NCPA - National Center for Policy Analysis

Betting on Competition in Telecommunications

May 10, 1999

It seems that telecom companies are buying each other up and merging every time one turns around. Yet so far the federal government seems content to let the multibillion dollar deals proceed.

Antitrust experts believe government officials are counting on the new combinations to increase competition in telecommunications -- bringing the lower prices and improved services that were the goals of the 1996 law that deregulated the industry.

They see four reasons why trustbusters are pursuing a hands-off policy this time around:

  • It appears that AT&T, through its string of acquisitions, is positioning itself to compete with the Baby Bells -- which would be preferable to a single monopoly.
  • The Justice Department might have a difficult time coming up with enough evidence to persuade a judge that blocking some of the mergers is necessary to promote competition.
  • Given the difficulties inherent in predicting how new markets might arise in telecommunications in a period of rapid change, federal officials don't won't to open themselves to later accusations of snuffing out a new industry in its infancy.
  • Regulators and Capitol Hill observers have been restrained in their comments so as not to make it appear the 1996 act was a failure.

Source: Bryan Gruley, "Why Laissez-Faire Is the Washington Line on Telecom Mergers," Wall Street Journal, May 10, 1999.


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