How telecom mergers affect consumers

updated 5:44 p.m. ET Feb. 14, 2005

NEW YORK - The acquisition of AT&T Corp. by SBC Communications Inc. and the purchase of MCI Inc. by Verizon Communications Inc. will eliminate two choices for residential telephone service, but may not have a major impact on consumers.

AT&T and MCI halted their efforts to sign on new customers for traditional phone services last year after losing some regulatory battles, so their influence on price competition has already declined dramatically.

Instead, two rival modes of placing calls have been keeping pressure on traditional phone companies to hold down prices: cell phones and the Internet-based phone services being introduced by all the major cable TV companies, independent players such as Vonage Holdings Co., and even AT&T.

Estimates vary, but millions of Americans use their cellular handsets as their primary or only phone service.

In addition, tens of millions more of the nation's 175 million wireless subscribers use their mobile phones for long distance because they have national calling plans with unlimited off-peak minutes.

Internet-based phone service, often called "VoIP" for voice over Internet Protocol, hit the mainstream over the past year with the introduction of service from AT&T, top cable companies and many small upstarts.

VoIP service requires a high-speed connection to the Internet such as DSL service from a phone company or broadband from a cable provider.

The technology converts the conversation into packets of data similar to any other type of online traffic, then reassembles it into sound at the receiving end.

For those who'd prefer to stick with the old-fashioned way of making a call, traditional local and long-distance service is expected to remain available for years to come through the regional Bell companies — Verizon, SBC, BellSouth Corp. and Qwest Communications International Inc.

SBC and Verizon haven't said what will become of the AT&T and MCI brands, which have a combined 38 million consumer customers at the end of 2004, primarily in long distance.

But since all four local Bells also sell long distance, those customers won't suddenly find themselves cut off without a provider.

MORE FROM PERSONAL FINANCE

Personal finance Section Front

Therapy tries to achieve life, account balance FDIC: Minorities struggle to access banks Vanguard: 60 percent of 401(k) have recovered Answer Desk: Repairing consumer credit  New $100B safety net for jobless in works Congress scrambles to extend estate tax Auto loan delinquency rate edges higher Jobless face expiration of health benefit Cutting back is hard, cutting gift list is harder Newsweek: Delaying retirement to support the kids Personal finance Section Front   Add Personal finance headlines to your news reader: