The recent news that AT&T made a deal to acquire BellSouth has elicited two reactions: one, an assumption that communications prices will go up; and the other, an assumption that prices will go down. It’s always tough to predict exactly what will happen in the marketplace, but the best money will be on the bet that the merger is good for consumers.
The communications market isn’t what it used to be, and that’s a good thing. Consumers used to get their phone services from the phone company and their cable services from the cable company. With the advent of the digital age and the creation of technologies that allow for multiple types of data to be transmitted using Internet protocols, the market for phone and cable services is open to anyone who can best serve consumers.
Scale Matters
For instance, voice over Internet protocol companies (VoIP) such as Vonage and Skype offer consumers low-cost phone service, making old landlines virtually obsolete. Likewise, new technologies like Internet protocol TV (IPTV) allow for lower-cost video services via the Net.
The nation’s telephone and cable companies are well aware of these facts, which is why they have been steadily moving into the broadband market. However, building big data networks is not cheap, which is why there’s been so much consolidation in the last couple of years. Even Reed Hundt, former FCC chairman and a Democrat, agrees.
[…]
Read more here.