And the winner in the great telecom-consolidation sweepstakes is...monopoly! That appears to be the most likely outcome as the giant telecommunications industry works its way through the current meltdown. The promise of competition and lower prices provided by the entry of new players is quickly fading. With hundreds of new telecom startups hugely in debt and facing bankruptcy, only those companies with deep pockets will survive to pick up the remaining assets on the cheap. These appear to be none other than the old Baby Bells, which may well wind up controlling not only the telephone and data services but also the all-important broadband market. Newly appointed Federal Communications Commission Chairman Michael K. Powell should take note. Competition is being threatened more than ever in telecom.
The Bells are not known for their competitive vigor or their willingness to roll out broadband quickly. Indeed, it was only competition from new companies that spurred them to start. Even now, the monthly cost--about $40--for broadband service is high, and the quality of digital subscriber line (DSL) service often low. Baby Bell SBC Communications Inc. just hiked its rate to $50 a month.
Broadband is clearly the next big thing in the info-tech economy. Cell-phone and handheld-device manufacturers, Internet infrastructure builders, server makers, content providers, software writers, advertisers, and others in the IT sector are betting on broadband.
The best hope is for a quick economic recovery that restores demand and provides financing to the remaining telecom startups--before they go belly-up. But regulators will have to do their part as well. If consolidation produces more monopolization of the telecom market, America's high-tech economy will suffer.