AT&T kills BellSouth Plans?

Who knew? David Burnstein, the highly respected telcom pundit with the unbearbly clunky html, says that AT&T’s acquistion of BellSouth frustrated BS’s plans to move to an all IP network and rip out the old phone systems antiquated operational guts.

The best minds in this business think it is now cheaper to replace the old PSTN network with a new all-IP network. British Telecom is essentially throwing out all the existing gear and running broadband to every home by 2011. Phone calls will be all VOIP, and there is no technical reason they can’t turn on data to 95% of the British Isles. New Zealand is thinking similarly, parts of Trinidad and Tobago are moving ahead, and BellSouth planned the same thing until the empire took over and cut everything back. (Has anyone else noticed they’ve decimated BellSouth’s network plans this year? Capital spending plunged.) (My emphasis in bold)

While that’s the first I’ve heard of it, the claim that BS planned an upgrade and that AT&T is keeping that money for its own purposes instead is fairly believable. —One of the most reliable patterns of the reconsolidation of the regional phone monopolies into a few national powers has been that those that phone companies that chose to spend their cash on acquisition swallowed their brethren that were investing instead in network capacity. The acquiring companies invested their current profits not in additional profit-generating capacity but in “buying” debt. That is a substantial part of the reason that the newly merged companies killed earlier promises to build national fiber networks. (Take a look at an overview (and then the massive documentation) of these broken promises—it’ll shake your confidence in our regulatory system.) They used the money to buy out each other and enriched the banking industry instead of their shareholders—and the communities they served.

Our regulatory regime allowed two behaviors that destroyed the US’ chance to stay ahead in the network race by allowing the phone companies to seek profit outside their core wireline networks: it allowed the phone companies to spend their monopoly income on buying up pretty much the entire potentially competitive wireless cellular market. We lost both competition and investment in fiber optics at one blow. 2) it allowed AT&T and the other Bells to further waste their substance by transferring huge amounts of money to the financial sector solely to make their companies prettier on the stock market selling block. Capacity was again sacrificed.

I’ve said it before and I’ll repeat it again: Deregulating monopolies is a recipe for disaster.

This time BellSouth customers (who would have benefited from an upgraded core even if BellSouth did not to have the courage for fiber they of all the baby Bells could have afforded) will be paying the price for our regulators’ fantasy that they could magically create a competitive market by allowing monopolists free rein to purchase their competition and reconsolidate.

What were they thinking?