Merger of phone companies could stifle innovation in telecommunication, professor says

Thursday, March 9, 2006
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A University of North Texas economist and associate director of the campus' University Center for Economic Development and Research says the $67 billion merger of AT&T and Bell South could stifle innovation in the telecommunication industry.

Dr. Terry Clower says that in terms of size, the merger is reminiscent of recent mergers in the railroad industry. But he says the new company is not simply the rebirth of the old "Ma Bell" -- the nickname for AT&T.

Before being split up into seven regional phone companies in 1984 because of antitrust concerns, AT&T was the largest telecommunications company in the United States. Today, only three of those companies are operating.

Clower says that while rapid innovations in communications technology are "very critical" in a global economy, "regulators should be concerned that the merged company may be so large that innovations will be stifled."

 The merged company will have 71 million phone lines, far ahead of competitor Verizon's 49 million lines. Clower says it will be interesting to watch how these two companies deal with each other.

"What you are doing, in essence, is creating a duopoly when it comes to major telecommunications companies," Clower says. "The companies can either compete aggressively, or they can act as near monopolists in their respective territories."

Clower says federal and state regulators will examine the merger closely, and are expected to focus on is the cellular telephone market. AT&T and BellSouth jointly own Cingular Wireless -- the biggest cell phone provider in the U.S.

"In terms of land lines, there is very little overlap between AT&T and BellSouth," Clower says.

"But since AT&T will now have complete ownership of Cingular Wireless, regulators may require the new company to divest itself of its wireless assets."

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