The Telecom Scam: 5 Behemoths That Strangle Innovation and Ensure You Pay Too Much for Bad Service

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According to its 2010 annual report, AT&T’s revenues were split nearly equally between its wireline and wireless operations. The breakdown is as follows: 

• Wireline – 47 percent or $57.7 billion (with voice at 22% or $27.0 billion and data at 25% or $30.7 billion)
• Wireless – 47 percent or $57.8 billion
• Other – 6 percent or $6.8 billion

The current AT&T was created by the shotgun marriages of one Baby Bell sibling after another. In 1996, Southwestern Bell Corporation (SBC) acquired PacBell; two years later, SBC acquired SNET. (In 1997, SBC attempted to acquire AT&T long distance, but the FCC rejected the bid.) It then went on to gobble up Ameritech (which controlled midwest states like Illinois and Indiana) and BellSouth (that controlled states from Florida to Texas, up to South Carolina and west to Kansas). SBC finally devoured long-distance AT&T.   

On the wireless side, the old AT&T’s wireless business began 1992 when it acquired a one-third share of the industry innovator, McCaw Cellular; two years later, it swallowed McCaw. In 2004, Cingular, a joint venture of SBC and Bell South, acquired AT&T and, in 2006, the “new” rebranded AT&T acquired Bell South. 

AT&T’s most advanced service, U-verse, is intended to compete with cable television as a programming service. As of June 2011, it reported only 3.4 million subscribers. U-verse’s high-end version, the High Speed Internet Max Turbo, offers downstream service at 18.1 Mbps to 24 Mbps; its high-end TV and Internet packages offers up to 410 TV channels but downstream Internet speeds only up to 12 Mbps.   

However, U-verse is not a “true” broadband optical-fiber platform. Rather, it’s a Fiber-to-the-Node (FTTH) or Fiber-to-the-Premises (FTTP) installation that, when in the home, runs over the old, already-installed “twisted pair” copper network; sadly, copper can’t handle more than 25 Mbps. AT&T does not advertise its upstream data rates; they are important for Skype, video conferencing, user-generated content (UGC) videos and other user-initated options. Thus, in the states that AT&T controls, consumers will never get true broadband service.  

To put this into perspective, in Hong Kong, France or Korea, customers get 100 Mbps in both directions for less money than Americans pay. 

Verizon 

Like AT&T, Verizon was created by mergers of a second group of Baby Bells. In 1997, Bell Atlantic (which covered the territory from New Jersey to Virginia) merged with the New York Bell operating company, NYNEX, that covered Maine through New York. Verizon had control of local communications services throughout the East Coast.  

In 2000, Bell Atlantic acquired the independent phone company GTE, which had over 20 different territories throughout the US, and rebranded itself Verizon. In 2005, illustrating growing industry consolidation, Verizon acquired MCI, the company that, ironically, initiated the campaign that brokeup Ma Bell. More recently, it also acquired another independent, AllTel. (Verizon is concentrating on urban territories, dumping more rural areas; it sold off Maine, New Hampshire, Vermont and other territories as part of its acquistions of GTE and Alltel.)   

Its 2010, Verizon’s revenues were $107 billion; it ranks 13th on the Fortune 500 list. Like AT&T, Verizon controls local service in multiple states and offers wireline (local and long distance), wireless, Internet access (as an ISP) and broadband content (e.g, video, music).   

According to its 2010 annual report, Verizon’s wireline services are its cash cow. Its revenue breakdown is as follows: 

• Wireline – 60 percent or $63.4.7 billion
• Wireless – 39 percent or $41.2 billion
• Other – >1 percent or $1.9 billion

Verizon Wireless is the brand name for a joint venture formally named the Cellco Partnership; Verizon, the former Bell companies, controls 55 percent and the British-based Vodafone controls 45 percent. In January 2009, Verizon Wireless acquired Wireless as part of a deal valued at $28.1 billion.