Cue the violins for the telecom gang

Boy, it seems like only yesterday, doesn’t it? The day that U.S. regulators busted up AT&T, I mean, and created the seven regional Bell operating companies or RBOCs, also known as the “Baby Bells” — including Southwestern Bell, Nynex, USWest and BellSouth. And how many big telephone companies are there now? Well, there are four: AT&T, BellSouth, Qwest and Verizon. And it looks like soon there will be three, if AT&T gets approval for its $67-billion (U.S.) takeover of BellSouth. The company that is now calling itself AT&T is actually Southwestern Bell or SBC, which bought AT&T last year for $16-billion and assumed the name.

Over the past decade or so, AT&T had acquired Pacific Telesis and Ameritech (two other Baby Bells), while Verizon bought Nynex and Bell Atlantic, and USWest merged with Qwest. Of course, there was also that whole sordid mess involving Bernie Ebbers and WorldCom (the shell of which became MCI), but let’s not get into that. If it feels a little like AT&T has been putting itself back together again, that’s not surprising, since in many ways it is — or at least creating a duopoly where there was once a septopoly. As Mike Masnick at Techdirt put it recently, Ma Bell is “getting the band back together” for a kind of reunion tour.

And how is the company going to make this mega-deal fly, especially when it will create the single largest telephone company since AT&T was broken up? Get ready to hear a lot about how the telecom market is hyper-competitive and local phone service just doesn’t make money any more, how voice-over-Internet is killing the industry and carriers need more volume to be able to compete, and how the idea of “network neutrality” just doesn’t pay the bills any more, and therefore AT&T needs to be able to charge Google and Yahoo and others extra to get their digital info to users on time.

That’s a tune Ed Whitacre of the new AT&T has been singing for some time now, and this is only going to make him boost the volume, as my friend Mark Evans points out. But will regulators buy it, or will it sound a little off-key when it comes from one of the world’s largest phone companies? Vinnie Marchandani at DealArchitect has a good take on it, and Blake Ross has a satirical take on the press release that is worthy of The Onion.

SBC to Internet: We own you

Ed Whitacre, CEO of SBC Telecommunications, tells Businessweek magazine that as far as he’s concerned, telecoms and cable companies get to control the Internet:

“Q. How concerned are you about Internet upstarts like Google, MSN, Vonage, and others?

A. How do you think they’re going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes? The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!”

That’s a nice try, Ed. You may not be the only one to try that kind of thing, but let’s see you try to block access to Skype or Gmail unless someone pays up. And don’t large bandwidth users pay for traffic carried on a cable or telecom network already? SBC’s new business model sounds a little bit like extortion to me. Former Release 1.0 editor Kevin Werbach says we should be afraid. More discussion on the Interesting People list.

Update: The Washington Post has a story criticizing Ed, in which an SBC spokesman does some serious backpedalling on the whole arging-chay for andwidth-bay thing.