The Internet Becomes Ma Bell’s Step Child

Cable operator Comcast (CMCSA) claims it is now the No.3 phone company in the country.  It follows two of the remaining parts of the old AT&T which was broken up in 1982. Verizon (VZ) and the new AT&T (T), which is made up of some parts of the old one, still hold the top two places. That may appear to be complicated because it is. Seven regional telephone firms were created from pieces of the original Ma Bell.  Over the last quarter of a century most of the regionals have been put back together through mergers and acquisitions. It should make phone customers wonder why the company started by Alexander Graham Bell was taken apart at all.

Comcast sells phone service known as IP-enabled, facilities-based phone service that uses VoIP  technology which began to be commercially used in 1995. The cable company now has 6.5 million subscribers talking over the internet instead of traditional landlines which have been used for more than 100 years.

VoIP has damaged the tradition phone operators because it is marketed for as little as $25 a month and is available to almost anyone with cable television service. The cable TV sales forces simply tell customers that they can watch movies and talk on the phone for one fee. At that point, the traditional phone company often loses a client.

The rise of VoIP is a nearly perfect defense of monopolies. Since AT&T stopped being the national phone company, cable operators have become providers of voice services and telephone companies now market home TV service and broadband. Through the three decade process that turned Comcast into a phone company and Verizon and AT&T into television providers, the customer has hardly been well-served. To have an internet connection, phone line, cell phone, cable TV, satellite TV, and a home alarms system, a typical household probably has to keep customer service contact information for half a dozen companies. A broken phone is often due to a faulty TV wire or internet connection.

Consumers are not better off with dozens of companies offering telecommunications and internet services. Cable TV packages can cost $200 a month. VoIP is another $25.  For people who want a traditional phone, the charge is closer to $40. Internet service is another $50 and soon that charge may change based on connection speed. A household with broadband, TV, and voice service can easily spend $300 a month on all of these services.
AT&T was lightly regulated before the government took it apart. Capping its rates, the way a utility’s rates are regulated, would almost certainly have allowed most people to get perfectly fine service for all of the new technologies. The government would have made certain that no one was charged too much. All customer service would have come from just one company. The industry as it existed in 1982 would essentially be nationalized, but there is nothing wrong with that. It is happening to the banking industry and that may end up being a good thing.

Douglas A. McIntyre