This week, the two largest competitive companies to the BabyBells ammounced plans to be merged into the Bells - AT&T and MCI (the ex-bankruptcy formerly known as WorldCom). MCI is being bid for by QWest for only $6.5b, 5% of its valuation in 2001 before the criminal fraud that caused its bankruptcy was discovered.
On the day that BT announced its equivalency plans, what do these US manoeuvres tell us? First, there is no viable business model for competitors - the major broadband alternatives are all ex-Chapter 11, most of the cablecos collapsed.
Second, this has massive implications for the UK - there was a lot of hot US money in the UK market in the late 1990s, and the market is still distorted by the former Chapter 11 companies and other distressed US bondholder-controlled companies - including not only Global Crossing, MCI etc. but also our entire cable industry (formerly run by the head of OfCom of course).
Third, if the US - and its regulatory settlement created by similar legal and economic advice to ur own - failed to create a market for competition, then can ours ever hope to achieve what they failed? Energis and C&W have escaped their humiliating financial positions of 2001-2 - caused by overstretch in taking on BT directly - but can their pockets be deep enough to challenge BT in the local loop?
Fourth, if these gloomy prognoses are correct, then British fixed telecoms has only deeper pocketed non-Anglo-Saxon competitors - and the utility-owned players (Thus, Kingston, Centrica and a couple of regional players).
So is Wanadoo the saviour of LLU - triumphing thanks to FT’s deep pockets and its own knowledge of how to play the LLU regulatory game in Paris?
Fifth, how does Commissioner Reding respond? She’s not known for being clued up on economics, given her culture/luvvie background, but maybe she can surprise us? She hardly has the reputation of being the new Bangemann (I’m obviously referring to his time as Commissioner, not his highly unethical contract with mega-incumbent Telefonica…).
This all points to firesale consolidation in the sector in the next twelve months, assuming BT’s settlement with OfCom plays out without major drama. Hold onto your hats!