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Proving the Power of Owning the Pipe

Baby Bell SBC snatched up its estranged Ma, AT&T, for $22 billion on January 31. Then Baby Bell Verizon announced plans on February 14 to acquire MCI, the once brash upstart that forced the Bell system divestiture 21 years ago, for $6.75 billion. That's a lot of money intended to change hands in two weeks. :) There's nothing like 20/20 hindsight. During the federally mandated divestiture of AT&T, Ma Bell decided the most valuable piece of the phone business was its coveted long-distance operation. So, AT&T decided to stick the Baby Bells with running the messy local loop, while it focused on sexy long-distance and business services. Oops. If these deals teach us anything, it's that whoever owns the pipe has the power. This is good and bad news for cable. On the upside, MSOs are major pipe owners and are very well positioned for broadband's present and future. Also, with SBC and Verizon now consumed with digesting their acquisitions, their aggressive telco video rollout plans may slow in the near term. On the downside for cable, once these deals are done, SBC and Verizon will have incredibly powerful network and service portfolios for business customers. Cable continues to talk about its play in the business market, but compared to the moves of the Bells, cable's commercial activities are little more than lip service. One has to wonder, thanks to needless foot dragging, has cable's window of opportunity in the lucrative commercial sector essentially closed? And finally, what are MSOs going to do to fill the mobile hole in their product portfolios? SBC and Verizon will be raising the bar in phone, broadband and wireless integration in short order.
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