Wednesday, October 11, 2006

Consumer Groups: DOJ Rubberstamp on AT&T/BellSouth Merger Recreates the MA Bell Dynasty, Sells Out Consumers

WASHINGTON - October 11 - Consumer groups today blasted the Justice Department for approving without restriction the merger between telephone giants AT&T and BellSouth -- the largest telecommunications merger yet, a move likely to leave consumers with fewer choices and inflated prices for a host of services.

"DOJ's rubberstamp on this merger suggests the Justice Department has thrown in the towel on competition between the Bell phone companies," said Gene Kimmelman, senior vice president for Consumers Union. "The Justice Department has abdicated responsibility to promote the competition it promised when it broke up AT&T 20 years ago," he added. "In the end, the majority of consumers will end up paying inflated prices that result when Bell companies merge and dominate local, long distance, wireless and Internet services in their territories."

The AT&T/BellSouth merger is just the latest in a ten-year wave of consolidation following passage of the 1996 Telecommunications Reform Act -- legislation intended to unleash competition among the baby Bells in both local and long-distance service. Instead, the eight baby Bells consolidated into just four companies and gobbled up long distance carriers. Just last year, DOJ approved the SBC and Verizon buyouts of long distance carriers AT&T and MCI, respectively. Meanwhile, competition in local phone service has declined as Bell companies sued to eliminate pro-competitive policies in the Act.

Despite claims that this merger might foster competition between phone companies and cable giants, the fact is that cable companies are just now entering the phone market and are not positioned to compete with the national phone behemoth that will exist as a result of this merger. The other potential competitor -- voice-over-internet phone service (VOIP) -- that relies on broadband connections, is threatened by the ability of the Bells and cable companies with broadband wires to disrupt VOIP transmissions.

According to Mark Cooper, research director for Consumer Federation of America, "New Internet telephone service which could compete against phone companies can now be blocked by the merging AT&T and BellSouth giant. Consumers know that without real competition, prices will continue to go up and the drive for innovation will evaporate."

"DOJ's decision today makes the Federal Communications Commission's review of the merger even more critical," said Kimmelman. "With DOJ closing up shop on competition, FCC needs to step up and impose meaningful conditions that will salvage what little competition is left. The government has been deceived before by false promises that mergers of potential competitors benefit the public. It should not be fooled again."

Details about today's DOJ decision can be found at


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