Phone mergers and competitive advantage
With Comcast acquiring MCI and SBC buying AT&T, two major companies now have overwhelming control over a huge portion of the national telecommunications system. That may translate into higher prices for consumers. But it definitely will adds costs to corporate phone customers who, up to know, have managed to manipulate a competitive market to reduce their phone bills.
The Big Two now have customers in corporate customers in a bind, according to a Wall Street Journal story ("Phone Consolidation May Cost Corporate Clients Clout", 5/4/2005).
Before the acquisition deals for AT&T and MCI, businesses collectively received about 50% of their telecom services from their various top-two providers, according to a recent study by Control Point Solutions, a Rutherford, N.J., firm that advises companies on telecom spending. In the wake of the two acquisitions, businesses will receive 87% of their services from their top-two providers, the Control Point study says.
That additional concentration could mean a significant bump in costs for businesses, the report concludes. In the past decades, businesses have grown accustomed to negotiating discounts of 25% to 40% on their long-distance services, according to the report.
While private customers are gradually turning toward cable VOIP as an alternative to the long distance services of the Big Two, that's not an option for corporations, which do not have cable infrastructure in place (unlike private homes). By getting rid of their biggest corporate rivals, Verizon and SBC have cleared the way for further price hikes.
But just as important may be legislative clout, according to the WSJ article. Two big items on the agenda for the phone giants will be obstructing, however they can, the growth of Internet telephony, using legislation and regulation to make life harder and more difficult for the cable companies like Time-Warner and Comcast. Second, there is the fight against public Wi-Fi, something that is starting to take off, much to the dread of the phone companies. With a stable duopoly in place and a national constituency, the Big Two will have far more clout in state and federal legislatures and in the FCC.
New competitive landscape (US telephones)
Market share
