The joke in the US telecoms market is that the few surviving phone companies are going to merge and change their name to Ma Bell. Following three big takeovers in the past two months, we may not be that far away.
The current US telecoms market was created by the late Judge Harold Greene, who went after AT&T's historic telephone monopoly with a tenacity rarely seen outside of movies such as Jaws. The world's biggest private company simply caved in, and in 1984, AT&T and the US Justice Department agreed to split off seven standalone RBOCs (Regional Bell Operating Companies) known as "Baby Bells".
AT&T was allowed to hang on to Bell Labs (later spun off as Lucent) and its long-distance phone business. Later it bought a computer company, NCR, for $7.3bn, a mobile phone business, McCaw Cellular, for $11.5bn, and a cable company, TCI, for $48bn, but it never regained its former glory.
The AT&T that traced its roots to Alexander Graham Bell was finally swallowed up by SBC for just $16bn on January 31.
SBC started as the Southwestern Bell Corporation, one of Greene's RBOCs. Before buying its parent, it also gobbled up two siblings: Pacific Telesis (Pacific Bell and Nevada Bell) and Ameritech, with the latter costing $62bn. With Bell South, it also owns Cingular, a mobile phone network, which is absorbing AT&T Wireless.
SBC's main rival is now Verizon (sounds like horizon), which also started as an RBOC: Bell Atlantic. It took over another Baby Bell, Nynex, for $25.6bn, then GTE (General Telephone and Electronics), the biggest independent, for $53bn. It also has a huge mobile phone business, Verizon Wireless, and last month, it bought MCI, the long distance operator, for $6.75bn.
Qwest - which is still trying to buy MCI - remains the weakest player, and an obvious takeover candidate. Qwest came out of the Southern Pacific railway, which formed Southern Pacific Telecommunications to lay fibre-optic cables along its tracks. It then got into the local phone business by buying an RBOC, US West, for $43.5bn.
Judge Greene might be surprised to find that only one of the companies he created - Bell South - survives in anything like its original form. Whether his massive restructuring of the industry benefited consumers is another matter: we'll never know for sure. He certainly livened things up. But the telecoms market is much more competitive today because of the development of cellular phones, cable TV networks and the internet, not because US local and long distance calls were connected by different companies.
What we do know is that phone company executives, and the whole US financial services industry, have enjoyed an almost unimaginable bonanza. What AT&T took more than a century to build, SBC and Verizon have replicated in less than 20, mainly as a result of multibillion takeovers. This has been particularly true since the US government changed the rules again with the Telecommunications Act of 1996.
Judge Greene wanted competition. The result has been mountains of money spent on consolidation.
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