tions such as the new IBM consortium and Sematech who are doing their utmost to reclaim that technological leadership. I think it is fair to say that in the vast majority of telecommunications areas as distinguished from the merger area of computers in telecommunications, that we still retain the technological leadership here in the United States. Certainly we retain the applied technology leadership, and to the best of my belief, we retain the basic technology leadership. To the extent that there is any loss of leadership, we have not yet been able or successful in getting the Bell operating companies to describe to us those areas in which we have lost leadership. AT&T's technology for the most part is as sophisticated as any other manufacturer's technology of which I am aware in the areas of telecommunications. I think there are certain areas of futures and marketing in which manufacturers distinguish their products, but I don't think that in the basics of technology we have lost any leadership. So I don't think that argument has really been successfully made. We see in the newspapers, we do see a lot about semiconductors. All the technology for those that is available in the United States, to the best of my knowledge, with Judge Greene's approval, has been transferred to Bellcore. Bellcore is significantly involved in very large integrated circuit semiconductor development. Mr. MOIR. Mr. Chairman, I would like to add, the membership that I represent are the customers of Mr. Spievack's organization, the various service vendors that have testified yesterday and today, and what we want is obviously the most amount of technology in the network as soon as possible. As you recall, in the early days of these antitrust discussions before this subcommittee, the end user community had to go outside of the Bell System. We had to fight the FCC. We had to go to court in order to work with Mr. Spievack's members and others in order to try to keep this country at the cutting edge of technology. It was not the Bell System that put us there. It was vendors and end users working together to do those things that the Bell System was preventing us from doing. We have the best technology. When we have problems today and we go to USTR, when they listen or to the Department of State or the Department of Commerce, we are working with them to break down the problems we have in our countries. But what the vast majority of the business users-they are not saying that we are falling behind. That is why we hub our networks here, because we have the cutting edge technology right here in the United States. It doesn't always come from the Western Electric or Bell System, but we are able to piece together the cutting edge of the networks in this world here and they come to a large degree from U.S. suppliers. Mr. BROOKS. To a large degree―― Mr. MOIR. That is right, and we want to continue to have that. Mr. BROOKS. What would be a larger degree? Mr. MOIR. Over half. Mr. BROOKS. I have one more question. It is my understanding that you were involved in the AT&T antitrust suit; were you not? Mr. MOIR. We were, yes, and still are. Mr. BROOKS. My understanding is there is nothing in the MFJ that prevents the Bell companies from recombining into Ma Bell No. 2 and that there is nothing that would prevent a smaller company, one of the Bell companies, from acquiring AT&T, although there is a prevention where AT&T cannot acquire the small companies. What is the chance of the Baby Bells, as they call them, recombining into Ma Bell the 19th? Mr. SPIEVACK. You can't say it is not impossible, Mr. Chairman. Mr. BROOKS. Not just ego. It is money. Mr. SPIEVACK. That is correct. Certainly in today's world of merger and acquisition, you can't discount the possibility. Certainly that is not prevented by the modified final judgment. There is no indication that any of them want to be acquired and are unhappy with their present status. We saw outside the area a recent attempt at a takeover by Mr. Adelson of Centel telephone, which failed, and failed largely because it seemed clear to him that he was never going to get the regulatory approvals that would have been necessary for him to take over a company of the size of Centel. So I think it would be very difficult for a hostile takeover. Given the regulation that still exists in the United States, both on the State and the Federal level, for anyone to make an effort to hostilely take over any of the Bell operating companies, it would have to be along the lines of your suggestion, that it would be an amiable coming together of all seven of them or a part of them. I don't see that-it is just hard to say. I don't see it happening, but that doesn't mean it can't happen or that it won't happen. They certainly have the legal ability to do that. Mr. MOIR. Mr. Chairman, it is an interesting question. My sense is I don't think the seven Bell operating company chairmen or their heads of Washington offices could ever agree as to who was going to be No. 1 for that to ever become a reality. But I think the bigger Mr. BROOKS. Sometimes they work it out, you know. Mr. MOIR. Fortunately, since each one of them has now risen to a level of independence Mr. BROOKS. The seven little dwarfs. Mr. MOIR. Hopefully, we will never have to deal with that issue before this subcommittee or any other committee. If you look at what has happened in the industry since divestiture, we have found some degree of competition among the seven. Maybe it is unfortunate we can't sit here and talk about competition among the 22 had AT&T and others made a different decision some years ago and instead of creating 7, created 22. We may have much more competition between the various Bell operating companies. That would probably have been a better di rection. We wouldn't have had to have hearings like this. We wouldn't have to spend a lot of Judge Greene's time worrying about these things. Many of us would have fewer concerns that we would express at the FCC. We would still have problems about the ability of the FCC to do its job, but we probably would not have had the turmoil within the industry we have had for the last several years. Mr. BROOKS. Mr. Douglas from New Hampshire. Mr. DOUGLAS. Thank you, Mr. Chairman. Mr. Moir or Mr. Spievack, do you feel there is an information services bottleneck that exists today? Mr. MOIR. I had some trouble with the comment made by the individual from CCIA on the last panel. There was an inference that there are a variety of alternatives to the local bottleneck, and I made a note of the examples she gave you. The first one was a dial-up network, which last time I checked is owned and operated by the local telephone company who also provides the information gateway. The others were all examples of one-way service, which is not the way most of us like to sit down at our computer terminals and conduct interactive information activity. Direct broadcast satellites is one-way, CATV is one way. There are some people who might say there are options out there, but they are addressable and if you want more information on the record, I am sure