region by the affected incumbent LECs." (CC Docket No. 98-141, October 8, 1999.)



"the merger will finally enable one of the Bell companies to attack the local markets of the other bells on a widespread and effective basis. (GTE merger, FCC, October 2, 1998)


“The commission has concluded in recent orders that the Bell companies themselves may be among the most significant potential competitors to each other in the major metropolitan markets where their geographic regions are contiguous. Bell Atlantic today is not a significant potential competitor to any of the other Bell companies, its service areas are geographically separate from the major service areas of the other Bells and it lacks the presence that it needs to be effective to enter and compete in key urban markets of the other Bells' regions. The merger with GTE will immediately erase that limitation." (FCC, CC Docket No. 98-184, June 16, 2000).


Outcome: A Warning Signal for Future Mergers: Don’t Do them.


This was all just hype, window dressing or simply garbage, depending on the technical term you prefer. In every merger, the FCC took the hype as real, failed to create enforceable merger conditions, and the outcome was the removal of competition over the merger decade, harm to broadband, customers and the economy.


The final slap to the face of the Public Interest was the removal of the balance of power. Before, AT&T and MCI were a balance-to-the-forces, but today, even the cable companies now lobby with Verizon and AT&T. There is no public interest side or even a competitive side with enough funding. Thus, the scales of justice are now simply fat-fingers on the scale to favor AT&T, Verizon and Comcast --- the incumbents who control the wires and even wireless.


We’ve written extensively and tracked the mergers since their inception.


On the web:           


The mergers:  We created a separate report outlining the SBC-Verizon mergers through 2005. 


A list of our filings, data and analysis pertaining to the mergers.  


Bruce Kushnick,


Executive Director, New Networks Institute


Coming: Part 2: Why the Comcast-GE (NBC-Universal) merger is a bad idea.