David Lazarus: AT&T merger won't help the public

May 23, 2014 

Nobody should be surprised anymore by news of big, fat telecom mergers. AT&T's acquiring DirecTV for nearly $49 billion is just the latest in a long line of tie-ups among phone, cable and satellite companies.

It's the lies I can't stand.

Soon after announcing the DirecTV deal over last weekend, AT&T's chief executive, Randall Stephenson, said that "this is going to prove to be a pro-competitive and pro-consumer transaction."

His counterpart at DirecTV, Mike White, said that "this compelling and complementary combination will bring significant benefits to all consumers."

Oh, please.

Why can't these guys just man up and admit the truth: "We're merging because this will give us more clout against the cable industry in our efforts to dominate the market."

The giveaway wasn't in what Stephenson and White said, but in what they didn't say. Two words were noticeably lacking in their deal announcement: "lower prices."

Instead, the companies touted their ability to offer "new bundles," "a more competitive bundle" and "a better bundle" of phone, Internet, TV and wireless services.

And that's fine for AT&T, which wants to lock people in to as many services as possible to make it harder for them to jump ship.

For consumers, however, bundles of telecom options are a far lower priority than reduced bills and better overall service.

So when Stephenson says "pro-consumer," what he really means is "pro-company." His company, in particular.

Craig Aaron, president of the advocacy group Free Press, said AT&T and cable giant Comcast, which has announced its own $45 billion takeover of Time Warner Cable, have nothing up their sleeves except the tired old notion that bigger is better.

"The captains of our communications industry have clearly run out of ideas," he said. "Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition."

Consumers are the last thing they're thinking about, he said.

"These companies don't care about providing better services or even connecting more Americans," Aaron declared. "It's about eliminating the last shred of competition in a communications sector that's already dominated by too few players."


From a purely corporate point of view, consolidation makes a lot of sense. Fewer rivals means more ability to raise prices and not have to compete on costly fronts such as introducing new features and providing better reception.

Delara Derakhshani, policy counsel for Consumers Union, predicted that other telecom heavyweights will now feel pressure to cut their own merger deals if they want to cling to whatever market advantages they enjoy.

"The rush is on for some of the biggest industry players to get even bigger, with consumers left on the losing end," she said.

Many Wall Street analysts believe the next likely mega-merger will be Verizon making a bid for Dish Network.

Fewer industry players, of course, means a greater likelihood that prices will go up. It's competition that keeps prices down.

This places federal regulators in an awkward position.

If they put the kibosh on this latest round of consolidation, as was the case when the Justice Department nixed a merger of AT&T and T-Mobile in 2011, they'll have to fend off criticism that they're preventing telecom businesses from effectively competing.

But if they approve one merger, they'll probably have to approve them all or appear as though they're picking winners and losers in the marketplace.

Things were more straightforward in the 1970s when the federal government filed suit against what was then American Telephone & Telegraph Co. At the time, AT&T was the largest company in the world, with phone lines reaching almost every home and business in the nation.

The Justice Department argued that all this market power was hindering competition and stifling innovation. After years of legal and political wrangling, the breakup of Ma Bell was announced in 1982, with seven so-called Baby Bells splitting AT&T's local phone network among themselves.

Now look. The Baby Bells have pieced themselves back into a few bigger and stronger corporate entities.

AT&T's Stephenson said the DirecTV deal "will accelerate innovation and growth" and "will create a very different competitor that is going to be very good for consumers."

He can't really believe that.

David Lazarus is a Los Angeles Times columnist. He can be reached at david.lazarus@latimes.com or @Davidlaz on Twitter. Read more of his columns at fblinks.com/lazarus.

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