Masthead CMC Magazine / May 1, 1996

Merge and Bloat

by John December

It was two years ago in Washington when I first heard Bell Atlantic CEO Raymond Smith speak at the National Net conference. Back then, Smith was just getting over the break-off of a proposed merger with Tele-Communications Inc. Smith put a cheery spin on that break-off. "The beat goes on," he had said. Bell Atlantic certainly has weathered the last two years well, so why has Smith again sought another suitor?

[]Rowland describes how a "highway" metaphor might make one believe that a monopoly is possible.

In 1994, Smith characterized the TCI merger break-off as one of differing corporate cultures as much as a poor match with regard to technologies. So perhaps this recent merger with Nynex Corp. seems like a better match, a "merger of equals," as as the Bell Atlantic Web site trumpets. What happened to all those synergies everyone seems obsessed with gaining in mergers? Unless this merger is about something other than "synergy."

Combined with SBC Communications Inc. and Pacific Telesis Group's recent announcement of their merger, the baby Bells seemed poised to reconfigure themselves into little AT&T's, while AT&T seems to be spinning itself into still smaller pieces (most recently, Lucent).

But Nynex-Bell Atlantic won't be just another baby; it will dominate a whole swath of territory in one of the most populous and communications-rich regions of the world: 36 million customers in 12 Northeastern and Mid-Atlantic states and the District of Colombia. With a virtual monopoly on local phone service in that area, how will any other player come to challenge the bigger Bell Atlantic, with sales of $27 billion?

And why merge? AT&T and IBM have shown that merging is sometimes a foolish move: AT&T's purchase of NCR didn't turn out so well, IBM's purchase of Lotus doesn't seem so bright in hindsight. So why would two phone companies want to merge? Is the logic, if you can't beat 'em, buy 'em?

A combined Bell Atlantic-Nynex will do little to increase competition in telecommunications and will create a single, dominant player in the Northeastern United States. Instead of buying Nynex, Bell Atlantic should buy a clue and compete with innovative products. Otherwise, they may find some day that they are the dinosaur about to topple. [TOC]

John December (, editor of CMC Magazine, lives in Troy, New York.

Copyright © 1996 by John December. All Rights Reserved.

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