"Hi Mom. I know I don't call you enough, but now I have an excuse: The television set has eaten the phone."
This may sound ridiculous - didn't we all once say the dog had eaten our homework - but it may not be too far off-base in the future. With the announcement on Wednesday that AT&T, the long distance carrier, and TCI, the cable giant, will combine in a $37 billion merger, the distinctions in telecommunications are suddenly getting blurred.
The merger is an acceleration of the consolidation of the industry. Still under government scrutiny is the $37 billion merger of MCI and WorldCom, as well as the $60 billion combination of SBC Communications and Ameritech.
This week's merger is different, however, because it offers the opportunity for one company to provide cable service, Internet access, and phone service. And, it may even take place from one line. At least that's the theory.
The concept, which is probably still billions of dollars away from implementation, may mean more competition as your local phone company and Internet provider battle to keep your service. If that happens, consumer groups think the linkup is a good idea. "There is real potential for consumers to win if AT&T uses this cable wire to deliver phone services," says Gene Kimmelman, co-director of the Washington offices of Consumers Union of US Inc., the publisher of Consumer Reports magazine.
That's the government's attitude as well. "If it means that these companies will make a real commitment to building facilities to bring residential voice and high-speed Internet competition to America's homes, then this merger is eminently thinkable," says William Kennard, chairman of the Federal Communications Commission. The FCC will be part of the government regulators examining the merger.
There are plenty of doubters. Jeff Chester of the Center for Media Education complains that the new combination is about building "an Information Age supermonopoly" that will dominate the landscape.
There is no question that the combined company will have enormous telecommunications biceps. Denver-based TCI is one of the largest cable companies, reaching 17 million homes. With all its affiliates and other arrangements, TCI claims it connects to a third of American homes. Through its Liberty Media subsidiary, it also has investments in such entertainment companies as the Discovery Channel, MacNeil/ Lehrer Productions, and Fox Sports. It is currently investing billions to upgrade its cable network, which is one of the oldest in the business.
Point-and-click phone service?
AT&T is a giant as well. It is the nation's leading long-distance phone company with 90 million customers. It also has the most wireless customers. And, most important, it still carries the cachet of old dependable "Ma Bell," known to almost every American. Its latest effort is try to wedge itself back into the local market in an effort to cut its largest cost - access charges it pays local phone firms to hook up to customers' phones.
John Malone, the chairman of TCI, envisions customers sitting at home watching NBA stars Dennis Rodman and Karl Malone battle it out and then pointing and clicking to pull up their phone service, which will be attached to the TV. Behind the clicking will be a minicomputer attached to the TV. These new boxes will cost about $300 each and will allow the set to be used for more than TV viewing. TCI recently said it would spend $4.5 billion to buy 15 million of the units. At the same time, the phone companies, combined with some technology firms, are currently working on modems that will be 20 times as fast as today's models.
All these additions could add up for your telecommunications bill. Last year, cable rates rose 8.5 percent. Standard service cost an average of $28.83. To add high-speed Internet access could add $40 per month. Digital cable could run $10 more each month. Then there's the $300 for the actual box on the set.
The lure will be vastly improved connections. "A cable modem is amazing versus what comes over the phone lines," says Michael Salinger, an associate professor of economics at Boston University School of Management.
Despite the speed, cable companies will have to work hard to sell these products. For example, F. Neal Wade, a resident of Birmingham, Ala., has TCI as his cable supplier and AT&T for his long distance service. But, the concept of the two companies merged together scares him. "That one company could dominate the market," he says. "What could happen to prices?"