Phone Industry Chiefs Clash Over Regulations

Leaders of the nation’s telephone industry disagreed sharply Wednesday on the need for federal intervention to ease the transition to a fully competitive marketplace in the wake of the breakup of American Telephone & Telegraph.

AT&T; Chairman Charles L. Brown complained to a Senate subcommittee that his restructured company continues to be handicapped by federal restrictions, while its rival long-distance carriers operate nearly free of regulation. “Obsolete regulatory practices have perpetuated subsidies to AT&T;’s competitors and their customers that are fundamentally inconsistent with competition,” Brown said.

But his view of the industry was challenged by MCI Communications Chairman William McGowan and GTE President Theodore Brophy, who warned that further deregulation of AT&T; by the Federal Communications Commission would unfairly threaten competitors.

AT&T; still retains 85% to 90% of the nation’s long-distance business, McGowan noted, adding that, “in practical terms, this means that AT&T; continues to dominate this industry to a degree unheard of in other business sectors.”

But Brown charged that progress toward a fully competitive marketplace has been “too slow and needlessly delayed,” although he applauded the FCC’s moves to eliminate certain discounts and subsidies to AT&T;’s rivals and to increase AT&T;’s pricing flexibility. The FCC continues to control At&T;’s rate structure and the types of services that the company may offer.

“We’re not asking for deregulation,” he told the Senate Commerce subcommittee on communications. “We are asking for reasonable price flexibility.”

But AT&T;’s rivals have complained about the quality and cost of connecting their circuits to AT&T; equipment as the nation converts to “equal access,” allowing consumers to use all long-distance services by dialing 1 plus the area code and local number.

Brophy, whose firm’s subsidiary, GTE Sprint, is the nation’s third-largest long-distance telephone company after AT&T; and MCI, urged lawmakers to encourage the FCC to develop a more effective plan for the transition period following AT&T;’s deregulation.

He declared: “The FCC has assumed, erroneously, that effective competition already exists.”

While MCI agrees that AT&T; eventually should be deregulated, McGowan said “that time is not now.”

“Not only is the FCC tinkering with telecommunications policy without any real understanding of the adverse impacts on full and fair competition, but it has also caught a bad case of deregulationitis,” he said.

However, when the three executives were asked by Sen. John C. Danforth (R-Mo.) whether they wanted legislation to address their concerns, all said no.

Thus, with little prospect or desire for legislation, the spotlight remains on the FCC, whose chairman, Mark S. Fowler, told the subcommittee Wednesday that he believes that the transition to a fully competitive marketplace is well under way.

“The future of a competitive marketplace is basically assured,” he said. But he cautioned that “we cannot guarantee the future of every competitive entrant.”

Sen. Barry Goldwater (R-Ariz.), the subcommittee chairman, said in an opening statement that he saw no solution to the complex problems involved in the transition to a competitive marketplace.

“Maybe what everybody needs is a little time to make it work,” he said.