The Return of the Soviet Model!

The Atlanta Journal Constitution (a Cox Newspaper!) takes a rather cool view of the AT&T buyout of BellSouth, owing no small measure of that coolness to the fact that Atlanta will be losing the home office of one of its large corporations.

Yes, Atlanta is going to lose a ‘player’ and probably a lot of jobs. Those things happen when companies get bought out.

An African proverb says that “When elephants dance, it is the grass that gets crushed.” It’s true for Atlanta and it’s true for Louisiana.

Louisiana is (brace yourself) not a growth market. What we are going to find is that communities in our slow-growing state are going to move from some indeterminate middle place in BellSouth’s nine-state hierarchy of priorities to some lower place on AT&T’s 22-state hiearchy of priorities. It’s pretty clear that Louisiana and other small states in BellSouth’s service area are going to lose what little chance they had of gaining access to even late-20th Century telecom infrastructure in the first decade of the 21st Century.

One set of figures I saw yesterday showed that AT&T is going to spend a total of $89 Billion on this deal, of which is $22 Billion in debt that was already on BellSouth’s books. Even with an estimated combined income of the new AT&T in the $130 Billion range, it’s going to take a while for the company to digest this debt, and the debt from the earlier purchase of AT&T (by SBC, which then took the AT&T name), other debt from previous deals, AND then borrow money to build out new networks.

Oh, yeah! Networks! The company actually fancies itself as being in the network building business. That will likely be the case only less so after this buyout, which is more than a morsel.

No doubt AT&T will make all the right coo-ing sounds in Louisiana and other BellSouth states, talking about all the wonderful things this new gargantuan scale is going to enable them to do. But, as even a cursory glance indicates, the AT&T/SBC record on keeping promises made to win approval of mergers is, to put it kindly, weak. More on that in another post.

If there is a silver lining in this for Louisiana it is that maybe (and it’s just a maybe) this gobbling up of BellSouth by AT&T will convince the Governor, the Legislature and regulators that the interests of these companies are distinct and separate from the interests of the state, its citizens and their communities. If such a realization did occur, it would be a status quo shattering event.

In the 10 years since passage of the Telecommunications Act of 1996, one would be hard pressed to find any evidence that passage of that act has had any impact on the way the state of Louisiana handles its telecommunications.

In 1995, almost all of the state’s telecom business went to BellSouth. It was the same in 2005. In 1995, regulators turned to ‘the phone company’ for expertise on telephone rate matters. In 2005, the PSC remained firmly in the hip pocket of BellSouth.

In short, while the rest of America was experiencing the telecom revolution, with all its turbulence, in Louisiana little changed. Essentially sitting out that revolution contributed significantly to the economic doldrums our state has experienced over the past decade and (along with other issues) helps explains why Louisiana never really got over the oil bust of the mid-1980’s (yes, some cities have, but the state has never really returned to robust growth).

But, something so dramatic as the buyout of the third largest phone company in America will get the attention of even Louisiana legislators. No doubt, they either heard the story on the news last night or will read it in the paper today. If nothing else, they’ll be wondering whether their next campaign contribution checks will come with the BellSouth or AT&T name on them.

And maybe that’s when it will begin to dawn on them that this world of telecom IS really changing.

And maybe that’s when they’ll begin to realize that these big companies ARE only looking out for their own interests and that Louisiana is (at best) a side show for those folks.

And maybe that’s when they’ll recognize that Louisiana IS really going to have to look out for its own interests if we are ever going to move into the modern era of telecommunications, which is essential for ANY information/knowledge-based economic activity.

It would be ironic but somehow fitting if it took this attempt to restore the decades-gone phone monopoly to convince our good ole boys that the good ole days are really gone.

I’ll take change any way I can get it these days.

8 thoughts on “The Return of the Soviet Model!”

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