Critics Renew Blasts at AT&T; Judge : Baby Bells, Administration Officials Seek a Showdown
Pressure is mounting again to get Judge Harold Greene out of the telephone business.
It is coming from key officials in the Reagan Administration and, to varying degrees, the seven regional phone companies created in the 1984 breakup of American Telephone & Telegraph Co. Their goal is to end restrictions on these seven “Baby Bells” that are being kept in place by Greene, the controversial and powerful U.S. District Court judge who supervises the consent decree that broke up AT&T.;
Their basic pitch, heard ever since Greene entered the picture, is that a federal court is no place to chart the future of one of the country’s most dynamic and strategic industries, telecommunications. They contend that Greene is taking a narrow antitrust view of the industry and keeping in place limits that hamper the nation’s competitiveness in world telecommunications and keep a range of new information services out of the hands of consumers.
Mobilizing in defense of Greene and his court is an unusual coalition of home and business telephone users, long-distance companies and telecommunications equipment manufacturers. They argue that what Administration officials and Baby Bells want is, essentially, a turning back of the clock to the days before divestiture, to restore a potentially monopolistic system that could wipe out the carefully nurtured competition.
Point man for the escalating campaign against Greene is Alfred Sikes, chief of the National Telecommunications and Information Administration, a Commerce Department agency. Last month, he publicly called on Federal Communications Commission Chairman Dennis Patrick, another of Greene’s critics, to countermand a recent ruling by the judge, with the goal of setting up a conflict that would have to be resolved by an appeals court. The FCC has put out a request for public comment on Sikes’ proposal.
AT&T;'s breakup resulted from an antitrust lawsuit brought by the Justice Department. In 1982, the two sides reached an out-of-court agreement in which AT&T; agreed to break itself up. Greene formalized the plan in the consent decree and, ever since, various parties have been coming back to him asking for interpretations of the fine print.
‘FCC Should Do It’
That has resulted in a stream of opinions from Greene’s second-floor chambers overlooking Constitution Avenue, many of which can determine the flow of billions of dollars of telecommunications business and investment money. He has steadfastly refused to lift the constraints on the seven operating companies, contending that conditions have not changed sufficiently to warrant it. There is no sunset for Greene’s authority.
Sikes says this system doesn’t make sense. “What we now have,” he says, “is a judge and two clerks regulating the telecommunications industry and rejecting the recommendations of many expert agencies in what is a highly dynamic field and a frequently hard-to-understand field.” He says the agency that Congress created for the job, the FCC, should do it.
This month, Sikes has been talking quietly with other federal officials and executives from the regional companies, to try to draft a common strategy. Last week, he met in closed session with members of the federal government’s cabinet-level Economic Policy Council in apparent hopes of getting White House support for legislation on Capitol Hill. No action was taken at the meeting, but the issue is to be discussed again by the council.
The consent decree bars the regional companies from long distance, manufacturing and “information services,” the industry’s term for the emerging business of moving data from computer to computer over phone lines. The idea behind the restrictions was that, due to their control of local phone networks, the Baby Bells would be able to monopolize unfairly these businesses in the same way that AT&T; allegedly did so for long distance and equipment.
Many industry sources say that the council meeting participants focused on a plan that would allow the Baby Bells into any type of information service. It would let them manufacture, with two conditions: special safeguards against them subsidizing this business from rate-regulated operations and time limits on how soon they could sell equipment to themselves. It would also transfer jurisdiction for the long-distance business from the courts to the FCC and local regulators.
Sikes has been highly secretive about his actions. The council meeting was considered by his office to be so sensitive that several hours after it broke up, his spokesman would not say whether his boss had even been present, let alone what he had proposed.
Coalition Shouts Foul
In general, Greene’s critics fault him for keeping the regional companies out of certain fields out of theoretical fears of monopoly. A better approach, they say, would be to let them in, but only with proper controls and regulatory oversight to be sure they didn’t monopolize. “We’re really holding an awful lot of talent that could be used to increase our world competitiveness,” said Dick G. Boerger, a vice president at Southwestern Bell Corp., one of the regional companies.
He and counterparts in the other companies argue that freedom would add fire and energy to the industry as a whole. Consumers could more quickly have new computer services in their homes and business over the telephone, they say, and at low enough cost to make the “information services” sector take off. The regionals could become innovative manufacturers, adding to general competitive pressure to stay ahead and helping reverse the huge U.S. trade deficit in telecommunications equipment.
But the coalition against them is shouting foul. They tend to see the seven companies as the same people who, as the Bell system, pledged in 1982 to stay out of these areas. They argue that the companies are now trying to replicate, though on a regional rather than national scale, the same monopolistic powers that led to AT&T;'s breakup in the first place. They point to possibilities of market domination and illegal subsidizing of unregulated operations with money raised in rate-regulated ones.
“From our standpoint, total deregulation means that these guys can get back together again,” says Martin McDermott, vice president and general manager of National Telecommunications Network, one of the new long-distance networks.
Representatives from 14 trade associations and the four largest long-distance companies have been holding war councils of their own. Among them is the new, drastically slimmed down AT&T.; Blocking Sikes’ movement is one of the few objectives that have brought such diverse groups together, though each company has a somewhat different reason for joining.
They object strongly to Sikes’ secrecy. They deny they are anti-competitive--on the contrary, they say, letting in the Bell regional companies could end competition altogether. Not surprisingly, the man at U.S. District Court is their hero.
“Thank God we have Judge Greene,” McDermott says.
“He’s the only one immune from the incredible political pressure of seven of the 20 largest corporations in America,” says Catherine Reiss Sloan, director of legislative affairs for the Competitive Telecommunications Assn., which represents long-distance companies.
Key Sticking Point
Even if the White House backs Sikes’ idea, legislation is by no means sure to pass. It has been introduced in various forms before, the most recent being an abortive measure to take the matter out of Greene’s court proposed last year by Senate Republican leader Bob Dole (R-Kan.).
Tension between Congress and the FCC, which under most plans would step into the breach left by Greene’s departure, is a key sticking point. Recently, the two have clashed repeatedly over communications issues that range from the so-called Fairness Doctrine for broadcasters to data transmission fees and regulation of the pricing of long distance.
Following Reagan Administration directives, the FCC in recent years has deregulated and introduced market forces into as many fields of telecommunications as possible. In parts of Congress there is a feeling, says an aide to Rep. Edward J. Markey (D-Mass.), chairman of the House telecommunications and finance subcommittee, that “the FCC is promoting a philosophical agenda and not necessarily adhering to their primary responsibility, to protect the public interest.”
Meanwhile, the dispute has also taken a personal turn. Sikes’ call to FCC was a direct challenge to Greene. And in a recent opinion, Greene chastised Justice Department officials for alleged lax enforcement of the decree and, in particular, lit into the FCC’s Patrick.
Citing a recent speech in which Patrick said he was “surprised by the apparent acquiescence” of the regional companies to Greene’s rulings, the judge accused the FCC chief of urging them to disobey the court’s orders. Patrick later responded that he was only suggesting strictly legal alternatives before them, such as filing briefs and seeking legislation, but relations between the two men do not seem to have been repaired.
In that opinion, Greene said that he would stand firm. Today, he continues to work toward another landmark ruling, this one laying out to what degree the regional companies can get involved in information services. An opinion he issued in September laid down the principle that they can transmit other people’s data but cannot originate data themselves.
It is up to Congress to decide whether to pass legislation and end his role, Greene notes. That is how the system works, he says: “I’m just a federal judge.”