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services. And those gateways will provide millions of Americans with access to information provided by newspapers, magazines, financial institutions and thousands of other small and

large American companies.

The MFJ is a sound reflection of Congressionally-established policy. By reaffirming the line of business distinction, Congress would be enacting sound anti-trust policy. And you would be enacting sound public policy.

In conclusion, we at ANPA are delighted that your committee has decided to hold these

hearings. We agree with Congress's desire to set telecommunications policy. But we should

not confuse jurisdictional questions with the underlying lack of merit of the BOCs' arguments.

In that regard, let me leave you with the words of Judge Greene in rejecting yet another of the

BOCs' applications to enter electronic publishing. Judge Greene wrote:

the Regional Companies have presented 'no new information, and they have identified 'no special circumstances,' or 'no significant factors that would distinguish the present requests from the earlier ones. The Regional Companies obviously have sufficient funds, in part extracted from the ratepayers, with which to pay lawyers to repeat the same arguments again and again, but these arguments do not become more convincing by dint of repetition....

Mr. Chairman, thank you very much.

45-128 - 91 - 10

Mr. BROOKS. Mr. Verveer.

STATEMENT OF PHILIP L. VERVEER, PARTNER, WILLKIE FARR &

GALLAGHER, ON BEHALF OF THE NATIONAL CABLE TELEVI. SION ASSOCIATION

Mr. VERVEER. Good morning, Mr. Chairman and members of the subcommittee.

My name is Phil Verveer. I would like to summarize four points covered in my written submission on behalf of the National Cable Television Association.

First, history is decisively on the side of those who believe that rate of return regulated monopolists will not compete fairly. The poisonous synergy created by the combination of cost-of-service regulation and market power has evidenced itself in the case of the Bell companies throughout this entire century.

The Government's 1974 antitrust suit and the subsequent divestiture were based in no small measure on this phenomenon. The competitive problems corresponded with the application by both Federal and State authorities of public utility regulation. As histo ry discloses, regulation was insufficient to prevent profound competitive problems.

There is no basis for believing that elimination of the line-ofbusiness restrictions would eventuate in any different result today.

Second, the modification of final judgment [MFJ] has worked exceptionally well. Its line-of-business restrictions have provided an environment in which the risks of anticompetitive activities by the Bell companies in long distance, telecommunications equipment manufacturing and information services have been reduced to manageable proportions.

The result is significant investment, increased competition, and improved dynamism in all of the affected industries.

The section VIII(C) waiver process contained in the MFJ has pro vided a mechanism for ad hoc review of Bell company diversification proposals. This has helped assure that the line-of-business limitations are no more restricted than necessary to achieve their purposes.

Third, the cable industry historically has been particularly victimized by local exchange company anticompetitive activities.

The Bell companies are fond of reciting the purported fact that the Government's antitrust suit produced no evidence of Bell System misconduct in information services. This observation is largely irrelevant since the 1956 consent decree prohibited Bell System entry into information services.

But the suggestion that there is no evidence of relevant misconduct is also false, as anyone familiar with the history of the local exchange companies treatment of cable television companies during the 1960's and early 1970's can testify.

The cable part of information services experiences the same kinds of problems that long distance companies and competing equipment manufacturers suffered prior to divestiture and the imposition of the line-of-business restrictions.

Fourth, despite suggestions to the contrary there is nothing in the AT&T consent decree which prevents the implementation of

new technology. Telephone companies can construct fiber transmission plant without any change in the consent decree or in other applicable laws and regulations.

As with other kinds of electronic publishing, the consent decree prevents the Bell companies from offering content; in this case, video programming. But it does not preclude or inhibit the introduction of fiber and other new transmission technologies.

Thank you, Mr. Chairman, that concludes my summary statement.

Mr. BROOKS. Thank you very much, counselor. [Mr. Verveer's prepared statement follows:]

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opportunity to appear before you on behalf of National Cable

Television Association, the principal trade association for the

cable industry.

As I began to prepare for these hearings, I reflected

upon the fact that this is by no means the first time that this

distinguished Committee has inquired into the Bell Companies' resistance to their antitrust obligations. Over thirty years

ago, Chairman Cellar of your Antitrust Subcommittee investigated the irregular circumstances surrounding the U.S.

Department of Justice agreement to the 1956 Western Electric

consent decree. While today's context is certainly very different from that of 1959, the issues and problems have

remained remarkably constant.

Due to a dramatic shift in policy beginning in 1986,

the Justice Department is once again unwilling to preclude Bell

Company anticompetitive activity through the only effective

means available:

structural remedies.

Antitrust enforcement

may not be fashionable, but it remains the fundamental

underpinning to our free economy. Of course, there are significant intervening events between 1959 and 1989, not the

least of which was the break-up of the largest corporation in

America in 1984.

Nevertheless, as this Committee exercises its

jurisdiction to review the issues, it once again is confronted with the problems of the Bell Companies' monopolies, their efforts to escape antitrust enforcement and the acquiescence of

the Justice Department and the FCC in such efforts.

For me personally, history is repeating itself too.

Fifteen years ago, when I was a lawyer in the Justice

Department's Antitrust Division, I was the recipient of

numerous complaints from would-be Bell System competitors. Beginning with companies which planned to offer long distance

transmission services, these firms advised me that they were

having problems with the Bell System problems such as difficulty arranging for local interconnection, intimations of discriminatory pricing for competing transmission services, and general lack of cooperation clothed in a genial inability to resolve critical coordination issues in timely fashion.

These complaints led to an antitrust investigation of

the Bell System ultimately resulting in the filing of the largest government monopolization suit in history. Long after

I had left the Justice Department, the suit ended in a

settlement requiring the largest industrial reorganization in U.S. history. 1

1

United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983).

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