25 April 2024

Potential Telecom Deals Show Promise and Peril

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The communications industry long has promised a future where wireless service, video and the Internet are offered in one convenient package. Three huge possible deals now are bringing that future into view.

Cellphone and Internet provider AT&T Inc. is looking to buy satellite company DirecTV. Cable and Internet provider Comcast Corp. is considering offering mobile-phone service over Wi-Fi if its planned $45 billion merger with Time Warner Cable Inc. is approved. And cellphone company Sprint Corp. says it could provide home Internet connections over wireless if it is allowed to buy smaller rival T-Mobile US Inc.

In theory, the deals would usher in an era in which consumers would get new, flexible options to be entertained and communicate wherever and however they choose.

But the path to that idealized world is perilous, requiring that regulators approve mergers that would create still-bigger companies in industries where Americans already have few choices.

There are two possible outcomes, says Blair Levin, a former Federal Communications Commission chief of staff who helped draft the agency's road map for increasing broadband access.

In one, the companies bulk up and start competing aggressively, creating exciting new services.

In the other, new competition from technologies such as Internet broadband via wireless or mobile-phone service via Wi-Fi don't pan out, giving the biggest legacy companies more pricing power than ever.

It is impossible to know which one will prevail, says Mr. Levin, a fellow at the Aspen Institute think tank. "Anybody who thinks they know is probably wrong."

Consumers have a lot on the line. Wireless, pay TV and broadband Internet service gobble up a big slice of Americans' time and money. Annual household spending on telephone, pay TV and Internet service averaged $2,237 in 2012, the Labor Department says. That was up 20% from 2007, while overall household spending rose just 3.6%.

"Any of these deals individually would represent a major shift," says Rick Kaplan, former head of the FCC's wireless bureau. "Taken together, it is a pretty impressive transformation of the industry in a very short period of time," says Mr. Kaplan, the head of strategic planning at the National Association of Broadcasters.

Click here for the full article in the Wall Street Journal.

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