SBC to purchase AT&T for $16b
Wha..? I don't get it. Why? SBC - what do you think you will accomplish in buying AT&T? They are no longer a viable competitor to you. The RBOCs (Regional Bell Operating Companies) were formed as a result of the breakup of AT&T and are based on a restructuring agreement that took effect in 1984. The final restructuring agreement was the United States District Court's Modification of Final Judgment (MFJ). MFJ ended the Justice Department's suit against AT&T. The RBOCs were organized into seven regional Bell holding companies called Ameritech, Bell Atlantic, Bell South, Nynex, Pacific Telesis, Southwestern Bell, and US West. Each RBOC was assigned a specific geographical area, and each geographical area was divided into service areas called LATAs (local access and transport areas). The RBOCs are also called the ILECs (incumbent local exchange carriers). In contrast, CAPs (Competitive Access Providers) and CLECs (competitive local exchange carriers) are companies that compete against the RBOCs in the local service areas. IXCs (interexchange carriers) are long-distance service providers such as AT&T, MCI, and Sprint. The Telecommunications Reform Act of 1996 changed the telecommunications landscape yet again. RBOCs were allowed to merge and the following mergers or acquisitions took place in the following years: So, at this point, it is better to refer to RBOCs as ILECs. They include SBC Communications, Bell Atlantic (now called Verizon), Qwest Communications, and BellSouth.
For those who need a history refresher, let me explain:
(thanks to Linktionary.com for the exact dates)
So, the 1996 Telcom act has allowed SBC to provide not only local voice and data services, but long distance as well. Since 1996, they have been a direct competitor to AT&T. And AT&T could not compete completely against the RBOCs until very recently. AT&T started to offer local voice service by "renting" the local copper loop from the RBOC. The RBOC was federally mandated to lease these lines to AT&T (and MCI and Sprint) so that consumers have the illusion of having more than one local phone provider. But, SBC did not play nice. They set the lease rates so high, that AT&T could not offer competitively priced service. So, when consumers signed up for AT&T's local phone service, they were really getting a re-branded version of their local phone company with extra fees and surcharges. Not a good deal. But AT&T had little other choice.
Of the original three IXCs, MCI of course went bankrupt with an implosion larger than Enron (good job Bernie Ebbers!), Sprint is puttering along only supported by its cellular network and AT&T is hemorrhaging cash every quarter.
AT&T has pretty much divested itself of its other lines of business. Wireless (cellular) was recently purchased by Cingular, their cable modem / home broad band (AT&T Broadband) was sold to Comcast Cable a few years ago. Hardware manufacturing went out the door when Lucent was spun off from AT&T.
As of today, AT&T only has 6 main lines of business: Long Distance, Toll Free services, Local, Calling Cards, tele-conference, and data. But in all of these except for long distance and calling cards, SBC (the or the local RBOC) still owned the hallowed copper loop. AT&T was surviving based on the federally mandated kindness of the RBOCs.
I am appalled that SBC is even spending this amount of money to purchase AT&T. Just recently SBC went through some massive layoffs and debt restructuring. They are losing voice customers by the thousands, but gaining data (aDSL) customers. This means that SBCs new direct competitor are the cable TV (Comcast) companies.
As a result, AT&T has no viable revenue stream left to it. And if left alone, they would die off anyway. The RBOCs have already won. That's why I don't understand why SBC is spending $16b to purchase a dying company. It would be much smarter to let AT&T die on their own, and then pick up the assets from the auction block.