7 Baby Bells to Provide Information Services : Communications: Judge who barred such action in 1987 reluctantly OKs it. Domination of market is feared.
A federal judge reluctantly agreed Thursday to give regional telephone companies sweeping new power to provide a broad array of sophisticated information services, potentially placing them in competition with newspapers and other media outlets.
The ruling, which is subject to appeal, would allow the so-called Baby Bells to provide such services as home shopping, stock market quotes, “electronic Yellow Pages” and new forms of classified advertising by means of 900 numbers and other telephone links.
The decision was hailed by the regional phone companies and Bush Administration officials, who contend that it will increase competition within the rapidly expanding information services field. But it was denounced by opponents, who fear that the Baby Bells will quickly dominate the market and shove other firms aside.
The ruling was issued by U.S. District Judge Harold H. Greene, who wrote the 1982 antitrust decision requiring the breakup of the Bell system into regional firms. In 1987, Greene specifically prohibited the phone companies from entering the information services market, but last year an appeals court rejected Greene’s findings and directed him to issue a revised ruling.
Greene said that he was complying with the appeals court mandate “with great reluctance,” and he delayed the effect of the new order for 30 days to give opponents a chance to file appeals.
In the ruling, Greene made it clear that he believes allowing the regional phone companies to provide information services will actually lessen competition because of their dominance over local telecommunications markets.
“The most probable consequences of such entry . . . will be the elimination of competition . . . and the concentration of the sources of information of the American people in just a few dominant, collaborative conglomerates, with the captive local telephone monopolies as their base,” Greene wrote.
“Such a development would be inimical to the objective of a competitive market, the purposes of the antitrust laws, and the economic well-being of the American people,” he continued.
He said that the market power of the Baby Bells--Pacific Telesis Group, Ameritech, Bell Atlantic Corp., BellSouth Corp., NYNEX Corp., Southwestern Bell Corp. and U.S. West Inc.--would enable them to “discourage entry” by smaller firms into newly created information fields.
A wide range of opponents, including the American Newspaper Publishers Assn., the long-distance carrier MCI and a number of consumer advocates, have been fighting attempts by the phone companies to get into information services. Executives of Times Mirror Co., an ANPA member and parent company of The Times, declined to comment on the ruling.
Foes of the Baby Bells have argued that, in effect, the phone companies will subsidize their entry into the non-regulated information services businesses with earnings from their large, regulated phone operations. Such cross-subsidization is prohibited, but opponents contend that the regional firms easily could evade the regulatory restrictions.
The U.S. Justice Department and the Federal Communications Commission supported the seven regional phone companies in their efforts to lift the restrictions on their activities, arguing that they would provide added competition that would benefit consumers.
“I believe the nation will greatly benefit by obtaining the contribution which this large segment of the U.S. telecommunications industry can make,” FCC Chairman Alfred C. Sikes said in response to Greene’s ruling. “I would hope that any appeal would be swiftly disposed of. There has already been too much delay.”
Pacific Telesis Group, the parent of Pacific Bell, also hailed the ruling. “For years, consumers and businesses have asked us to provide information services, such as electronic Yellow Pages, but we have been unable to do so because of the restrictions imposed” by the courts, said R. F. Stowe, Pacific Telesis’ vice president for Washington affairs. “This is a major step forward.”
The California Public Utilities Commission, which regulates phone companies in the state, said that it, too, is pleased by the move. “Our position was that we wanted to see information services opened up and we wanted to see the Public Utilities Commission regulating this issue and not an antitrust court,” said Gretchen Dumas, an attorney for the agency.
Thursday’s ruling was issued in response to a 1990 order by the U.S. Court of Appeals for the District of Columbia overturning Greene’s earlier ruling prohibiting the Baby Bells from entering the information services field.
Despite his acquiescence to the appeals court decision, Greene characterized as “preposterous” the phone companies’ contention that consumers were clamoring for them to provide additional services.
Consumer advocates expressed outrage. The ruling is “terrible for consumers,” said Gene Kimmelman, legislative director of the Consumer Federation of America.
Greene has been overseeing the nation’s telephone industry since the original 1982 ruling breaking up AT&T; and its regional telephone systems in an effort to increase competition in the growing telecommunications industry.
The judge has issued a series of orders designed to implement his breakup ruling and has consistently resisted attempts by the regional phone companies to expand their powers into such areas as long-distance service. But those firms have been fighting back, and they are campaigning to get Congress to overturn his ruling prohibiting them from manufacturing telecommunications equipment.
