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precisely the role federal courts have historically played in overseeing the numerous similar decrees entered under federal
law, and there is thus no basis to consider changing or
The Modification of Final Judgment (or "Decree")
granted the United States the structural antitrust relief that
the Justice Department had sought in over three decades of
antitrust litigation with the formerly integrated Bell System. The January 1, 1984, divestiture split the Bell System between
its monopoly local exchange businesses (assigned to the BOCs)
and its competitive long distance and manufacturing businesses
(assigned to AT&T).
The Decree originally contained four line
of business injunctions and barred the BOCs from
(1) interexchange services, (2) equipment manufacturing,
(3) information services, and (4) nontelecommunications
The line of business injunctions are the "necessary
counterpart" of this divestiture.
By precluding the BOCs from
reentering the long distance and manufacturing businesses, the
line of business injunctions assure that the divested BOCs will
not recreate the very combinations and controversies that the
divestiture was designed to end.
At the same time, the Decree
was carefully fashioned to create an industry structure for
telecommunications that would not only promote competition in
long distance, manufacturing, and other markets, but also
protect ratepayers, prevent balkanization of the national
network, and promote America's international competitiveness
and balance of payments.
Both the divestiture and the corresponding line of
business injunctions received broad support among the 600
commentors that participated in the public interest proceedings
which led to the entry of the Decree by District Judge
Harold H. Greene.
And each rests on a fact that the District
Court, the Court of Appeals for the District of Columbia
Circuit, and numerous other antitrust courts have recognized: it creates profound competitive controversies and threatens vital national interests for a BOC both to control local
exchange networks on a widespread basis and to participate in
competitive businesses that depend on "access" to these local
exchanges or information about them.
These points are demonstrated by a brief review of
(1) the antitrust litigation against the Bell System, (2) the
fact that state and federal public utility regulation could not prevent these controversies, (3) the enormous costs that this antitrust problem imposed on the nation, and (4) the explicit antitrust findings that the District Court made when the Decree was entered and that appellate courts have since reaffirmed.
The 1949 and 1974 Government Antitrust Cases And
Prior to 1984, the Bell System had been a single
enterprise that participated in monopoly and related
competitive businesses alike.
Through the BOCs, the Bell
System owned the local telephone exchanges, which everyone
recognized to be natural monopolies that could not feasibly be
Through AT&T and Western Electric, the Bell System
also participated in three actually or potentially competitive
businesses that depended on access to the local exchange monopolies: (1) long distance or "interexchange" services,
which require access to local telephone facilities to originate
and terminate calls; (2) the manufacture of telecommunications
equipment (including equipment located on customer premises),
most of which was purchased by the BOCs and all of which
requires access to information about the evolving technical
characteristics of the network's local exchanges; and (3) the
provision of a very few “information services" (i.eu, time,
weather, and sports information), which similarly require use
of local telephone facilities for transmission of the
In the 35 years that led up to the Decree, the United
States brought two separate antitrust actions to break up the
the first in 1949 (United States y. Western
Electric, No. 17-49 (D.N.J.)) and the second in 1974 (United
States v. AT&T, No. 74-1698 (D.D.C.)).
The basis for each was
the Justice Department's contention that the structure of the
Bell System was inherently anticompetitive.
The Department proceeded under the theory that a firm
with a lawful monopoly violates Section 2 of the Sherman Act if
it "leverages" that monopoly to impede or foreclose competition
in a related market
even if the firm neither monopolizes nor
attempts to monopolize that second market
and that a
monopolist acquires special duties if it controls an "essential facility" or a "strategic bottleneck" to which competitors
require nondiscriminatory access.
Judge Greene and other courts
found that this dual control over the local telephone exchange
monopolies and related competitive business gave the Bell Companies both the "ability" and the "incentive" to foreclose
competition in the long distance and equipment manufacturing markets through discrimination and cross-subsidization.
eiler United States v. AT&T, 552 F. Supp. 131, 187 (D.D.C.
1982), aff'd sub nom. Maryland y. United States, 460 U.S. 1001
(1983); Litton Systems, Inc. V. AT&T, 700 F.2d 785, 798-802
(2d Cir. 1983), cert. denied, 404 U.S. 1073 (1984).
See Otter Tail Power Co. Ve United States, 410 U.S. 366,
Equipment Manufacturing. The Department claimed that the Bell System's control over the local telephone exchanges
inherently foreclosed competition in equipment manufacturing
In the Department's view, the Bell System could, and
had, misused its local monopolies to foreclose competition in
these markets in three different ways.
First, in numerous episodes in United States v. AT&T,
the Department charged that the BOCs and their centralized
engineering affiliate, Bell Laboratories, had "discriminated"
information about the BOCs' needs and requirements, and other
information about the evolving characteristics of the local
exchanges that was essential to the design and manufacture of
equipment for sale to the BOCS.
See Plaintiff's Memorandum in
Opposition to Defendant's Motion For Involuntary Dismissal,
United States y. AT&T, No. 74-1698 (D.D.C.), pp. 49-51,
296-359, 366-410 (August 16, 1981) (hereinafter cited as
*August 16, 1981, DOJ Memorandum"); Competitive Impact Statement, United States v. AT&T, No. 74-1698 (D.D.C.), p. 15 (February 10, 1982) (hereinafter cited as "Competitive Impact