This story appeared on Network World at

http://www.networkworld.com/columnists/2007/010207bradner.html

Is the FCC pining for the good old days?

Reading between lines of the AT&T/BellSouth merger approval

By Scott Bradner, Network World, 01/02/07

It was not much of a surprise when the FCC figured out a way to approve the AT&T/BellSouth merger before last year ran out.

FCC Chairman Kevin Martin had been pushing for this result for months, and when push came to shove, AT&T came up with a few temporary and perhaps meaningless “concessions” that convinced the two Democrats on the commission to go along with the chairman’s wishes. Given Martin’s public statements, and the press release the FCC put out to announce the approval, we may be down to two or even one telephone company in the United States by this time next year.

The press release lists five benefits the FCC sees in the merger and summarizes the conclusions of the FCC’s analysis of the effects on competition for six groups of services. In all but two of these, the FCC conclusion would also apply if the newly minted AT&T decided to merge with both Verizon and Qwest.

The benefits seen by the FCC include broadband deployment, IPTV deployment, better management of Cingular Wireless, improved national security, disaster recovery and government services from a “unified end-to-end IP network,” and better disaster response because of “unified operations.” Other than managing Cingular, the rest of the benefits would be even better if there were only one U.S. phone company.

In two of the six service areas (mass-market voice and Internet service) the FCC recognized the reality that the big U.S. telephone companies simply do not compete outside their areas except for wireless. This is just as true for Verizon and Qwest as it was for AT&T and BellSouth.

In three of the other areas (special access, retail enterprise and international services), I see nothing that would be different in the FCC analysis if the commission were asked to approve the old Ma Bell (without the manufacturing arm). Not that I think the FCC analysis makes much sense.

The only area where a merger of Verizon, AT&T and Qwest would have a problem with this FCC is in the area of Internet backbone services. And this could be dealt with the same way it was once before: spin off one of the backbones and use the remaining one.

A lot of press coverage focused on the “voluntary concessions” that AT&T made, particularly in the area of network neutrality. But all the concessions are temporary and may not be all that meaningful, because the important ones do not apply to AT&T’s new infrastructure if it is used to support IPTV. In addition, based of the statements of Martin and Commissioner Deborah Taylor Tate, it looks like the FCC would refuse to enforce the concessions in any case.

I can understand the nostalgia that this FCC seems to have for the telecom world of old. Things were so much simpler when there was just one company to deal with and that one company provided all needed telecom services. There was none of this dynamic and unpredictable innovation. No companies going out of business -- just one monopoly doing the public good.

I sure hope that the new Congress does not succumb to this picture of a past that never was and figures out a way to preserve something that has at least a faint echo of today’s Internet.

Disclaimer: Harvard has lived through more of the past than the FCC has but has not issued an opinion on the FCC’s vision. Thus, the above observation is mine.