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Optical/IP

Back Slappers

Reading through the next-day coverage of the proposed mega-merger between AT&T Inc. (NYSE: T) and BellSouth Corp. (NYSE: BLS) is a lot like reading the sports pages: who won, who lost, and who's going to have to trade up to compete.

Among the losers, according to the consensus of analysts and telecom reporters: the cable industry, which now faces a formidable pair of competitors in the new Ma Bell and Verizon Communications Inc. (NYSE: VZ), once it disentangles itself from Vodafone Group plc (NYSE: VOD); equipment vendors, which could now face "a process akin to military contracting" in selling to the telecom duopoly, according to a Wall Street Journal source; and consumers, who could face rising prices and diminishing choice in basic phone service.

The winners: AT&T itself, which will now have a unified terrestrial and wireless network, nationwide reach, and a huge market cap of $170 billion; Alltel Corp. (NYSE: AT) and Qwest Communications International Inc. (NYSE: Q), both seen as potential acquisition targets for Verizon; and, according to stockpicker James Cramer, lesser-known companies like Atheros Communications Inc. (Nasdaq: ATHR), maker of wireless chipsets.

Lost in all this score-keeping are the effects the tectonic shifts in the telecom landscape might have for enterprise customers, particularly those adopting wireless networking technology at a rapid pace. I've seen remarkably little coverage of the response from business users, even though they make up the highest-margin segment for most telecommunications providers.

Unstrung covered this briefly yesterday in the wake of the deal. And, as the ramifications of the rebirth of Ma Bell ripple out across the telecom sea, we'll continue to explore how enterprise wireless customers are adapting to, and taking advantage of, the Great Re-consolidation. (See Cautious on Convergence.)

For now, I tend to agree with networking commentator Paul Callahan, who writes on his blog that the AT&T/BellSouth merger is like two dinosaurs mating. Verizon has more coverage and a more powerful network, Callahan asserts, and the cable guys (not called "MSOs" for nothing) have already proven they can use their networks to supply attractive triple-play services that both enterprises and consumers demand.

"But if somehow the combination of AT&T and BellSouth can fix both of these problems – spending billions to fix their swiss-cheese GSM network, and magically figuring out how to deliver content – then I'll believe this merger has some value," Callahan wrote yesterday. "Until then, it is nothing more than two old boys slapping each other on the back."

— Richard Martin, Senior Editor, Unstrung

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