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AT&T/BellSouth Merger Could Pose Threat to Cable Companies

6:30 am on March 14, 2006 | Category: Business, Corporate, Telecom Services, Telephone, Television

In the increasingly heated competition between telephone and cable companies, major mergers within the telephone industry could pose a huge long-term threat to American cable companies like Time Warner and Comcast.

The sheer size advantage of telecom giant, AT&T is about to become a whole lot bigger due to its pending merger with BellSouth. This consolidation will give Americaâ€™s biggest telephone company more power to cut prices, move more quickly into pay TV, and increase its dominance in the wireless market.

The fact that both AT&T and Verizon are building fiber optic networks throughout the US, will allow both telecom leaders to gain a competitive advantage in the pay TV and broadband internet markets.

“The playing field is being leveled, and it’s Comcast’s mountain that is getting leveled more than AT&T’s,” said former cable executive, Leo Hindery Jr., who is now a partner at private equity firm, InterMedia Partners. “The cable guys are boxed in, and I don’t think there’s a Hail Mary pass.”

If the cable companies want to fight back at this point, they will most likely have to do so aggressively. Offering competitively priced VoIP services is one way that cable providers have managed to cut into telephone companies core market of voice communication.

There is little question that players on both side will have to innovate more and more in the years to come if they hope to remain competitive in this age of increasing convergence. Although leading cable providers still claim to have an edge in terms of service quality, the telephone giants are catching up fast, and seem to have both low prices and overall momentum on their side.

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