Ma Bell revives; watch her with a very wary eye

Ma Bell revives; watch her with a very wary eye
Tue Mar 7, 6:47 AM ET

Recent years have not been good to the businesses formerly known as phone companies. They got off to a slower start than cable in rolling out broadband service. And they lost core customers who signed up with Internet telephony services, or opted to go wireless.

But, not to worry, this is an industry with a plan: Bring back Ma Bell - the AT&T monopoly that once ruled the wired world, throttling competition.

While other industries have decided to race forward to keep pace with innovation, this one sees a bright future in turning back the clock. Maybe there is even a black, rotary-dial telephone in our future.

Sunday's announced merger between AT&T and BellSouth would reunite five of the eight companies created when an antitrust suit splintered the phone monopoly in 1984, igniting a communications revolution. (AT&T had already been merged with three of its offspring: Pacific Telesis, Ameritech and Southwestern Bell.)

Given the current, accommodating state of antitrust policy and the arrival of cable as a competitor in broadband and telephony, this deal might well be approved by federal regulators. It might even create economies of scale that would make the combination more efficient than the sum of its parts.

But it also should raise red flags for Congress and federal regulators. For all the talk of robust competition between cable and telephone, the reality has been less impressive. The most intense competition and the fastest roll-outs of new services have been largely limited to affluent areas.

Reassembling the old Bell system would hardly provide companies with greater incentives to do what they are not doing already. If anything, it would give this new behemoth greater market strength with which to dictate prices and services.

What's more, the merger raises questions about the future of the Internet and digital entertainment. Even before Sunday, AT&T was vocal in its determination to impose limits on the Internet. The company envisions charging high-flying Internet companies such as Google and Yahoo for the privilege of flowing quickly through its high-speed pipes. It argues that because it invested in new lines, it deserves a greater piece of the action.

This merger might well increase its power to bring about such an unfortunate reality. With its massive customer base and ability to offer telephone, wireless telephone, broadband and video, it could bring enormous pressure to bear on Internet companies to pay its ransom, regardless of what its cable competitors do.

For that reason, lawmakers and members of the Federal Communications Commission should take a long, hard look at where the Internet is headed and what might be done to prevent a handful of companies from gaining a chokehold over an evolving medium that is one of history's great innovations.

Such an outcome would not only punish innovative companies, but in its most extreme form it would also make decisions for consumers on where they shop online, how they conduct their searches and which social networking sites they should use.

More broadly, Washington policymakers might want to examine the state of competition almost 10 years after the passage of a massive telecommunications law that partially deregulated the industry. If a company such as AT&T is able to erect tollbooths on the Internet, and if competition on price and service in many parts of the country remains anemic, then the law and subsequent court rulings further deregulating the industry are not having their desired effect.

Telephone and cable companies were freed of their regulatory shackles on the premise they would compete aggressively with each other. Progress on that front has been, at best, mixed.

Now the public is being asked to believe that putting the Bell system back together is going to stimulate competition and help consumers. It's hard to believe there is much progress to be made by going backward.

Copyright © 2006 USA TODAY, a division of Gannett Co. Inc.