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Last week the CEO proposed his most spectacular link-up yet: a plan to merge $70 billion Bell Atlantic (which serves roughly 40 million customers in 13 states) with GTE, a $52 billion company with some 21 million widely scattered customers. Earlier in the week AT&T had announced a multibillion-dollar joint venture with British Telecom. Driven by a violent reworking of the competitive and technological landscape, phone giants were embracing one another mostly out of mutual fear and defensiveness...
...stimulus for all this furious merging is the growth of competition from nontelephone companies. A decade ago, most Americans picked up their phones to hear a dial tone linking them to one of the Baby Bell companies. But in recent years that monopoly has slipped away. And in the eyes of traditional telecom bosses, the antidote is conglomeration, a kind of circle-the-wagons strategy they hope can hold off competition's inevitable charge. The approach has roots in an earlier boom time. In the 1920s the nation's railroad firms consolidated in a vain attempt to stave off competition...
While the 1996 Act did touch off this buyout binge, it also allowed other competitors, including cable-TV firms, to enter the business. And on Wall Street, the big phone mergers are now regarded with skepticism (and some concern that Washington will intervene). Both GTE and Bell Atlantic stocks slipped last week. AT&T--which took a hit after announcing a merger with TCI--ticked up after the British Telecom deal...
That should be good for consumer service and savings. Even Bell Atlantic's Seidenberg has said, to FORTUNE magazine, that he foresees a world where, rather than pay for phone calls by the minute, "people will in effect just pay a subscription rate to have access to a network." And while all-you-can-talk (or watch, or surf) lines could be a dream for consumers, they will be a nightmare for the mega-Bells, which must add new subscribers faster than they lose revenue to new competitors and pricing pressures. Some firms, like AT&T, hope to find lucre...
...surely a new world, and the signs are not just global. Even those old New York manholes where Seidenberg spent his youth are changing. Once threaded with a few Bell Atlantic cables, they are now knitted by dozens of other "local loops" from competing firms--proof that at the end of the day, there may be only one set of guys who are guaranteed to profit in this new telecom world: the cable splicers...