Choose one Term Paper Example | Topics and Well Written Essays - 1250 words

Choose one - Term Paper Example The $ 16.6 billion deal ensured that AT&T and SBC became the largest telecom company in the nation. Although from the perspective of both the companies, this deal was most certainly revolutionary; from the perspective of the consumers, it might not have been such good news. As a matter of fact various customer advocacy groups filed petition for the cancelation of the deal as the advocacy groups believed that this deal was bad for customers and bad for business. Several customer advocacy groups such as The Utility Reform Network, Office of Ratepayer Advocates presented a market research report by an economist belonging to the California Institute of Technology. (Brown, 2009, p. 209). According to the advocacy groups the research report showed that the merger would affect various services and also customers. Such a deal would not only kill the competition in the market; but also would increase the whole sale prices by almost fifteen percent. This would lead to monopoly in the market as it would reduce market concentration and choice of the customers. A part from the telecommunication market the report also suggested that in Los Angles alone the choice of commercial buildings may go down by more than seventy percent as the newly merged company may end up controlling almost 80 percent of the buildings. A part from the rising wholesale prices the merger would also lead to a rise in the retail prices. The elimination of choices would increase the wholesale price almost by fifteen percent leading to the much higher retail prices for data and voice services used by the customers. Another major factor would be collusion not to compete. Verizon and SBC would continue to avoid competition due to the merger. This could be seen even in the cities where the businesses operate quite close to the distribution channels. One prime example could be LA. In LA the marketing channels of both Verizon and SBC over laps quite scarcely. Hence the customer groups advocated that after the merger the choices of the customers would go down, prices may go up as consumers would have very less bargaining power; add to that market concentration would also increase. The consumer groups believed that the last thing that the business and the customers need is monopoly in the market. The merger would ultimately lead to very little number of competitors (Burgemeister, 2003). From the information presented by the customer advocacy groups the impact of the merger between the two companies on the national telecommunication market can be analyzed by using the porter’s five force analysis (Churchill, 2009). The rivalry among the existing firms would be low as the merger would kill competition. This would severely impact the smaller firms. As a result the industry competition would be low. Due to the lack of competition the bargaining power of the buyers would be low as the buyers would have very little choices. As a result the company can increase the prices. The bargaining power of the suppliers would also be low. As there would be very less competition in the market, just like the customers the suppliers would also have a very little option resulting in lowered cost of raw materials. Threat of new entrants would be very low. The merger leading to monopoly may lead to a situation where, the merged company can achieve economies of scale and strong brand equity. This would most certainly acts as major barriers to entry to