U.S. Report Urges Easing Rules on AT&T;, Regionals

Times Staff Writer

The Commerce Department, saying consumers and businesses will best benefit from an industry not "artificially protected from competition," recommended Wednesday that AT&T; and the seven regional Bell holding companies be freed from a broad range of federal restrictions.

A report by the department's National Telecommunications and Information Administration said rapid changes in technology, the breakup of American Telephone & Telegraph and the merger of the communications and computer industries have spurred the need for modifications in the regulatory environment.

"The neat dividing lines which once separated segments of the domestic telecommunications industry functionally and economically are becoming increasingly blurred by the steady advances in the underlying technology," the report said.

Among its conclusions, the 193-page report said that the regional Bell companies, including Pacific Telesis, should be allowed to compete more freely in the marketplace in businesses other than basic telephone service.

The report also recommended that all restrictions on overseas activities by the regional companies be eliminated and that they be allowed to provide more innovative phone services, such as call forwarding and message storage. The restrictions were imposed as part of the consent decree that reorganized AT&T; last year.

In addition, it urged the Federal Communications Commission, which established separate restrictions, to reconsider its requirement that AT&T; and the regional companies offer almost all services--except telephone service--through separate subsidiaries.

The companies have complained that they are at a disadvantage because they cannot offer their customers "one-stop" shopping for products and services, unlike competitors such as IBM and ITT.

"Technology is really driving this area," David J. Markey, assistant commerce secretary for communications and information, said in an interview. Markey heads the information agency, which is responsible for telecommunications policy.

Moreover, "these changes are going to happen, whether anybody wants to see them happening or not," he declared. "It will become increasingly difficult to regulate them and to restrict business, so that these kinds of restrictions will be increasingly difficult to maintain."

He termed the agency's report "a blueprint for the next five years," saying: "We tried to set some goals as to where the nation ought to be."

Markey concluded: "It is in the interest of consumers to let the local telephone companies do a lot more."

For now, the report said, the only restrictions that should be retained are those that bar the regional companies from providing long-distance service outside prescribed territories and from manufacturing telephone equipment. However, it recommended that the long-distance issue be reviewed next year.

Arthur Latno, executive vice president of Pacific Telesis, said the study "appears to reflect our continuing concern about our ability to provide a wide variety of services needed and wanted by our customers."

The consent decree requires the regional companies to apply for waivers if they want to enter any new businesses, ranging from office furniture to real estate. In the past 18 months, the report said, the companies have filed 50 waiver requests, and 30 have been approved.

In calling for some "mid-course corrections" in overall federal telecommunications policy, the report said that the consent decree should not be treated "as if carved in stone, given continuing changes in technology and the marketplace."

It also said that the restrictions imposed on AT&T; and the Bell companies make it "reasonably clear that we may well have simply swapped one regime of distortions for another. Absent changes, this new system may prove even more damaging over time."

Indeed, some of the restrictions may even worsen the U.S. trade balance, the report argued. It said they are creating a new market for more sophisticated telephones that are being manufactured by foreign suppliers.

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