Bells Want ’82 Consent Decree Axed by Courts : Telecommunications: Four companies will seek action on the agreement that keeps them from long-distance market.
After scoring a partial victory in the House last week with a bill that would eliminate key restrictions on their business activities, four of the regional Bell operating companies were expected to file a motion in federal court today seeking to throw out entirely the decade-old consent decree governing the breakup of the Bell system.
The decree, overseen by U.S. District Court Judge Harold H. Greene, prevents the seven Baby Bells from offering long-distance service or manufacturing telecommunications equipment and requires them to seek court permission before they can enter many new businesses.
“Technology and competition have rendered (the decree) obsolete, and it’s time to bid it farewell,” said Eric Rabe, a spokesman for Bell Atlantic Corp.
The consent decree, designed to balance the interests of the Baby Bells, AT&T; and consumers by specifying which companies could be in which businesses following the Bell System breakup, has given Greene extraordinary regulatory authority over the telecommunications industry. The Bell companies have been fighting it almost from the day it was signed in 1982.
A key goal for the Bells is to gain entry into a $70-billion long-distance market now dominated by AT&T; and MCI. Although the recently passed House bill provides for Bell entry into that market, a similar bill moving through the Senate, sponsored by Sen. Ernest Hollings (D-S.C.), could set higher obstacles to Bell entry into the business.
The Bell companies have said they would rather have no telecommunications bill rather than be kept out of the long-distance business. If legislation allowing them into long-distance does not pass, they could accomplish the same objective through a successful challenge to the consent decree.
“We are already experiencing severe competition in our local markets, and we want these restrictions (on Nynex Corp. activities) taken off,” said Bob Varettoni, a spokesman for Nynex.
Although only Bell Atlantic Corp., Bell South, Nynex and Southwestern Bell Corp. are part of the motion, the other three Bell companies--Ameritech, Pacific Bell and U.S. West--are expected to make statements supporting the action.
Skeptics question whether the new judicial initiative will be effective. “The Bells have been trying to get rid of the decree since five minutes after it was signed,” said William Baxter, a Stanford Law School professor who as head of the Justice Department’s antitrust division led the push to dismantle AT&T.;
Baxter said he doubts the courts will overturn the decree and suggested the Bells may be trying to influence deliberations in the Senate by “trying to convince people it doesn’t matter because the regulations will be neutered anyway.”
Long-distance companies are fiercely opposed to Bell entry into the market, contending that the Bells would gain an unfair advantage through their control of the local exchange. The long-distance firms, led by AT&T;, say they would support a relaxation of the restrictions only after robust competition developed in the local telephone business.
The Bell companies have bolstered their court motion with affidavits from dozens of prominent economists and industry experts. In a 10-page statement, Gary Becker, 1992 winner of the Nobel Prize in economics, argues that the consent decree “improperly restricts entry and harms consumers.”
Paul MacAvoy, a Yale economist who has worked as adviser in several administrations, says in his statement that the oligopoly in long-distance markets has enabled AT&T; and MCI to set prices “at non-competitive levels as if in tacit collusion.”
Pacific Bell said it did not participate in the suit because its primary concern is with winning approval to offer long-distance calls within California. “We are going the legislative route locally and federally,” said Jerry Kimata, a spokesman for Pacific Bell.
