What does AT&T/BellSouth mean for consumers?

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Remember why AT&T broke up

For those of us who remember when there was only one phone company, life was a lot different. We could not even own our own phones, add an extension in another room, or add an answering machine without going through the phone company, and paying more. Long distance calls were very expensive, and competition was almost impossible.

I worked for GTE Sprint back when people thought that Sprint was probably a package delivery service. People were scared to move away from AT&T because they were afraid they would lose quality. And if they tried Sprint or MCI, that's exactly what they found. AT&T had agreements with the baby Bells even after the break up, and it allowed them to get better connections than anybody else. The other companies had inferior connections at the switches and had limited capability, and the lack of automatic number identification meant that you needed a PIN. In order to make a long distance call with Sprint, you effectively had to do what people do today with credit card calls. The advantage was that with Sprint, you could wait until the weekend and call coast to coast in the US for a mere 35 cents per minute. When you factor in inflation, that still seems expensive, but the price of having a single phone company meant that AT&T charged substantially more.

By that time, with electronic switching, the true cost of a long distance call was no higher than the cost of a local call. But it made the big money. Of course, competitors had the added expense of building a network from the ground up.

These days, I pay 2.5 cents a minute with calls rounded to the nearest 10 seconds, and long distance is no longer a big money maker. With ubiquitous cell phone networks, there's no chance of "local" phone companies getting a monopoly, since I can now get a prepaid cell phone for 12 cents a minute or less with no monthly fee.

So what would happen if AT&T kept growing? First of all, they would never get close to a monopoly. We can get Internet connections over cable, by satellite, and by cell phone. Whatever limits those technologies have will diminish over time.

They might have control over one of the three wired connections to my home, but the cable company and the electric company will still be there, even though power companies don't currently have a big stake in this market. They will not have a big effect on satellite. But since cable currently has the potential to offer much more than DSL in most areas that have service, AT&T has every reason to improve the quality of their service. But ultimately, they will have to compete on price.

As much as we would like higher speeds and more features, ultimately, the market has moved past necessity into luxury. Moving from a 2400 baud modem to a 9600 baud modem was an expensive proposition, and at $1300 per modem, was a strategic business decision when I first had to go there. But moving from 1.5K DSL to 3K DSL because of a special offer by the phone company is not in the same league for most end users. They might notice the speed on a huge download, but for typical activities such as web browsing, or email, it will all look the same.

A true monopoly is a problem, especially when the product is really needed. A pseudo-monopoly on a value added feature is not a problem. There will still be enough competition that AT&T will have to do a better job or offer a better price if they want to compete.

Posted by: wresnick   Posted on: 03/07/06 You are currently: a Guest | Members login | Terms of Use

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