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Don't wait for lower rates
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May 11, 1998: 3:29 p.m. ET
Massive phone company mergers may not mean lower local phone bills
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NEW YORK (CNNfn) - Massive local phone company hookups like the one between SBC Communications Inc. and Ameritech Corp. may not mean lower local rates.
The $62 billion merger, announced Monday, elicited predictions from SBC Chairman Edward Whitacre of "more competitive prices and more convenience for millions of consumers."
Those predictions, however, are unlikely to translate into a lower phone bill, said Bruce Roberts, telecommunications analyst at SBC Warburg Dillon Read Inc.
"Historically, the consumer has been subsidized by business users. Unfortunately, with the deregulation of this industry, the consumers are going to pay more regardless of this merger," said Roberts. "It's already in the cards."
If the deal goes through, chances are you or someone you know will be making local calls over SBC-Ameritech phone lines. The combined company will have 57 million phone lines, nearly one-third of the United States. And the companies say they plan to expand beyond their 13-state region to provide local service to other areas of the country.
Despite claims by enthusiastic executives, Baby Bells like SBC aren't really looking to lower the cost of your local phone service.
Instead, telecommunications companies are wrangling to be the providers of all your communications needs. They're hoping that if they can provide you with more wireless, local and long-distance phone services than the other companies, you'll choose to sign up.
The companies will remain focussed on business customers, the most lucrative part of the local phone market. The best a residential consumer can hope for after such a merger is lower cellular and long distance rates in the long-term, said Roberts.
Deregulation disappointment
It wasn't supposed to be this way. The Telecommunications Act of 1996 was aimed at opening up local and long-distance phone markets gradually. This move, Washington hoped, would bring about competition in telecom services, lowering rates and spurring technological advances.
Instead, deregulation has been caught up in a tangle of legal actions. Baby Bells like Ameritech have been blocked by the courts from competing with long-distance firms like AT&T Corp. until they have opened up their own local markets.
"Consumers have really been left in the dark since February 8, 1996 when President Clinton signed the law," said David Otto, Telecommunications Analyst at Edward Jones.
Additionally, instead of seeing nimble phone companies attempting to undercut each other's local phone rates, telecoms like SBC have grown even larger, gobbling up other phone companies like Pacific Telesis Group and Southern New England Telecommunications Corp. of Connecticut.
"This merger is extremely dangerous for consumers," said Gene Kimmelman, co-director of the Consumers Union.
"It is the inevitable backslide toward monopoly and results from excessive deregulation and weak antitrust oversight."
The only Baby Bell combination to emerge from the legal complications has been the 1996 Bell Atlantic Corp./Nynex Corp. merger. And its experience has not been promising for consumers.
There has been no significant drop in local rates for Bell Atlantic customers since the merger and the quality of the company's phone service has been derided by state regulators. 
--from staff and wire reports
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