Outlook: Perils of the AT&T link-up

THE 1996 telecommunications act in the US was one of those splendidly ill-conceived pieces of legislation which has had the exact opposite effect to the one intended. The idea was to usher in a new era of competition in US telecoms by allowing long distance operators to enter the local market, for years the exclusive preserve of the Regional Bell Operating Companies (RBOCs), and visa versa. Instead it has brought on an unprecedented round of consolidation in the industry, with long distance operators merging with local ones, RBOCs merging with each other, and all manner of other alternative get togethers. The legislators surely cannot have envisaged that they would be opening the doors to such mega-mergers as MCI and WorldCom when they drafted the bill. The upshot is that the cause of competition doesn't seem to have been advanced one jot.

However, the merger announced yesterday between the giant AT&T and the cable operator Telecommunications Inc (TCI) might be the first such consolidation to break the mould. The central justification for the deal, other than the usual opportunity for a vicious round of cost-cutting, is so that AT&T can use TCI's cable TV and internet access business as a platform for its assault on the US local telecoms market.

Whether this happens in practice is anyone's guess. Britain is about the only country in the world where there is serious competition at a local level in fixed line telecommunications. Most forecasters believe that the real competition to the entrenched local monopolies that rule the roost elsewhere is much more likely to come from mobile telephony than an alternative wired network. All the same, AT&T's rhetoric at least sounds credible and certainly it should be enough to ensure the merger gets an easy ride through the regulators.

What the deal means for Britain is even less clear. Possibly it will put the kibosh on the mooted international link up between BT and AT&T altogether. Certainly it seems likely to delay it for a while. Alternatively it could mean that Telewest, one of the very few UK telecom companies not to have participated in the spectacular bull market in telecom stocks of the last year, finally comes under the hammer, and gets sucked into the separate consolidation going on in our own cable TV industry. Whatever the corporate implications, one thing is certain; the consumer can look forward to less competition, not more.

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