Financial Times, London, March 7: The proposed merger of AT & amp;T and BellSouth, which was announced yesterday, is a testament to how much things have changed in the world of telecommunications in two decades. Since the old AT & amp;T was split into a long-distance company and the Baby Bell local telephone companies in 1984, the competition facing fixed-line operators has increased markedly.
The merger would leave AT & amp;T as the dominant force from the Bell system, with a big share of local phone services and a strong mobile phone operator in Cingular. Verizon, which shares ownership of Verizon Wireless with Vodafone, would be behind and Qwest would trail still further. A previous generation of regulators would have found that prospect disturbing.
These days, however, the merger is unlikely to face draconian conditions from the Federal Communications Commission. The mood in Washington towards big mergers is more forgiving and there are reasons for greater leniency in the communications industry. Phone companies now face competition both from cable companies and from providers of internet telephony.
Intense pressure
Consolidation in the cable industry, together with regulatory and technological changes allowing cable companies to offer phone services alongside cable television and internet access, has produced the biggest change. Companies such as Verizon and AT & amp;T are under intense pressure in their core business from cable companies such as Comcast and Time Warner Cable.
The increase in the number of U.S. households with broadband internet connections has also led small internet companies to compete head-on with the Bells. Vonage, one of the best-established internet phone companies, now provides 1.5m connections and plans to go public. Old regulatory constraints and taxes on local phone companies have made it easier for internet phone companies to undercut their prices and squeeze their margins.
The phone companies also face regulatory difficulties in competing effectively with the cable companies in offering television services over broadband connections. They must get permission from local regulators in order to offer these services, as well as investing to upgrade networks. It has been easier for others to attack them than for them to expand in scope.
So regulators should look favorably on an AT & amp;T/BellSouth combination. Competition between phone and cable companies spanning telephony, television and broadband internet (the so-called "triple play") is likely to have more benefits for consumers than the regional break-up of AT & amp;T provided. Internet phone competition is a useful added element to this framework.
But phone companies must not use reunification to distort the internet. Ed Whiteacre, chairman and chief executive of AT & amp;T, wants to charge some internet companies extra to ensure speedy delivery of bandwidth-intensive services such as video-downloading over its broadband connections. This would undermine the "net neutrality" principle that all providers are treated equally on the internet.
The FCC has yet to reach a view on net neutrality and the review process for this merger provides an ideal opportunity to do so. This deal will lay the cornerstone for the future regulatory framework governing communications in the U.S. Allowing strong phone companies to compete effectively with cable companies, while ensuring that the internet remains free from interference, is the right balance.
Yomiuri Shimbun, Tokyo, March 8: Japan has no option but to make preparations to begin prospecting for natural gas in the East China Sea if China adamantly continues to refuse to stop exploration in the area. Continued talks between Japan and China over the dispute regarding gas exploration rights in the waters should not be allowed to serve as a vehicle by which Beijing can turn its gas field development program into a fait accompli.
On Tuesday, Japan and China wrapped up two days of working-level talks in Beijing on exploration rights for natural-gas fields, the first time negotiations on the subject had been held in five months.
Though Japan and China agreed to settle the dispute through dialogue, it is questionable whether they will be able to make progress in resolving the controversy through continued talks.
In the latest talks, Beijing bitterly opposed Tokyo's demand that China stop exploring for gas in waters on its own side of the median line.
This means Japan cannot expect to break the impasse in the series of talks by adopting a conciliatory approach to the dispute. Japan should make preparations to prospect the waters on the Japanese side of the median line. Doing so would merely be exercising its sovereign rights in the waters.
Demonstrating Japan's determination to protect its sovereignty and interests would cause China to reconsider behaving in a manner that violates international rules.

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