U.S. Proposes Ending Curbs on 7 Bell Firms : Would Allow Regional Companies to Provide Many High-Tech Services

The Justice Department recommended Monday that a federal judge lift restrictions on the seven regional Bell telephone companies and free them to enter major new areas of business, including the manufacture of telecommunications equipment, computer information services and some long-distance service.

The department’s recommendations, if approved by the court, would have major ramifications for the nation’s telephone industry and would enable the Bell companies to provide a variety of computer information services, including automated answering services, alarm monitoring and electronic classified advertising.

Justice’s recommendations also would allow the Bell companies to compete with AT&T; and other long-distance telephone companies, but they would be restricted to offering long-distance service outside the areas where they provide local telephone service.

In a 210-page filing in the U.S. District Court of Judge Harold Greene, the department said that the business restrictions it wants eliminated no longer are necessary to protect competition.

“The costs of judicial regulation in these areas outweigh the benefits,” the department said.

The seven regional companies formed by the breakup of AT&T; three years ago were barred from entering various businesses by temporary restrictions imposed by the 1982 consent decree that ordered the breakup. While Green has granted dozens of waivers allowing the companies to enter businesses ranging from real estate to insurance, restrictions on key business areas have remained intact.

Charles R. Rule, acting assistant attorney general in charge of the antitrust division at Justice, said that the restrictions actually may be depriving consumers of the benefits of the information age services that citizens in other countries take for granted.

“There is a booming information services industry out there, but the average telephone user just isn’t getting the benefits of those services because the Bell companies can’t provide them,” Rule said.

The recommendations must be approved by Greene before the restrictions are removed. The court is expected to seek public comment and may conduct a hearing. Rule predicted that it would be six months to a year before a final decision is made. He added, however, that the department’s proposals would not affect telephone rates nor result in any sudden or disruptive changes for consumers.

The long-awaited recommendations were immediately criticized by AT&T;, which termed it “unbelievable” that Justice “would reestablish this combination of monopoly and competitive businesses it fought so hard to dismantle.”

“The Department of Justice argued that letting companies provide long-distance service and engage in manufacturing, while also operating monopoly local exchanges, created an unfair advantage in the marketplace,” the company said in a statement through spokesman Herb Linnen. “Three years later there is no convincing evidence that the monopoly on local service has disappeared.”

Morton Bahr, president of the Communications Workers of America, called the proposals “ludicrous.”

“Lifting divestiture restrictions should not create an open door for American manufacturing jobs to be moved overseas,” he said. “Manufacturing should only be allowed if it is in the United States.”

Others however, including Mark S. Fowler, chairman of the Federal Communications Commission, endorsed the recommendations, saying that the restrictions “have handcuffed seven of America’s most technologically advanced companies.”

Ronald Stowe, vice president of Washington operations for San Francisco-based Pacific Telesis, the parent company of Pacific Bell, said that “it is time to get rid of the line-of-business restrictions and allow these companies into the market.”

In recommending the retention of restrictions for long-distance service, however, Justice said that these regulations should be lifted only when individual states remove the regulatory protection that guarantees the local Bell company a monopoly franchise for local service.