Ask SBC Communications' Edward Whitacre how he's feeling these days, and you won't hear any good news. "The economy is taking its toll," he says, a toll forcing the former Baby Bell, which posted $51 billion in sales last year, to heed every expense. What's more, "we face competition from the wireless carriers, including Verizon; from cable - AT&T is the biggest cable company in the land; from satellite providers," he adds. "It's a tough marketplace right now, and it will only become more so."
Behind Whitacre's gloom, however, there's more than a little posturing. Bell executives never miss an opportunity to state how competitive their business is getting. As the company is expected to announce weak earnings this week, the truth is SBC and its regional Bell brethren are better-positioned than any of their rivals in telecommunications. After all the upheaval caused by years of technological change, deregulation and the Internet, it's an outcome that hardly anyone anticipated.
For most of the '90s, the conventional wisdom was that the Bells were too slow to keep up with the hundreds of technology-charged telecom upstarts flying out of the gate. The Web was changing the basic architecture of the public telephone network, and the Bells couldn't adjust. They got trounced in their early forays into Internet access. Business customers, if not consumers, suddenly had all kinds of alternatives to the local phone companies, especially for data services. The Baby Bells seemed to be stuck with a declining business, and a heavily regulated one at that.
Now it seems clear that in the world of trenches and copper wires and heavy-duty regulatory politics, things actually move at Baby Bell speed. What's left of Ma Bell's progeny - BellSouth, Qwest, SBC and Verizon - have maintained their lock on local phone service and driven most of their newfangled rivals to the hills. They've moved successfully into new markets like wireless and broadband Net access. They're poised to fulfill their longstanding ambition of get-ting full permission to enter the long-distance business; there is even talk that one of the Bells could buy the matriarch herself, AT&T. In short, "Baby Bells" doesn't fit anymore. Try Big Bells.
That's not to say the Big Bells are immune to economic downturns or severe problems in the telecom sector. Last week, for instance, BellSouth's profits fell 11 percent. But their troubles are mere blips in an industry where a whole category of newcomers - the competitive local exchange carriers, or CLECs - are going bankrupt, and even stalwarts like AT&T and Sprint are worrying about cash flow. The Bells have billions to ride out the storm. And if they ever get serious about competing outside their territories, one of them, quite possibly SBC, just might become the dominant national communications company.
The Baby Bells began life in 1984 as the unwanted offspring of the biggest antitrust battle in American history. When AT&T agreed to a court-ordered bust-up of what was then a national phone monopoly, no one really wanted to claim the seemingly stagnant business of providing local phone service. Seven new companies, the Baby Bells, were born to do that work, while AT&T took the more promising businesses of long-distance telephony and communications equipment. SBC - or Southwestern Bell, as it was known in 1984 - was the runt of the litter. But after acquiring its siblings Pacific Telesis and Ameritech, SBC has emerged as the second-largest Bell, behind Verizon.
