U.S. Regulators May Further Loosen Reins on AT

In a move that could lead to a broader deregulation of American Telephone & Telegraph, the Federal Communications Commission said Wednesday that it will take a fresh look at the state of competition in the nation’s $54-billion long-distance telecommunications market.

The announcement pleased AT&T; and some of its biggest customers, but worried its competitors and left consumer advocates concerned about the future.

Five years after AT&T; was forced to give up its local telephone operations to settle a federal antitrust lawsuit, the FCC continues to hold a tight rein on the company, which controls about two-thirds of the long-distance phone business. While its competitors can set prices at will, AT&T; must justify its rates to federal and state regulators because it is considered the nation’s “dominant” long-distance carrier.

But last month the FCC agreed to loosen its grip, effective July 1, by removing regulatory limits on AT&T;’s long-distance profits. Instead, it decided to impose caps on the prices the company can charge and maintain other restrictions on rate changes. The intent is to encourage the company to cut costs, improve its technology and provide new services by letting it make as much money as it can within the price limits.

If the review announced Wednesday finds that competition in the long-distance business is strong enough, the company might be freed from even the looser constraints of the new rate-cap rules. AT&T; has sought the freedom to set prices to meet market conditions, arguing that slow-moving regulatory procedures have caused it to lose some major commercial accounts to such companies as MCI Communications and US Sprint.

But a spokesman for the broadly based Consumer Federation of America called the new FCC review “irrational.” When the FCC adopted rate caps last month, it tacitly acknowledged AT&T;’s dominance, argued Gene Kimmelman, the federation’s legislative director.

“How can an agency that a month ago completed a two-year regulatory process altering regulation of AT&T; based on the notion that AT&T; is a dominant carrier turn around a month later and say maybe it’s time to find out if AT&T; really is a dominant carrier?” he asked.

Kimmelman said that while there might be adequate competition among long-distance companies to serve big business customers, there is too little price competition to ensure low prices for residential customers.

“Competition is not evenly spread across the market,” he said, “and the weakest markets involve the discount periods when consumers do the bulk of the calling. So deregulation may be another word for rate increases for evening, night and weekend long-distance calling.”

The FCC’s latest initiative comes at a time when the five-member commission already has two vacancies and follows Chairman Dennis Patrick’s recent announcement that he plans to resign pending the naming of a successor. A fourth vacancy is due this summer, but President Bush has shown no indication of wanting to reverse the telecommunications deregulation begun under the Reagan Administration.

The move came almost as an afterthought to the commission’s action on a proposed AT&T; pricing approach, known as Tariff 12, geared to the company’s largest and most sophisticated telecommunications customers. The commission rejected the tariff, which would have allowed the company to offer flexible prices for customized packages of network services and equipment. But it gave the company a month to respond to its objection that the tariff was unlawful largely because it wouldn’t be available to all potential customers.

Joe Nacchio, AT&T;’s vice president for business communications services, said the FCC’s willingness to let AT&T; revise Tariff 12 demonstrates its belief that adequate competition now exists. Nacchio predicted that the company will easily meet any objections.

AT&T; competitors, primarily MCI Communications, opposed Tariff 12 as anti-competitive. MCI contended that because of AT&T;’s market share, the company can price services below cost to win key customers unfairly. MCI said it is “pleased” that the tariff was rejected but expressed dismay that AT&T; was allowed to continue serving customers who initially signed up pending FCC approval.