Hold On to Your Phone Bill -- It's Merger Time!

Wall Street is happy, and the Federal Communications Commission is complacent, but nobody seems to be looking out for consumers in the recent rash of communications mergers.

| Wed Oct. 13, 1999 3:00 AM EDT

It was a bleak week for communications democracy in the United States.

In what would be the largest merger in corporate history, MCI WorldCom announced its $115 billion proposed takeover of Sprint. The banner headlines on the MCI-Sprint merger overshadowed the same day's news that the number one radio chain in the United States, Clear Channel, proposed to take over the number two chain, AMFM, in a $23 billion deal. Then, two days later, the Federal Communications Commission (FCC) announced its approval for the merger of local telephone service providers SBC and Ameritech.

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Wall Street seemed happy with all of the mergers. Stock prices went up, and the investment banks that brokered the deals will surely collect inflated fees.

But citizens are not likely to make out as well.

Long-distance prices have been tumbling, especially in recent months. The driving force leading to five-cent Sundays, seven-cents-a-minute calls and other discounted prices has been the competition between AT&T, MCI and Sprint. With MCI and Sprint a single entity, there is every reason to expect the price cuts to slow or perhaps halt together.

The $72 billion SBC-Ameritech merger, announced more than a year ago but just now approved, creates a similar problem in the local telephone market. The break up of AT&T created seven regional bell local phone companies. The merger of Bell Atlantic and Nynex, plus the mergers of Southwest Bell, Pac Bell and Ameritech (now combined into SBC) have dropped the number to four. There is virtually no competition in local phone service provision now, but the ongoing spate of mergers means that direct competition, if it ever comes, will be much less intense than it would otherwise have been.

There is no question that eliminating or precluding future competition is a driving force behind the telecom mergers. An even bigger factor, particularly in the MCI-Sprint merger, may be the companies' desire to provide a full-range of telecommunications services -- long-distance, local calls, cellular service and internet access.

The companies says that such one-stop shopping will benefit consumers by making their life easier. But the difficulty in managing separate providers for long-distance, local, cellular and internet service is minimal, so there is very little potential consumer gain. The real effect on consumers of these bundled packages is likely to be price-gouging, with consumers paying more for the whole package than they would if they were able to shop separately for each component.

The one-stop shopping issue highlights as well an even more profound challenge posed by the telecommunications merger wave. The very fact of such a high level of industry concentration will give the giant telecommunications companies immense control over determining the shape of the telecommunications infrastructure. At stake will be matters such as the accessibility of high-speed internet access.

So too does concentration on the radio spectrum vector the future of radio in a worrisome direction. Post-merger and after likely divestitures, Clear Channel is expected to control 850 radio stations. Clear Channel and Infinity, a division of CBS and the other major radio chain, would dominate the commercial radio spectrum. Their national reach would give Clear Channel and Infinity significant advantages over rivals in courting advertisers, which makes it almost inevitable that much more industry concentration is soon to follow.

Almost as certainly, that concentration is likely to increase what University of Illinois Professor Robert McChesney calls the "hypercommercialism" of the medium. It will promote even more homogenization among commercial stations and a further shrinkage of democratic space. And it may well affect the fashion in which radio and internet technologies converge.

There is a grouping of industry analysts, not all of them tied to communications companies, who dispute the dangers of corporate concentration. Perhaps their favorite argument is that the Internet will obviate concerns about concentration in the communications industry. But this claim fails to deal with the multitude of ways in which industry concentration will shape the future of the Internet itself.

Can the regulators be counted on to act in furtherance of democracy and block the newly announced mergers? The same regulators who blessed the marriages of SBC and Ameritech, Vodafone and AirTouch, Bell Atlantic and Nynex, CBS and Infinity, Disney and ABC, TimeWarner and Turner? Maybe not.

Although he raised concerns about the MCI-Sprint proposal, FCC Chair William Kenard also followed up the merger announcement with the statement, "We are certainly not per se against consolidations, particularly those that achieve the kinds of economies of scale that can help consumers." How "economies of scale" are achieved in the merger of companies already worth tens of billions of dollars remains a mystery.

But although the regulatory process is supposedly apolitical, regulators' backs tend to stiffen when citizens cry out for action. As always, bursts of democratic energy are the best way to stave off corporate incursions on democracy.

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter. Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor. They are co-authors of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, Maine: Common Courage Press, 1999)

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