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Camp, Lee G., vice president and general manager of information services,
Pacific Bell: Prepared statement........
president and chief executive officer, Rochester Telephone Corp.: Prepared
Kimmelman, Gene, legislative director, Consumer Federation of America:
McGowan, William G., chairman, MCI Communications Corp.: ared state
Moir, Brian R., partner, Fisher, Wayland, Cooper & Leader, on behalf of the
International Communications Association: Prepared statement.....
and president, ITT Communications Services, Inc.: Prepared statement
AT&T CONSENT DECREE
TUESDAY, AUGUST 1, 1989
HOUSE OF REPRESENTATIVES,
COMMITTEE ON THE JUDICIARY,
Washington, DC. The subcommittee met, pursuant to notice, at 10:07 a.m., in room 2141, Rayburn House Office Building, Hon. Jack Brooks (chairman of the subcommittee) presiding.
Present: Representatives Jack Brooks, Romano L. Mazzoli, Dan Glickman, Edward F. Feighan, Lawrence J. Smith, Mike Synar, Patricia Schroeder, Don Edwards, Hamilton Fish, Jr., Michael DeWine, William E. Dannemeyer, Chuck Douglas, and Carlos J. Moorhead.
Subcommittee staff present: Jonathan R. Yarowsky, chief counsel; Judith Bailey, counsel; Gary Goldberger, counsel; Mary V. Heuer, research assistant; and Linda Jo Shelton, office manager; full committee staff present: William M. Jones, general counsel; Robert H. Brink, deputy general counsel; James E. Lewin, chief investigator; Alan F. Coffey, minority chief counsel; and Charles E. Kern II, minority counsel, Committee on the Judiciary.
OPENING STATEMENT OF CHAIRMAN BROOKS Mr. BROOKS. Today we will begin the first of 2 days of hearings on the AT&T consent decree. This decree, also known as the modified final judgment or MFJ, was entered into in 1982 and settled the U.S. Government's antitrust monopoly suit against the American Telephone & Telegraph Corp.
I vividly recall how contentious those times were. Many individuals who were otherwise calm and rational would turn livid with rage at the mere mention of the Government's efforts to break up AT&T. They couldn't understand how Congress could stand by and watch our Nation's largest corporation being dismantled, simply because it was big and successful. After all, Ma Bell had provided our country with the best phone sy stem in the world.
To many companies and consumer groups, however, this benevolent image of Ma Bell was an illusion which masked an entirely different and more sinister form. In their view, AT&T had systematically used its monopoly position in the local phone market and its revenues of $1 billion a week to dominate, maim and destroy its competition. Corporations such as MCI and GTE/Sprint knew that without the Government's intervention under the antitrust laws, AT&T could put them out of business virtually over night. In antitrust jargon, the barriers to entry were air tight. Looking at the
first panel on our witness list, you can see how times have changed. AT&T, MCI and Sprint are not only sitting at the same table, they all share the same position and support of the modified judgment. It reminds me of an old saying, the lion has laid down with the lamb. I'm not sure which one is which, however.
Mr. BROOKS. Certainly the industry has changed considerably since Judge Greene approved the MFJ 7 years ago. Today, there are thousands of companies offering a wide range of products and services in a highly competitive and diversified industry. As a result, the regional Bell companies are suggesting that the MFJ restrictions are no longer needed. It is not surprising that this position is not shared by everyone. Many believe that releasing the Bell companies from the MFJ would lead to precisely the kind of cross subsidization and anticompetitive activities by these regional monopolies that led to the Federal breakup of AT&T's national monopoly in the first place.
In my view, the competitive environment fostered by the MFJ and supervised by Judge Greene has been greatly beneficial to our country. It took almost 40 years for the antitrust laws and the Federal courts to bring back the brisk winds of competition to the telecommunications industry. You can be assured that this subcommittee in whatever it decides will not permit a return to the days of coercive bottleneck practices so harmful to the industry and consumers alike.
I yield now to the distinguished member from California, Mr. Carlos Moorhead.
Mr. MOORHEAD. Thank you, Mr. Chairman.
I thought you were going to tell us a few minutes ago that you didn't know which one of them would get eaten, the lions or the lambs.
As one of only four members of this committee who also serve on the Energy and Commerce Committee, it sometimes appears that I am rarely on a holiday from telecommunications issues. Everyone in this room is well aware that the Telecommunications Subcommittee of my other committee has been devoting long hours to the Swift/Tauke bill, H.R. 2140, which would open up information services and manufacturing to regional Bell's under the supervision of the FCC. The antitrust perspective of this subcommittee, however, is no less important to the full and proper consideration of this legislation.
The present and future state of competition in the telecommunications industry will affect all of our lives on a daily, indeed, almost hourly, basis. In exercising our committee's jurisdiction, therefore, it is both appropriate and necessary that we hear from all the principals involved, from the long distance carriers and the RBOC's, to the specialized providers and, not least, the American consumer.
