Tuesday, December 11, 2007

Back to the future: Could AT&T be facing major federal regulatory action two decades after divestiture order?

Could AT&T once again find itself facing sweeping federal government regulatory action on the scale of the 1984 federal court ruling ordering the big publicly traded telecommunications company be divested on anti-trust grounds?

It’s possible because in the more than two decades following the break up order, AT&T through a combination of mergers and acquisitions including its purchase of BellSouth one year ago has regained much of its territorial hegemony and is now the dominant telecommunications provider in 22 states.

If it happens in the next several years, this time around federal policymakers will be motivated by a different set of circumstances: Not just the company’s dominant market position, but growing alarm over the insufficiency of AT&T's aging copper wire-based local distribution infrastructure to meet the burgeoning demand for advanced telecommunications services based on broadband Internet access.

The realization that broadband Internet access is vital to the health of the nation’s economy and concern the U.S. will end up uncompetitive relative to other industrialized nations measured on broadband Internet access will fan the unease.

Public policymakers could ultimately require AT&T to sell off regions within its service area where it does not commit to deploy infrastructure ensuring near universal broadband access by a future date. Congress is already laying the groundwork for such a move with legislation that would map out America’s broadband black holes.

Skeptics might argue such strong regulatory action is improbable because unlike in 1984, AT&T competes with cable companies and other telcos to offer broadband-based services. Not necessarily. Cable companies often aren’t anywhere to be found in AT&T broadband black holes. Moreover, there’s a lack of competition among telcos since their market practice is to avoid competing in each other’s territories with wire line-based services.

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