Make This Merger An Opportunity

One monopoly is bad. Two monopolies merged into a giant that controls one-third of the American phone market is worse. The SBC-Ameritech merger is a bad deal. As it stands, it should be opposed by the Justice Dept., the Federal Communications Commission, Congress, and anyone else who believes that competition is important to the health of the U.S. economy.

But the deal could prove to be a redeeming opportunity as well. If FCC Chairman William E. Kennard shows some spine, he can exact concrete measures from SBC that finally open up its home market to competition. SBC is notorious among the Bells for tying up the vaguely written Telecom Act in the federal courts in a successful attempt to block the act's provisions for generating competition in the local phone markets. SBC has also effectively kept AT&T from competing efficiently in local service in its home market. Now, SBC is promising to increase competition in other local phone markets, but not its own, if it is allowed to proceed with its $56 billion merger with Ameritech.

The FCC should demand two things from SBC: First, SBC must stop thwarting the Telecom Act in the courts and end its opposition to open local phone markets. Second, it must slash access charges to local customers to AT&T, other regional Bells, and all other telecom players. Given SBC's long history of protecting its monopoly, nothing less is credible.

If regulators cannot get these concessions, then Congress must rewrite the Telecom Act. Senator John McCain (R-Ariz.) is right in saying that there was too much regulation left in the original bill. The SBC-Ameritech merger can be an opportunity or an affront to those who believe competition is essential to economic growth. One thing it should not be is yet another monopoly.

Before it's here, it's on the Bloomberg Terminal.