conduct was not only subject to regulation, but had actually been reviewed or approved by the FCC or the state utility commissions that regulated the Bell System companies. Indeed, the existence of this regulation had been the basis for the 1956 Judgment that settled the Department of Justice's 1949 complaint. In the 1956 Judgment, the parties stipulated to the entry of a judgment that did not order any structural relief, but that, instead, limited the Bell System to the provision of regulated services and the manufacture of equipment used for such regulated services thereby relying - on regulation to prevent future controversies over claimed abuses of the local exchange monopolies. Consistent with the 1956 Judgment, AT&T contended in the government case filed in 1974 and the more than 70 private antitrust cases of this period that the conduct of the Bell companies was immune from attack under the antitrust laws because that conduct was pervasively regulated by the FCC and state public utility commissions. AT&T argued that the pervasive common carrier regulation to which the Bell companies were subject under the Communications Act of 1934 (47 U.S.C. S 151, et seq.) and corresponding state public utility laws was inherently inconsistent with the free and open competition that the antitrust laws are designed to foster, and that to apply the antitrust laws to pervasively regulated conduct would unfairly impose conflicting standards and requirements on the regulated company. Accordingly, AT&T contended that the application of the antitrust laws was repugnant to the regulatory scheme and that antitrust immunity was necessary to enable the regulatory scheme to work. Shortly after the filing of the government's complaint in the 1974 case, the District Judge who was then assigned to the case stayed all other activity in the - Judge Waddy - case and requested the parties and the FCC as amicus curiae to brief this basic jurisdictional issue. Both the FCC and the Department of Justice contended that the FCC's regulatory authority over the conduct being challenged in the case did not displace the antitrust laws and did not deprive the court of jurisdiction to order injunctive relief. See Memorandum of Federal Communications Commission As Amicus Curiae (filed December 30, 1975). The Court agreed. It held that neither the Communications Act nor the FCC's regulation had impliedly repealed the antitrust laws or otherwise deprived the Court of antitrust jurisdiction over the case. United States v. AT&T, 427 F. Supp. 57, 61 (D.D.C. 1976), cert. denied, No. 77-1009 (D.C. Cir.), cert. denied, 429 U.S. 1071, 434 U.S. 966 (1977). Both the Court of Appeals for the District of Columbia Circuit and the Supreme Court declined to review that decision. In 1978, after the case was reassigned to Judge Greene, the District Court reconsidered the immunity issue and reaffirmed that "regulation by the Federal Communications Commission and state regulatory bodies does not immunize defendants in this antitrust action." United States v. AT&T, 461 F. Supp. 1314, 1320-30 (D.D.C. 1978). AT&T made identical immunity claims in numerous private antitrust cases brought against the Bell System companies. These claims were rejected by each federal court of appeals that considered them, with the Supreme Court refusing to review these decisions.* and In its 1974 case, the Department of Justice also introduced extensive evidence to prove that regulation cannot assuage the antitrust problem created by the combination of exchange monopolies and related competitive businesses that a structural remedy thus was essential. The Department's evidence showed that the local telecommunications network is so complex, so technologically dynamic, and characterized by such great joint and common costs that existing forms of public utility regulation simply could not prevent disputes or abuses. Thus, the Department claimed that regulation could not prevent discrimination in the provision and pricing of bottleneck facilities to interexchange carriers, discrimination See, e.g., Southern Pacific Communications Co. v. AT&T, in the provision of interface information and specifications for new products to equipment manufacturers, discrimination in the procurement of equipment, or misallocation of the BOCS' joint and common costs between competitive and monopoly activities. See, e.g., August 16, 1981, DOJ Memorandum, pp. 46-47, 125 n.*, 161-62, 281-82, 285, 374. C. The Social Costs Of The Antitrust Problem The Bell System vigorously defended all the conduct that was challenged in the more than 70 public and private antitrust cases and AT&T believes to this day that its conduct was reasonable and lawful. However, the litigation demonstrated that the mere fact of the Bell System's - - no matter No First, the dual control of the local exchange bottlenecks and competitive businesses created inherent antitrust exposure and the certainty of enormous litigation costs. No single verdict could ever end the controversies. matter who won United States v. AT&T and the other pending cases, exposure to these antitrust charges was inherent in the integrated structure of the Bell System. Under the Department's leveraging theory, virtually any competitive success by AT&T - or failure by a competitor - could be challenged in an antitrust court. A competitor could always claim that AT&T's success resulted from the misuse of its local exchange bottlenecks, not the efficiencies of integration. each case, the allegation would raise a question of fact that would have to "go to the jury." In Equally important, the Bell System's integration of monopoly exchanges and related competitive businesses did more than create antitrust exposure that increased the Bell System's costs of doing business. It led to incessant antitrust, regulatory, and legislative proceedings throughout the 1970s and early 1980s that attempted to establish regulations that would prevent abuses of the local exchanges and thereby establish more level playing fields for the emerging competition. For example, the risks of these anticompetitive abuses led to almost continuous congressional investigations and several legislative proposals during the last half of the 1970s and the early 1980s.* In 1978, a bill was introduced in the * See H.R. 12323, 94th Cong., 2d Sess. (1976); H.R. 13015 95th Cong., 2d Sess. (1978); H.R. 3333, 96th Cong., 1st Sess. (1979); S. 611, 96th Cong., 1st Sess. (1979); S. 662, 96th Cong., 1st Sess. (1979); H.R. 6121, 96th Cong., 1st Sess. (1979); S. 2827, 96th Cong., 2d Sess. (1980); S. 898, 97th Cong., 1st Sess. (1981); H.R. 5158, 97th Cong., 1st Sess. (1981); MCI Communications Corp. v. AT&T, No. 79-1182, Complaint for Violations of the Antitrust Laws, Prayer for Relief, ¶¶ 6-8 (D.D.C. April 30, 1987). |