I or the people from the cable industry could explain that we really don't have interactive two-way cable television today. Blanking intervals were mentioned, again one-way. FM side band, again one-way. Mr. DOUGLAS. What is that? Mr. MOIR. It is using a portion, I believe, from the description of the television channel band width-you have blanks in the TV screen, a series of lines. You would fill in part of that line, as I understand it-I am a liberal arts major-with information. It is a one-way transmission, but if you take all the needs that could be fulfilled by that, it is still a niche. That is not the issue before the subcommittee. We are talking about the vast majority, 90, 95 percent of the information flowing. These things wouldn't handle that and never could and I am sure if we had a chance to have her back, she would agree with my statement. Mr. DOUGLAS. Mr. Spievack. Mr. SPIEVACK. I guess I agree with some of the former witnesses, those who gave testimony, that as long as you have that local exchange bottleneck and the economic power of it, you don't want to allow the Bell operating companies to be the providers of information services. They certainly can provide the gateway service, which is the much more profitable ends of it, although they don't realize that as yet. They have been authorized to provide those gateway and transport services for information services and they really haven't understood yet the implications of that and how to do it successfully. So we find this kind of a ludicrous situation in which they are actively pushing, as a legislative matter, for the right to get into the information services business and the contents of information services under circumstances where they haven't really figured out even how to market the underlying transport in aid of those information services. I think that until there are some alternatives to the local exchange monopoly, it is a serious error to allow them to go into information services as a competitive matter. Now, there is another issue at the policy level for the Commerce Committee, and that is the amount of money they are going to lose, which is going to be fairly substantial, in going into those information services and the impact that that is going to have on residential and business telephone users in terms of rising rates. That is a very serious policy issue and one that has not as yet been addressed by anyone. Mr. MOIR. I wish I could tell you that alternatives were around the corner. They are not. Peter Huber's study for the Department of Justice in the triennial review pointed out that 99 percent of all traffic goes through the network. There isn't a bypass, which is another way of describing the types of alternatives that Mrs. Biddle mentioned. I wish those alternatives were there to handle the bulk of the needs so we wouldn't have to worry about antitrust issues, take the time up of Judge Greene, but unfortunately, those alternatives aren't there for the vast majority of user needs, either at business or at home today, and they are not likely to be there in the future. Mr. DOUGLAS. Why do we have to worry about Judge Greene? If it isn't that case, it will be another one. Mr. MOIR. At one time, there were a number of judges, over 70I think it was over 100 antitrust suits pending against AT&T, so there were a number of judges that were kept quite busy due to abuses of the Bell System predivestiture. Mr. SPIEVACK. I would add, and this relates to a question that Mr. Mazzoli has asked of other witnesses-that is coming from our experience, which is now 21 years of battle and litigation over anticompetitive practices in the Bell System, a history which is now under existing conditions settling down, we asked ourselves why should we now subject ourselves to changes that are going to take us right back into the antitrust court? We haven't got enough history under our belt. There hasn't been enough change as yet. The monopoly is still fully there and working well. That monopoly, whenever given a chance, has been leveraged for anticompetitive and discriminatory practices. That is beginning to calm down. We want to keep it calmed down. There is an old saying, “If it ain't broke, don't fix it." This baby could use some fixing, but we can't think of any fixing that is better than what we have right now. Mr. MOIR. We have asked the Bell operating companies, tell us what do you really need to have changed. What they find is we only need this little part or manufacture changed, but we really can't work out any negotiations with you because the other Bell operating companies have different agendas. So they keep playing each other off in the negotiations and the bottom line is they want everything changed and you are never able to sit down and even conduct a meaningful dialog as to what a company may really need to have changed. Mr. DOUGLAS. Thank you, Mr. Chairman. Mr. BROOKS. Mr. Mazzoli, the gentleman from Kentucky. Mr. Mazzoli. Thank you, Mr. Chairman, and thank you, gentle men. I think I heard you say that you were proud to be a lap dog. I used that term earlier today and you were referring to it. I am glad you are at least admitting that you are a lap dog. Mr. Mazzoli. Mr. Halprin and Mrs. Biddle, I suggested, were not lap dogs, and in fact, they were saying critical things about the Bell operating companies, but they still felt despite those criticisms and wariness, that change could be profitably and suitably and in the public interest made. Obviously, you all don't feel that way, so I guess we are on a bit of a different wavelength. Mr. SPIEVACK. That is not entirely true. Mr. MAZZOLI. Someone on the panel said if it was a good idea to break up AT&T, then why change it. I don't agree it was a good idea. I am just saying that I don't accept that exact premise that to break up AT&T was such a great idea. Mr. MOIR. Keep in mind Mr. MAZZOLI. If you were to poll the average person, not the average company, not the average lawyer, member of a firm, but the average person, I would suggest that there would be a very large percentage of those average people walking the street that would agree with me that the breakup was not such a great idea. It is broken up. We can't unscramble the plate of spaghetti. We can't put Humpty Dumpty back together again. We have to take it forward and that is where I am dismayed to see this panel and other members saying that nothing should be done, that we are at the optimum level. Mr. MOIR. I never said that. Mr. MAZZOLI. How would you change it? Mr. MOIR. Normally, when somebody wants something made changed, they come and tell us. We have had numerous conversations Mr. MAZZOLI. Somehow you guys are estranged; you are just like that divorced couple. They are not going to agree with you. Mr. MOIR. You, as a customer, would obviously like to have more choice and high-quality choice. That is what I bring to this table, 18 billion dollars' worth of corporate America purchasing power. We would love to have more suppliers. What we don't want to have is seven new entrants that reduce the total number of people in the field. |