The U.S. economy is consolidating with ever-larger conglomerates gaining ever-more power. In July 2021, the White House issued “Fact Sheet: “Executive Order on Promoting Competition in the American Economy” that stated:
For decades, corporate consolidation has been accelerating. In over 75% of U.S. industries, a smaller number of large companies now control more of the business than they did twenty years ago. This is true across healthcare, financial services, agriculture and more.
Much has been said about “Big Tech” companies – i.e., Alphabet (Google), Amazon, Apple, Meta (Facebook) and Microsoft. And there is also Big Phama (i.e., Johnson & Johnson, Roche Holding, Pfizer, Novo Nordisk and Eli Lilly), Big Oil (Shell, ExxonMobil, BP, Chevron, and ConocoPhillips) and Big Tobacco (i.e., Altria, Philip Morris International and British American Tobacco).
Often forgotten are other sectors of the economy dominated by a shrinking number of giant corporations. These sectors include:
+ Poultry industry – i.e., Tyson’s, Pilgrim’s Pride and Perdue.
+ Drug store chains – i.e., Walgreens, CVS and Rite Aid.
+ Infant formula – i.e., Abbott Nutrition, Mead Johnson Nutrition, Nestle USA and Perrio Company control about 90 percent industry.
+ Music industry – i.e., Universal Music Group, Sony Music Entertainment and Warner Music Group control 69 percent of industry.
In addition, as reported by The Guardian, four firms or fewer control at least half of the groceries market and three companies control of soft-drink soda as well as breakfast cereals. In addition, four slaughtering companies control “about 85% of U.S. grain-fattened cattle that are made into steaks, beef roasts and other cuts of meat.”
These businesses form a cartel or trust. A cartel is defined as “a collection of independent businesses or organizations that collude in order to manipulate the price of a product or service.” They are “competitors in the same industry and seek to reduce that competition by controlling the price in agreement with one another.”
“It’s a system designed to funnel money into the hands of corporate shareholders and executives while exploiting farmers and workers and deceiving consumers about choice, abundance and efficiency,” said Amanda Starbuck, policy analyst at Food & Water Watch.
When considering the ever-increasing consolidation of critical sectors of American economy, little consideration has focused on the telecom industry. The July 2021 White House “Fact Sheet” noted that “More than 200 million U.S. residents live in an area with only one or two reliable high-speed internet providers, leading to prices as much as five times higher in these markets than in markets with more options.” This is known as the “digital divide” or “digital inequality.”
Few Americans are aware that the U.S. is a second-tier telecom country. In is estimated that, in 2021, only 43 percent of American homes had access to fiber broadband services compared to Norway and South Korea with over 80 percent access, and Spain, Portugal and Japan that are above 90 percent. The Organization for Economic Co-operation and Development (OECD) ranksthe U.S. 18th of the 38 OECD countries in terms of broadband usage.
In terms of fixed broadband service, the U.S. ranked 11th at 191.97 Mbps [Megabits per second] — Singapore ranked first at 245.5 Mbps; in terms of mobile service, it ranked 18th at 82.04 Mbps – compared to South Korea at 186.06 Mbps.
Making matters worse, Americans pay more for their inferior telecom services. Fees for a gigabyte of data range from $0.26 in India and $0.27 in Kyrgyzstan to $6.66 in the United Kingdom and $6.96 in Germany. Costs in North America were the highest, averaging $12.02 in Canada and $12.37 in the U.S.
The U.S. telecom industry was remade over the last four decades. In 1984, Judge Harold H. Greene issued the Modification of Final Judgment (MFJ) that broke-up the old AT&T or “Ma Bell” monopoly. As he wrote, “What the Bell System did was illegal. It abused its monopoly in local telephone service, also known as the Last Mile, to keep out competitors in other areas. Competition will give this country the most advanced, best, cheapest telephone network.” AT&T’s 23 subsidiaries consolidated into seven Regional Bell Operating Companies (RBOCs or “Baby Bells”).
In 1996, Pres. Bill Clinton signed the Telecommunications Act, arguing that it “promotes competition as the key to opening new markets and new opportunities.” He sought to deregulate the information communications sector, insisting, “it will protect consumers by regulating the remaining monopolies for a time and by providing a roadmap for deregulation in the future.”
“The 1996 Act was designed to usher in competition to telephony and cable by breaking down the cross-entry barriers that were put in place by the Communication Act of 1984,” University of Connecticut scholars argue. They note, “yet immediately after the passage of the 1996 Act, telecommunication industries witnessed a deluge of mega mergers and acquisitions [M&As]. This unprecedented merger wave resulted in a handful of conglomerates dominating industries that were previously separated by telecommunications regulations.”
The wave of M&As led to telecom market consolidation. The first wave of M&As included:
+ Southern Bell Company (SBC) acquires Pacific Telesis (aka Pacific Bell) for $16.7 billion in 1997.
+ SBC acquires Ameritech for $81 billion in 1999.
+ Bell Atlantic merges with NYNEX in a $20 billion deal in 1997 forming Verizon in 2000.