Mr. Chairman, I'm delighted that you have scheduled these 2 days of hearings on the antitrust aspects of the AT&T consent decree. I look forward to the enlightenment which I am sure our witnesses will provide today. I want to welcome the witnesses and I thank
Mr. Synar, the gentleman from Oklahoma.
Mr. SYNAR. Thank you, Mr. Chairman. Like Mr. Moorhead, I have the distinction of being one of the four members that serve both on Energy and Commerce and here. I look forward to these hearings today.
The Telecommunications and Finance Subcommittee has spent the better part of the last 3 months reviewing telecommunications policy. We have heard from representatives of every segment of the telecommunications industry, the Bell holding companies, long distance providers, equipment manufacturers, information service pro viders, communication workers, rural telephone companies and telephone users.
The hearings were informative but in my opinion, they failed to cover some very critical issues. First, the hearings failed to fully explore whether or not the terms of the consent decree had served the public's interest. To hear some of my colleagues on that subcommittee tell it, the antitrust laws are anticonsumer.
Second, the hearings failed to fully explore whether or not the Federal Communications Commission can give telephone consumers and competitors positive assurance that the agency can police cross subsidy and anticompetitive behavior.
Let's face it. When we talk about taking jurisdiction over setting telecommunications policy away from Judge Greene and turning it over to Congress, we are really talking about turning it over to the FCC. I've made very clear my disappointment with that agency's record of enforcing communications law during the last 8 years. I don't need to go through that again this morning.
I'm still keeping an open mind of whether or not legislation in this area is necessary. At the very least, however, I think Congress should explore all of the issues surrounding the MFJ debate thoroughly and carefully before we start acting.
am anxious for the day that we can take full advantage of the telecommunications revolution, but just as Rome was not built in a day, I doubt that sensible long-term telecommunications policy can be drafted in just a few months.
Here is how I view the present lay of the land. I think that for the most part, consumers and the industry have been well served under the present system, which promotes universal service, competition and protection from monopoly abuse. I think the present lay of the land says that the quality of the telephone service has improved vastly. Consumers
have more choices in equipment and services than ever before. There is increased competition. There are lower prices for consumers and more choices.
There are 510 long distance companies; 40 million Americans own personal computers. The United States manufactures $66 billion in telecommunications equipment each year. The information services market is growing. Consumers already have a wide array of information services to choose from. Many areas are now presently experimenting on a trial basis with many new information services. All of this has been done under the terms of the MFJ.
Those are the types of things that I think we need to remember as we move forward in this area and I commend the chairman for taking up the jurisdiction of this area, which is rightly here at the Judiciary Committee and I look forward to these hearings.
Mr. BROOKS. Thank you, Mr. Synar.
These are important hearings on a highly complex and difficult issue and the Committee on the Judiciary, and especially this subcommittee, has a direct interest because of our legislative jurisdiction over the Federal antitrust laws.
While these hearings are being described as oversight in nature, we know that our subcommittee has pending before it legislation known as the Consumer Telecommunications Services Act of 1989, H.R. 2140. That bill also has been referred to the Committee on Energy and Commerce. It proposes to modify the modified final judgment so as to allow the regional Bell operating companies to engage in both information services and telecommunications equipment manufacturing.
In addition, the legislation would transfer jurisdiction over information services and manufacturing from the U.S. district court to the Federal Communications Commission.
In my estimation, any bill that alters the terms of the MFJ, directly or indirectly, is within the jurisdiction of this committee. Make no mistake about it; the MFj, or, as it is often referred to, the AT&T consent decree, is an antitrust issue.
The changes proposed in H.R. 2140 also raise important questions about our national telecommunications policy and America's international competitiveness. Where should we draw the line between anticompetitive concerns and regulatory policy is a difficult dilemma.
The divestiture of AT&T became effective January 1, 1984, just 542 years ago. What have been the consequences? Since divestiture, the cost of long distance service has significantly declined, as have the cost and availability of consumer premises telephone equipment. Local telephone rates initially went up but they have been leveling off over the last 2 years. Local telephone service has become regionalized in a corporate sense and the seven regional Bell's are now very successful companies.
Most believe that the AT&T consent decree has spawned tremendous growth in the telecommunications industry that otherwise would not have occurred. There is no question but that America is in a considerably different place today with respect to telecommunications than it was a few short years ago.
Whether or not Congress should legislatively alter the terms of the consent decree is at this time the focus of an ongoing debate that will continue here this morning. In fact, that has been the debate almost from the inception of the decree.
I intend to keep an open mind in this matter as we proceed with these hearings. There are attractive, compelling arguments on both sides that we will have to consider and evaluate.
Before we act or choose not to act, Congress should know the real consequences of both of these choices. I am hopeful that this morning's hearing will begin an inquiry that will enlighten the members of the subcommittee, the full Judiciary Committee and the entire Congress on this issue.
Mr. Chairman, you are to be congratulated for taking the initiative to schedule this timely inquiry.