There is much about the proposed SBC-AT&T merger that is not particularly surprising. Predictions of approval aside, the "vertical" aspects of these combinations can bring consumer benefits, encouraging companies to provide better bundles of services more cheaply, as I have suggested previously. And a huge goal of the 1996 Act under section 271 was to promote competition by removing restictions on phone companies that existed when the government broke up "Ma Bell." These former restrictions would have made this deal patently illegal a few years ago.

Equally unsurprising -- but more troubling -- are the quick, unequivocal objections to the deal from those purporting to represent consumers.

One peculiar benefit of the AT&T/SBC merger might be a firm with better incentives to work out the seemingly intractable problems of intercarrier compensation reform.

Ronald Coase famously in The Nature of the Firm noted that markets and firms were different ways to organize economic activity, and that the decision whether to organize hierarchically in a firm or use the price system in markets depends on transaction costs. Another determinant that influences integration into a firm is when the price system breaks down. With intercarrier compensation, we have a variation on that theme, where the price system has been distorted and communicates "false" signals to the market. By integrating two firms on opposite sides of that broken price system (SBC and AT&T), you create the internal incentives for the merged entity to work out intercarrier compensation transitions.

Of course, you are not in a perfect world of Coase-ian integration because regulators and third-parties (particularly rural carriers) are reliant on the current system and will be affected by any reforms the merged entity might arrive at. Nonetheless, with the merger, you do create a firm with better incentives to work these issues out.

Yes, the potential SBC/AT&T merger is a significant event, and, yes, the antitrust authorities and the regulators will give it careful scrutiny, as they should.

But there will be much talk today about offspring growing up to slay their parents and the like. Maybe even talk of Oedipus complexes.

I much prefer to listen to the simpler Humpty Dumpty tale....the one about "all the King's horses and all the King's men, couldn't put Humpty together again."

It really is a very different--and much more competitive--telecommunications marketplace we have now than when Reed Hundt called a Baby Bell/ATT combination "unthinkable". This time, before jumping to any quick conclusions, I'd be thinking Humpty.

It's official that SBC is acquiring AT&T, at least between the parties. Now comes the excruciating process of the government setting the merger tax.

Of course, there is no such thing as an explicit merger tax. And furthermore, a transaction where uber-regulator Reed Hundt opines: "[t]he odds are that regulators will welcome this new SBC-AT&T as a champion of American communications, both domestically and internationally" seems to be on track for approval. That said,

According to TR Daily [subscription required], the Minority Media & Telecommunications Council has weighed in on the dispute between telcos and AT&T Corp. over the latter's prepaid calling card services, urging the FCC to preserve universal service and access charge mechanisms by declaring that the offerings in question are telecommunications, not information, services.

The MMTC says: "It should be axiomatic that if a service is regarded and actually used by consumers as telecommunications, providers of that service should pay their USF [Universal Service Fund] and access charge obligations."

There are, of course, very fundamental questions concerning the extent to which the rationales underlying the high-cost and low income Universal Service funds remain valid in today's marketplace. For a PFF report that helps elucidate those fundamental questions, click here. But, the MMTC is on to something, of course, in presuming that in a rational regime, the focus for regulatory purposes should be on how consumers actually perceive and use services in the marketplace, and not on the techno-functional characteristics of the service.

Even the New York Times gets it. (Registration required).

Ray is right to point out the important ways in which a Bell-AT&T merger may no longer raise the same monopoly fears it once did, particularly as one contrasts the current structure of the market with cirucmstances when Ma Bell was divvied up over two decades ago. What puzzles me is the most recent resurrection of the descriptor "unthinkable," as in "such a proposed merger would so undermine public policy goals that that it is unthinkable and, thus, should be rejected before it gets filed."

The term "unthinkable" might (and perhaps should) be dismissed as a catchy -- and therefore quotable -- confection for the press to sample. But to the extent folks rely on it to contribute to meaningful policy debate, that reliance is, at best, misplaced.

Nothing signifies the seismic changes in the communications landscape than the reported merger talks between SBC and AT&T. A merger that then-FCC Chairman Reed Hundt once deemed "unthinkable" now draws a yawn in telecom circles, with the speculation only tending toward whether SBC will overpay for the declining business of AT&T.

The interesting policy point here is how dramatically our definition of markets has changed. This once would have been a vertical merger for SBC into the long distance market, but that market is rapidly disappearing altogether. Instead, for antitrust purposes, it appears to be a simple horizontal merger in the enterprise market -- and this is a market with multiple players and even more potential players as VoIP gains a foothold.

It is always a big event - and unfortunately all too rare - when a government agency reverses a bad decision, but that is exactly what happened today when the California Public Utilities Commission suspended the consumer "bill of rights" it had adopted last year. The 3-1 vote, in which Commissioner Susan Kennedy and CPUC President Michael Peevey were joined by newly appointed Commissioner Dian Gruenreich, illustrates that elections sometimes do have consequences.

The CaPUC voted 3-1 today to push off implementation of onerous new wireless rules that were set to go into effect last month. RCRNews has the story. The issue will be revisited in April. The political story isn't far from the surface in the Governator's state. The critical vote came from just-sworn in Commissioner Dian Grueneich. The San Francisco Democrat joined two other Democrats, Commissioners Kennedy and Peevey, to stay the regulations. Hear, Hear! Let's cheer economically rational decisions.