Phone Firms Can Now Sell Equipment : FCC Approves Plans by Regional Firms to Set Up Subsidiaries
The Federal Communications Commission on Friday approved plans by the seven regional telephone companies formed by the breakup of American Telephone & Telegraph Co. to market telephone equipment through newly established subsidiaries. It warned two of the companies that failure to promptly file information on their subsidiaries will result in stiff penalties.
The so-called capitalization plans, required as the result of a 1983 FCC ruling, detailed how much in assets each regional company would divert to set up the new subsidiaries.
The FCC approved the plans Friday after finding that the requests represented no more than 2.5% of the assets, or 5% of net worth, of each company.
Commissioners had worried that the transfer of a higher percentage of equity from the regional companies to the subsidiaries might “raise unduly” the costs of basic telephone service.
Pacific Telesis Request
In its 1983 decision, the FCC required that the regional firms and their local telephone companies establish telephone equipment subsidiaries separate from those already set up for telephone service. The new subsidiaries could be held as part of either the local or regional companies, however.
The requests approved Friday included those by Pacific Telesis Group, the San Francisco-based holding company for Pacific Bell, for a subsidiary with equity of $87.6 million; Bell Atlantic, $356 million; Bell South, $363.6 million; Ameritech, $83.6 million; Nynex, $151.9 million; Southwestern Bell, $47.7 million, and US West, $66.4 million.
But two of the firms, Ameritech and US West, challenged the FCC’s authority to require the capitalization plans if the new telephone equipment subsidiary is directly held by the regional company rather than as part of the local company.
Both US West, which serves 13 states in the Southwest and Northwest, and Ameritech, which covers five Midwestern states, have established directly held equipment subsidiaries.
However, in its order Friday, the FCC rejected the two companies’ arguments and ordered them to comply by submitting information on their directly held subsidiaries. Refusal to submit the information could result in fines of $2,000 a day, commissioners warned.
“We’re putting in pretty strong language what we expect,” Commissioner James Quello said.
The ruling also requires the regional companies to file annual reports with the FCC so that commissioners can be sure that the companies continue to keep their telephone service and equipment businesses separate.
The FCC also will require assurances that the regional companies are making their customers aware of other telephone equipment vendors and not just their own marketing services.
In a separate action, the FCC voted to eliminate a 1966 policy statement that had cautioned broadcasters against airing promotional contests that “adversely affect the public interest.”
Commissioners argued that adequate local civil and criminal remedies now exist, removing the need for burdensome federal requirements.
