Holy cow! I was surprised to see in my RSS aggregator this morning an article from the Wall Street Journal on-line conveying a rumor that a proposed acquisition of BellSouth by AT&T could come as early as next week. This is a bold and ambitious move so soon after the merger between SBC and AT&T completed late last year. Im not surprised by the move, but definitely surprised by the timing of the move. This is a lot to digest both operationally and financially in a very short time.
It seems pretty clear that the motivator behind the acquisition of BellSouth is to acquire the forty percent stake in the Cingular Wireless joint venture that AT&T doesnt already own. Cingular has been on a growth trajectory for some time, and it seems only natural that AT&T would want to capture all of that growth.
We can bank on the return of the AT&T brand to the wireless space if this merger goes through. How will AT&T manage this to maintain the goodwill contained in the Cingular brand?
On the fixed line side there are some serious issues that should get sorted as part of the DoJ and the FCC review of this acquisition. This has to do with comments made by both AT&T and BellSouth executives related to applying premium charges to particular types of traffic or certain content providers. These have been very troubling suggestions to turn the model for pricing of Internet access completely upside down, and the RBOCs have been employing some very unilateral language in how they are going to go about putting this model in place. The timing of these comments have been clearly a reflection of the perception within the Bell companies that theyve consolidated sufficient market control to tell the rest of the value chain whats what. Review of this acquisition is an opportunity to really clarify what is and is not going to be acceptable. Of this issue the WSJ had this to say:
Although AT&T and Verizon’s last mergers passed both FCC and Justice Department review with little major problems, the latest proposed merger may face more hurdles. Recent comments by AT&T and BellSouth executives about their intentions to explore new revenue streams from their high-speed Internet services by introducing two-tier or “premium” service for Internet content providers. Concerns about those plans and the concept of “net neutrality,” or ensuring that consumers have open access to all Internet sites and services and businesses do not find their content slowed, has become a major problems for the Bells in Washington.
Ive been thinking a lot about the notion of tiered pricing and premium content, and Ive been making some comparisons between all-you-can-eat fixed line broadband Internet access compared to the pricing for wireless broadband content. There are some consumer dynamics that I think the RBOCs are ignoring or forgetting, and this is the fact that their efforts to sell premium, tiered wireless broadband data content have basically gone nowhere. Who the hell wants to pay $3 to download a Shakira video from Verizon Broadband!?!? I wouldnt watch a Shakira video if you paid me $3! If you dont believe me, take a look at this entry from Om Maliks blog summarizing two surveys on this topic from RBC Capital and the disconnect between mobile carriers and consumers on the topic of wireless content. The walled garden model clearly isnt working in the wireless space.
Tags: Net Neutrality
