PANEL DEBATES MERITS, DRAWBACKS OF TELECOM CONSOLIDATION
Consumer advocates painted bleak picture for customers seeking better service and more competitive rates for cable, phone and Internet access at Consumer Federation of America conference in Washington. One advocate said deregulatory atmosphere at FCC and in Congress meant large companies such as AOL Time Warner (AOL-TW) would continue to dominate country’s telecom service sector. “We think there’s going to be more relaxation with this Bush-led FCC,” said Gene Kimmelman of Consumers Union. “There’s no real engine to produce a major overhaul at this time.” He said FCC under Clinton administration “put blinders on,” allowing companies to acquire bigger footprints without competition. Unless public “rises up” and forces govt. to “deliver on what was promised,” it will continue to pay higher prices for fewer choices, Kimmelman contended. Every govt. effort to deregulate has resulted in higher bills, he said, and strict regulation and oversight, along with true competition, are only ways to resolve problem of monopolies. “We want not just many [cable TV] channels, but many channels from many sources, owned by many people,” he said. Kimmelman acknowledged that with Sept. 11 attacks, telecom services weren’t top priorities for many people and that safety, security, education and health care were much bigger issues for most Americans.
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Describing her role on panel as that of “obligatory corporate punching bag,” Jill Lesser, strategic policy adviser at AOL-TW, defended her company’s conduct and insisted it was competing against variety of ISPs and DBS providers for consumer dollars. Offering both cable and Internet services, AOL-TW has some 32 million subscribers nationwide. Its own analysts don’t see AOL-TW as dominant force throughout telecom sector, she said, but instead look at each piece separately to determine its market share. “It’s not right to look at everything we do,” Lesser said. Also, she said, “consolidation can be good” because synergies and economies of scale could be achieved that way, providing savings for consumers. When Kimmelman suggested that TW Cable should allow customers a la carte cable TV choices, Lesser said that would be like putting Oreo cookies in packages of 10 rather than in packages of 50 just “because I don’t want to eat that many… That’s not the way to run a business. It’s too expensive.”
Legg Mason analyst David Kaut described telecom sector as being on “a very confusing playing field” with different rules applying to various communications such as telephony and cable, both of which are getting into Internet service offerings. “Our basic view… is that there is more consolidation coming, likely in the next few years,” Kaut said. He cited current negotiations between AT&T and Comcast on possible sale of AT&T Broadband (CD Oct 2 p3). Kimmelman said he believed such merger would be “tough for the government to swallow,” but Kaut said he thought deal could gain approval.
Most of more than 50 members of audience were consumer advocates and public utility officials. One asked whether govt. or big companies could be counted on to help small rural communities gain access to cable and Internet services. Kaut suggested that members of public prevail upon govt. to redefine current Universal Service Fund to include all services delivered via broadband, not just telephony. Kimmelman said DBS was an option, but more expensive one. Asked by member of audience whether really anything could be done to achieve greater competition in telecom marketplace, Kimmelman said: “I have no idea.”