Titans of Telecom Face Off
AT& T's Whitacre and Verizon's Seidenberg Are Battling for
Supremacy In a Highly Competitive Sector, Using Acquisitions
and Bets on the Future
By Arshad Mohammed, Staff Writer
Tuesday, March 7, 2006
One started out as an engineer in Lubbock, Tex.; the other
as a cable-splicer's assistant in the Bronx.
From those humble beginnings, AT&T Inc. Chairman Edward E.
Whitacre Jr. and Verizon Communications Inc. Chairman Ivan
G. Seidenberg have built the two biggest U.S.
With Sunday's announcement of AT&T's agreement to buy
BellSouth Corp. for about $67 billion in stock, Whitacre,
64, capped a career that has transformed what was once the
smallest of the Baby Bells, Southwestern Bell Corp., into
the largest local-phone and wireless company in the country.
What immediately followed was speculation about what
Verizon's Seidenberg, 59, might do next to one-up his
biggest competitor for more than a decade. He has already
said publicly that he'd like to buy out Vodafone Group PLC's
45 percent stake in Verizon Wireless, the second-largest
U.S. mobile phone company.
For years, since Whitacre was the head of Southwestern Bell
Corp. and Seidenberg was running Bell Atlantic and before
that Nynex, the two have outdone each other through a string
of mergers, acquisitions and partnerships.
People who have followed Whitacre's trajectory describe him
as unusually aggressive and competitive, fond of the bold
stroke and seldom given to self-doubt afterward.
"It's a sport. It's a competition. In this business, scale
really matters," said Reed Hundt, a former chairman of the
Federal Communications Commission who has dealt with both
men over many years. "It's like NFL linemen. You want 'em
big, you want 'em fast, but most important, you want 'em
The aim of the AT&T-BellSouth merger is to strengthen AT&T
for what is shaping up as a battle against the cable
companies to sell consumers bundles of video, high-speed
Internet, wireless and traditional land-line telephone
service. The deal, if approved by regulators, would also
give AT&T full control of Cingular Wireless, the nation's
largest mobile phone company, which it runs as a joint
venture with BellSouth.
San Antonio-based AT&T yesterday said it planned to cut
about 10,000 jobs, through attrition where possible, as part
of $18 billion in cost savings it projects from the merger
with Atlanta-based BellSouth. AT&T's stock price slid 97
cents, to $27.02, as the market digested the merger, while
BellSouth's rose $3.04, to $34.50. Verizon shares rose 15
cents, to $33.73.
The AT&T-BellSouth merger, which will give the combined
company local-phone service in 22 states in the South,
Midwest and West, immediately raised questions whether
Verizon would try to buy another Bell.
Michael H. Salsbury, a telecom lawyer with Chadbourne &
Parke LLP who was a former top executive at MCI Inc., said
Seidenberg would continue with his basic strategy and
dismissed speculation he might bid for heavily indebted
Qwest Communications International Inc., the main local
phone company in much of the West.
"If you had a dollar to invest and you were Ivan Seidenberg,
would you invest it in Qwest or in wireless? Where would
you get a better return? Wireless." Salsbury said.
Verizon spokesman Peter Thonis declined comment on whether
the New York-based company might be interested in Qwest, and
he reiterated the company's long-standing position on
Vodafone's stake in Verizon Wireless.
While Whitacre has a reputation for boldness, Seidenberg is
pursuing what many in the industry regard as a more
audacious and costly strategy of running fiber-optic cables
right to people's homes to carry what he hopes will be
increasing video and high-speed Internet traffic. It is far
more expensive to run new fiber-optic cables to customers'
homes, but the technology allows for the transmission of
more data than traditional copper wires because glass filers
can carry data faster.
Verizon is spending billions of dollars to build out its new
all-fiber network, while AT&T is taking a less-costly
approach by running fiber-optic cable to neighborhoods and
using copper wires from there, which may allow it to offer
such service at lower cost, albeit with less bandwidth.
Bandwidth is the rate that information can be transmitted
along a communications line.
"The risk associated with [Verizon's fiber-optic] build-out
is higher. That risk may be acceptable because the returns
are so great -- lots more bandwidth," said Ellen Daley, an
analyst with Forrester Research Inc. "The risk on the AT&T
side is less, and the gain is less as well."
Analysts said that one advantage to AT&T's strategy is that
it may be able to build its high-speed network faster than
Verizon, allowing it to achieve economies of scale and to
negotiate discounts from content providers as it competes
directrly with cable companies.
Consumer groups said the AT&T-BellSouth merger would
probably lead to higher prices, arguing that the telephone
companies and the cable companies will effectively be a
duopoly with little interest in aggressive competition.
While the consensus view among analysts was that the merger
would be approved, the concentration of power could still
trip some concerns on Capitol Hill or among regulators,
especially when it comes to open access on the Internet.
"These companies were going to compete against each other.
Instead, we have just the opposite," and that makes it all
the more important to ensure that these companies don't
become gatekeepers of the Internet, said Rep Edward J.
Markey (D-Mass.), the ranking Democrat on the House
subcommittee on telecommunications. "The United States
needs open networks."
As a condition of approval for both the Verizon-MCI and
SBC-AT&T mergers last year, the companies agreed not to
impose restrictions on Internet traffic, which in effect
would enable some programs to work better than others. That
provision sunsets two years after the close of those
In recent months, Seidenberg, Whitacre and BellSouth chief
technology officer Bill Smith have all said they would
prefer a system that would allow the carriers to charge to
carry some kinds of traffic -- statements that have prompted
concern from Internet companies such as Google Inc., which
rely on Internet pipes to reach consumers.
With the latest proposed merger, critics of further
consolidation say consumers, regulators and software
companies should seek to codify "network neutrality" into
law for all carriers.
"This time around, this merger should put media and content
providers on high alert," said Jason Oxman, vice president
of regulatory affairs for Comptel, an association of
competitive carrier. "This could be the end of the line if
the Internet community doesn't recognize the threat to the
Federal Communications Commission Chairman Kevin J. Martin,
who initially opposed the network neutrality provisions in
the earlier two mergers buyt voted for them in the end, did
not tip his hand yesterday.
"We will carefully weigh the information presented,
examining any allegations of specific harm in individual
markets and the potential benefits for the deployment of new
services," he said in a written statement.
Staff writer Yuki
Noguchi contributed to this report.