Merger Could Mean Better Services, Analyst Says

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MELISSA BLOCK, host:

For more on what this deal might mean to consumers, we're joined by Scott Cleland. He's president of the tech com consulting firm Precursor. Thanks for coming in.

Mr. SCOTT CLELAND (Founder and CEO, Precursor Group): Thank you.

BLOCK: Let's think about this in terms of consumers, first, the average consumer at home. What might a merger like this mean?

Mr. CLELAND: Well, it's not going to have a big effect on most consumers. It will be a change in brand, so they'll have to get familiar with the new company. But most of the services will remain the same, and it will probably accelerate some of the innovation and new services down the road.

BLOCK: And what might those new services be?

Mr. CLELAND: Well, it's going to be brining TV or video to the phone service and it'll be eventually integrating your wire line phone with your wireless phone.

BLOCK: If you still happen to have a wire line phone, which not everybody does.

Mr. CLELAND: Correct.

BLOCK: Would you anticipate that this would mean a shift in prices and cost for consumers, either up or down?

Mr. CLELAND: Probably not. I mean, the trend is for prices to be going down. You know, prices of wireless per minute, for long distance per minute, prices for local, for broadband access, all these prices are coming down. The reason why there's this consolidation that's been going on is in response to the competition and the prices going down.

BLOCK: But, if there is that consolidation, wouldn't there be less incentive to lower prices?

Mr. CLELAND: Well, the question is, will there be consolidation that will lead to monopoly? And that's an anti-trust question. And I think in this instance, this deal is not going to be found to be an anti-trust problem, it's highly likely to be approved. There may be some conditions on it, but the times have changed. This is, the policies to break up the monopoly have succeeded.

BLOCK: You hear about something in the context of this deal, the notion being Internet neutrality. As far as I understand it, the idea would be that there might be different tiers of service. There'd be essentially a toll lane and the basic access that the rest of us would have. Explain how that would work.

Mr. CLELAND: Well, we have a rather unique situation in the United States where we have allowed the Internet to grow up in a period where everyone has kind of flat rate service, it's not usage-based. A lot of places around the world are usage based. And so our whole Internet economy has grown up thinking that once you pay to get on broadband, you don't have to pay incrementally. And some of the phone companies would like to change that back to usage base. And I think that issue will be fought over in the years ahead.

BLOCK: When you look at the consolidation in this industry with big companies that were already huge, getting even huger, is there still latitude for an upstart firm, a small firm to be more nimble, to get in where maybe the big companies can't go?

Mr. CLELAND: Oh, I think, you know, we know the names. Vonage started out as a very little company, Skype started out very small and was bought by eBay. I think there's always a possibility for innovative companies to enter in. Now, clearly if they want to be an infrastructure player, you know, if you want to supply to tens of millions of Americans, that's going to cost money and so the large scale infrastructure players, I think, that will always be the land of the giants.

BLOCK: If you're a consumer then, doesn't that mean that you're beholden to the big companies? You're waiting for them to innovate in some way. There are fewer of them out there doing anything.

Mr. CLELAND: Well, the benefit for consumers is, you know, five or six years ago consumers had no alternative. And the great thing about today is, if people don't like the phone company, they can go to the cable company. If they don't like the cable company, they can go to the phone company. And they have multiple wireless choices. So, is the competitive situation nirvana now? No. However, it's dramatically better than was when it was a monopoly. And directionally, it's getting better every single day.

BLOCK: Scott Cleland, thanks very much.

Mr. CLELAND: Thank you.

BLOCK: Scott Cleland is President of the tech-com consulting firm Precursor in McLean, Virginia.

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