+ Qwest acquires US West for $35 billion 2000.
+ Bell Atlantic Corp. acquires GTE Corp in 2000 for $53 billion.
+ Cingular acquires AT&T Wireless for $41 billion in 2004.
+ SBC acquires AT&T for $16 billion in 2005 and kept the AT&T name.
+ SBC/AT&T acquires BellSouth for $86 billion.
These initial mergers were followed by a series of additional M&As that helped forge the telecom cartel:
+ Comcast acquired a controlling stake (51%) in NBCUniversal, a subsidiary of General Electric, and French media conglomerate Vivendi Universal Entertainment for $6.2 billion in 2011.
+ Charter Communications acquired Spectrum (aka Time Warner Cable) for $55 billion and Bright House Networks for $10.4 billion in 2016.
+ AT&T acquired DirecTV for $67.1 billion in 2015; it bought Time Warner for $85 billion in 2018; and acquired AppNexus, a digital ad exchange that competes with Google and Facebook, for between $1.6 and $2 billion in 2018.
+ Verizon acquires AOL in 2015 for $4.4 billion and Yahoo! in 2017 for $4.8 billion; it sold AOL and Yahoo in 2021.
+ Mobileand Sprint, valued at $26.5 billion, merged in 2020.
FCC Commissioner (and now chair) Jessica Rosenworcel opposed the Mobile-Sprint merger, noting, “Our economy thrives on competition. …” And added:
The proposed tie-up of T-Mobile and Sprint will reduce competition. This merger will combine two of the four nationwide competitors in the wireless industry in the United States. As a result, three companies will control 99 percent of the wireless market. By any metric, this transaction will raise prices, lower quality, and slow innovation, just as we start to deploy the next-generation of wireless technology.
Rosenworcel warned, “Shrinking the number of national providers from four to three will hurt consumers, harm competition, and eliminate thousands of jobs. …”
AT&T, Verizon and Comcast form Big Telecom, a cartel that really don’t compete with one another, but are partners in a scheme to control all your communications. Today, AT&T and Verizon no longer upgrade their “advanced” TV services, U-Verse and Fios, but promote the wildly overhyped “5G” (Fifth Generation) fixed and mobile wireless services. They have sought to combine their core business of content distribution with content ownership. Except for Comcast, the efforts of AT&T and Verizon have failed.
AT&T acquires DirecTV for $67.1 billion in 2015; it bought Time Warner for $85 billion in 2018; and acquired AppNexus, a digital ad exchange that competes with Google and Facebook, for between $1.6 and $2 billion in 2018. Verizon acquired AOL in 2015 for $4.4 billion and Yahoo! in 2017 for $4.8 billion; in May 2021, Verizon sold its media assets.
Comcast succeeded in building a diverse combination of media holdings that include AT&T Broadband; Sky Broadcasting; NBCUniversal (Telemundo, TeleXitos, and Cozi TV), cable services (MSNBC, CNBC, Oxygen, Bravo, G4 and E!); Universal Pictures; Peacock; animation studios (DreamWorks, Illumination and Universal Animation); and XUMO. It also controls Universal Parks and Resorts.
American capitalism has come full cycle from the legendary battles waged by Teddy Roosevelt and other Progressives a century ago. Then, they battled the shameless practices of industrial cartels or trusts like John D. Rockefeller’s Standard Oil and the many other Robber Barons. Today, Rockefeller’s corporate descendants – e.g., Amazon’s Jeff Bezos and Tesla’s Elon Musk – continue to dominate the American economy and as a result the Big Cartel model has reemerged, accompanied by rising inequality.
Instead, Democrats and Republicans, along with a vast infrastructure of lobbyists, front groups, grateful nonprofits and astroturf shills shamelessly serve the interests of not only big tech, big finance, but big healthcare, big energy, big online and big telecom. Political support for consolidation is rationalized as necessary to combat the challenge of globalization and to ensure American competitiveness, fictions waved before voters every election cycle to inflame patriotic zeal.
Today’s telecom conglomerates control not only the “pipes” — the wireline and the wireless networks – that link the nation’s homes, businesses, schools and people, but are moving to control media “content” as well. The traditional telecom duopoly of “phone” and “cable” companies has been superseded by integrated voice, video, internet and media content, delivered via a wireline or wireless service.
This time, unfortunately, there is no TR to do battle for the public good. Instead, many Democrat and Republican officials, along with a vast infrastructure of lobbyists, lawyers, front groups, nonprofits grateful to their telecom benefactors, phony grassroots groups, shills and corporate media outlets that shamelessly serve the interests of the large corporate sectors on whom they depend for advertising revenues, and themselves are owned by telecom and cable interests. Industry consolidation is rationalized as necessary to combat the challenge of globalization and to ensure America’s competitiveness. Both have proven to be big lies.
However, as Sen. Elizabeth Warren (D-MA) warned:
Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”
And Warren added: “To restore the balance of power in our democracy, to promote competition, and to ensure that the next generation of technology innovation is as vibrant as the last, it’s time to break up our biggest tech companies.”