03.13.2006 11:13 AM
AT&T to purchase BellSouth; targets the future of television

AT&T’s plans to buy BellSouth for $67 billion may result in a mega merger of telephone company giants, but the business motives behind it have much to do about the future of television distribution.

With cable providers and technology companies entering the telephone business, the former Baby Bells are gearing up to sell television programs to home and mobile customers. Companies such as AT&T, the New York Times reported, are trying to bulk up and transform themselves into one-stop shops for all communications needs.

AT&T, like competitor Verizon, is in a frantic race to head off rivals by offering television services over high-speed fiber connections. However, the construction of the next-generation networks to carry their programming has been expensive and the carriers have had to acquire permission from municipalities to sell their service.

The Bells have asked Congress to help them streamline the local franchise process, alarming cable companies that have aligned to defend themselves against potentially fierce competition.

The newly merged AT&T-BellSouth company, with $120 billion in sales, about 317,000 workers and 71 million local phone customers in 22 states, would recreate a major portion of the former AT&T monopoly that was broken up a generation ago, the Times reported.

After the merger only three Baby Bells would remain: AT&T, the former SBC Communications that provided service in the Southwest and elsewhere; Qwest; and Verizon, the $90 billion company mainly serving the northeast.

Though the new deal will no doubt get major regulatory scrutiny, things have changed since 1984, when a federal court dismantled the original Ma Bell monopoly. At the time, the Internet and mobile telephony barely existed and cable operators were far smaller than today.

Regulators in the Bush administration have also been generally sympathetic to mergers, which has not escaped AT&T’s attention, according to the Times.

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