U.S. Says AT&T; Should Modify McCaw Filing

The Justice Department said American Telephone & Telegraph Co.’s proposed acquisition of McCaw Cellular Communications Inc. would violate the agreement that broke up AT&T;’s telephone monopoly 10 years ago.

AT&T; must obtain a modification of the agreement before being allowed to proceed with the merger, Justice Department lawyers argued in court documents filed Wednesday with U.S. District Judge Harold Greene.

The filing, which is only a recommendation, supports a motion by BellSouth Corp. asking Greene to declare that AT&T;’s $12.6-billion acquisition of McCaw violates the consent agreement. The Justice Department filing does not take a position on the merger itself, only on the question of modifying the consent agreement.

BellSouth’s motion, filed a month ago, shifted to the courts the objections of the Baby Bells, which had been seeking to use the AT&T-McCaw; merger as a lever to ease current restrictions on their own services.

The seven regional Bell operating companies, of which BellSouth is the largest, fear that the proposed merger will allow AT&T; to compete with the Bells in providing local telephone service. AT&T; was stripped of the right to compete in local phone arenas by a 1984 consent decree that separated AT&T;’s local phone businesses into seven independent regional companies.

A spokesman for Atlanta-based BellSouth said Wednesday that the company was disappointed that the Justice Department did not support its broader contention that the regional Bells should be freed from restrictions on carrying interstate long-distance calls.