Monopolized U.S. Telecom Industry Eyes More Consolidation, Because What Could Go Wrong

Deals

from the do-not-pass-go,-do-not-collect-$200 dept

The ink is barely dry on Verizon’s $20 billion proposed acquisition of Frontier, but industry analysts — ever excited to boost stock valuations via speculation — are already pushing for greater consolidation in the very broken U.S. telecom industry.

Telecom industry trade magazines are all frothy at the potential for even more mergers, including a potential Verizon purchase of Lumen (formerly CenturyLink):

“Analyst Jonathan Chaplin wrote in a research note issued Friday that an unnamed person pitched that idea to New Street Research about two weeks ago. Such an acquisition could help shore up Verizon’s fiber base and convergence strategy. “It is speculative. But it makes a lot of sense,” Chaplin wrote.”

…”I think Lumen is up for grabs. They are probably the next one to drop,” Jeff Heynen, a VP at The Dell’Oro Group focused on broadband access and home networking, tells Light Reading.

Ah yes, the “convergence strategy” of gobbling up every single provider of an essential service in order to create a barely regulated monopoly over broadband access across much of the country. What could go wrong? Where in history has that ever shown to be folly?

As we’re currently seeing in streaming, pressures for continued quarterly returns are challenged when your market starts to saturate and subscriber growth slows. So then companies turn to cutting corners (usually labor, customer service) and nickel-and-diming subscribers (usage caps, hidden fees) to goose earnings.

When those efforts are taxed out, they then turn to often mindless mergers and acquisitions to temporarily boost stock valuations and drive massive tax reductions. That consolidation not only leads to less competition generally (resulting in high prices, spottier broadband access, and crappier service), but as we saw with previous deals between Verizon and Frontier, the huge debt loads created by such deals result in additional cuts, usually impacting labor, service quality, or users.

This kind of stuff isn’t of any real interest to most telecom industry analysts, whose primary function is to ensure that shareholders get their sweet, justified returns. And it’s amusing to watch everybody involved in this self-serving chain utterly refuse to learn absolutely anything from history. Almost none of the debate considers, even for a fleeting second, the impact debt-fueled consolidation has on employees and users. It’s just deemed a tangential irrelevance.

U.S. broadband is a patchwork of regional monopolies, coddled by corrupt federal and state lawmakers, who’ve worked tirelessly to demolish anything closely resembling competition in local broadband markets. More mindless consolidation is the exact opposite of what the broken industry needs, but the zeal in which folks pursue such “synergy creation” and “convergence” is unrelenting all the same.

Filed Under: broadband, competition, consolidation, high speed internet, mergers, telecom
Companies: centurylink, frontier, lumen, verizon