Every so often history seems to repeat itself right before your eyes. That happened last week as Los Angeles City Atty. Rocky Delgadillo sued Time Warner Cable Inc., alleging that it failed to deliver on promises of better service.
Those vows were made a couple of years ago when Time Warner joined with Comcast Corp. to buy bankrupt Adelphia Communications Corp. for $12.7 billion.
Time Warner and Comcast then swapped franchises so they wouldn't have to cooperate or compete with one another. Instead, each claimed control of different regions, enjoying the market power that comes with being a monopoly, or close to it.
So let's recap: Multibillion-dollar telecom merger, supposedly good for consumers, not so much actually.
And just as L.A. was taking Time Warner to court, what happened? A multibillion-dollar telecom merger was announced and the companies involved pledged that this would be good for consumers.
Deja vu all over again.
In the latest deal, Verizon Wireless said it would shell out $28.1 billion to acquire rival Alltel Corp. and become the largest cellphone provider in the country, vaulting past current leader AT&T Inc.
Once the deal goes through, Verizon and AT&T will account for roughly 150 million of the 255 million cellphone subscribers nationwide, or nearly 60% of the market.
Verizon said its acquisition of Alltel would be good for customers.
That remains to be seen, said Chris Murray, senior counsel for Consumers Union. What's sure, he said, is that the merger will be good for Verizon.
"The less competition you face, the more market power you enjoy," Murray said.
The more market power you enjoy, the less incentive you have to make customers happy. It's pretty simple.
Verizon Wireless is a joint venture of Verizon Communications Inc. and Britain's Vodafone Group. Here's what Lowell McAdam, chief executive of Verizon Wireless, had to say after the Alltel takeover was announced: "This move will create an enhanced platform of network coverage, spectrum and customer care to better serve the growing needs of both Alltel and Verizon Wireless customers for reliable basic and advanced broadband wireless services."
It's nice that "customer care" will now enjoy an
"enhanced platform," whatever that means. But the glaring omission from McAdam's statement is how the merger will affect prices.
John Walls, a spokesman for CTIA, a wireless industry association, said people have nothing to fear.
