Media Mergers: Why Washington Should Butt Out

The reaction was swift and predictable. As soon as Bell Atlantic Corp. announced its plan to buy Tele-Communications Inc., Senator Howard M. Metzenbaum cried "antitrust." In calling an Oct. 27 hearing by his antitrust subcommittee into the "ominous trend" of media mergers, he declared: "Consumers are facing a megamonster."

Metzenbaum should tone down the rhetoric. When it comes to the new information superhighway, politicians and consumer advocates, such as the Ohio Democrat, threaten to keep America traveling the backroads of its past.

These critics figure that bigness is inherently bad, at least insofar as it thwarts competition, and that it is government's role to protect consumers from the dark underbelly of technological upheaval. Certainly, they have some legitimate worries: There is danger when a single company provides everything from local phone service to entertainment-on-demand, from banking services to on-line education.

BIGNESS AS USUAL? But in this merger, the free-market techies who believe that new competition will actually prevent abuses have the better case. Congress has a role to play in protecting public interests as the nation's telephone and cable-television systems evolve, but for the most part, Washington should butt out. "Congress loves to play this game--that not a sparrow will fall unless they will it," says Reagan Administration antitrust chief William F. Baxter, now a Stanford University law professor. "The best thing they can do in this case is to stay the hell out of the way."

Much of the concern in Washington stems from the sheer size of the communications combines that are now emerging. But even the most aggressive trustbusters have abandoned the notion that bigness is bad per se. Size will be increasingly important in the communications industry--and consolidation such as the Bell Atlantic deal is being driven by fundamental economic forces. New technologies, such as the wireless phone systems known as PCS, or personal communications services, are expensive. Companies need deep pockets to develop them.

There are more important issues for regulators to address. One is safeguarding competition in the short term. Since most U.S. homes are already wired both for phone and cable service, chances are good that most Americans ultimately will have access to two competing information highways. But for now, it makes sense to prevent cable operators and local phone companies from buying systems in their service areas. Bell Atlantic plans to avoid that issue by spinning off TCI operations that overlap its own.

BANDWIDTH SHARE. The government should also ensure that the owners of the information highway provide access to all comers at a fair price. Former Lotus Development Corp. CEO Mitchell D. Kapor suggests that the government allow the owner of each information network--whether a phone company, a cable operator, or someone new to the business--to use part of the "bandwidth" as it wishes--but require that the remainder be regulated for public uses. "There is a government role in making sure that common carriage continues to mean something," says Kapor, who is now chairman of the Electronic Frontier Foundation, a group that advocates open communications networks.

Finally, telephone companies still enjoy local-service monopolies--and will for some time to come. The government should make certain that the Baby Bells don't use monopoly profits to subsidize new, unregulated activities, such as video-on-demand.

These are vital concerns. But there is plenty of room to provide the needed consumer protections and still allow, even encourage, construction of a private information infrastructure. If Congress and the Clinton Administration drag their heels, they risk crippling the development of new services and markets that were unimaginable just a few years ago. Policymakers should bet on their hopes for the future, not take counsel from fears of the past.