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Mr. MAZZOLI. You can't have it both ways.
If you are for competition, you can't be against seven more.
Mr. Moir. That is not necessarily true.
Mr. MAZZOLI. Why is it not true?

If we are talking about competition, an earlier panel said the same thing.

Mr. Moir. That is a good discussion to have.

Mr. MAZZOLI. How can you be for competition? Everybody in there—we say competition is the American scene, but we don't want these seven in it?

Mr. MOIR. When I go home, how many choices of local telephone service do you have?

Mr. MAZZOLI. Interestingly enough, I asked Mrs. Biddle to give us a little amplification on her statement.

Mr. Moir. I would love to have the opportunity to comment when that comes in because I suspect it is incapable of dialing your neighbor through any of those vehicles other than the one the phone company provides.

Mr. Mazzoli. When I was a kid, I used two cups and a string and I got along almost as well as I do now. Mr. MOIR. Usually my brother was at the other end of the line.

Mr. MAZZOLI. I sometimes think if we went backwards, we would be, to some extent, going forward.

Mr. MOIR. That raises a good point.

Remember, going backwards, the bulk of the people in the industry, your constituents, my members, were only having a choice of a black rotary phone or a black rotary phone.

They wanted touch tone. They wanted colors. They wanted fax machines

Mr. MAZZOLI. I think what they wanted was the service they could call one number and get it all done.

Now they have to call 15 numbers and get 12 different bills.

They are getting ripped off by these long distance companies they never heard of because they pick up a phone in a hotel or at our airport in Louisville—they switched over from South Central Bell or AT&T to some other kinds of a system.

Mr. Moir. It is too bad our FCC hasn't solved those problems.

Mr. MAZZOLI. Let me mention a couple of quick things. I have said, and some of you may have been in the room yesterday, that I have some misgivings about information activities because of the gateway problem.

I am trying to learn what this gateway bottleneck problem really is.

It is of significance, and we cannot avoid that.

I don't see the same problem with equipment manufacturers, particularly if you agree with what Mrs. Biddle said, that the term 'manufacturer" has been extended to specification, establishment has been moved into R&D almost.

Do you accept her general view that there is some area of ambiguity about what manufacturer means and it could prohibit the Bell operating companies from designating

Mr. MOIR. You may get some different answers to that question.

My answer is, yes, there is. At the same time, I would like to point out that there are some necessary safeguards that need to accompany that that have yet to enter in any dialog in any hearing room on Capitol Hill.

Mr. Mazzoli. You heard me say today that we are not talking about all of a sudden take the muzzle off the dog. We are talking about a step-by-step incremental kind of a move.

Mr. Spievack, do you agree with what Mrs. Biddle said about the term "manufacturer," that the gentleman's rulings might inhibit that area of R&D and of

Mr. SPIEVACK. The way in which Mrs. Biddle stated it, I don't agree.

I do agree that there are ambiguities. They are not in the areas that Mrs. Biddle described.

If the Congress is so disposed to overturn and provide relief from modified final judgment, I would say there has to be very significant safeguards and that raises other issues that we would be de lighted to discuss.

Mr. MAZZOLI. We could explore that area without too much disservice to the public?

Mr. SPIEVACK. Certainly you could explore that area. We would have a lot of opposition from the Bell operating companies.

Mr. SMITH. We represent also the alarm device manufacturers of the United States.

We feel—I hate to say they can't be trusted-but getting the camel's nose under the tent and letting them do R&D and all phases, dancing around the idea of actually producing the product, eventually ends up making the product.

Mr. MAZZOLI. Why shouldn't they make the product if they make it better than you guys do?

Mr. SMITH. Because they hold the monopoly position. If they would give up the monopoly position so they can't control the marketplace when they are vertically integrated and cause the same abuse with the same incentives as they did before, that would be fine, but I don't think that can be stopped.

Mr. MAZZOLI. I disagree.

You said something about the Bell operating companies being far behind the curve.

Mr. SMITH. They are in the alarm industry.
Mr. MAZZOLI. In quality.

Therefore, I think you said, that they might be able to farm-I think you used that term-farm your list of customers.

Mr. SMITH. I think target the customers.

Mr. Mazzoli. If they are so far behind the curve, why would they be able to successfully get your customers?

Mr. SMITH. Because they know where everyone is, because we go through their bottleneck.

When we put the jack on, their jack, they advertise to them and bill them.

They automatically change the phone number and they have our customers.

Mr. MAZZOLI. I think the question is if they don't produce good equipment, your people wouldn't want them, and if they do produce good equipment that is cheaper, why shouldn't your people have a chance to have that alternative?

Mr. SMITH. Because they have got our customers too late before the customer knows it. They have taken over and billed 50 cents a month for 20 years.

Mr. MAZZOLI. If I were in a business like yours, I would probably feel threatened the same way, but I am trying to look at it from the standpoint of what might be better all around for the total people.

I think if the Bell System can come into this alarm system and do a better job and give a better quality at a lower price, I don't see how that is against the national interest.

Mr. SMITH. History has shown they don't do it that way.

Mr. MAZZOLI. We have talked about the R&D and the manufacturer. How about the company that actually does metal bending?

How do you see that? With proper safeguards, do you see a problem there?

Mr. MOIR. We have no shortage of suppliers out there. If this subcommittee is able to get the RBOC's to conduct a dialog that they have been unwilling to discuss with us on workable safeguards, fine.

Mr. MAZZOLI. Mr. Spievack. Mr. SPIEVACK. Mr. Mazzoli, you said before that you didn't think all cross-subsidy was necessarily bad and when it is used to provide service to remote areas that you thought it was probably good, and I would be inclined to agree with you.

The issue is who makes that decision? If it is you making the decision, that is different than the executive officer of a Bell operating company making the decision.

If the FCC or State regulatory agency makes that decision, it is something qualitatively socially different.

No Bell operating company should have the right to make a societal decision or a competitive decision of that character at all.

Mr. MAZZOLI. If I understood the witnesses, when those decisions were being made by the Bell company, the Dow Jones prices were

Since we have been making the decision through Judge Greene, the prices have gone up.

Mr. MOIR. They were low for the phone equipment, but we paid for it for years.

My grandmother paid for a black rotary phone for years. She probably invested hundreds of dollars in that phone.

Had she paid a one-time price, which they refused to allow—Mr. MAZZOLI. My time has expired.

I was going to say, though, metal bending with proper safeguards, you would probably object, Mr. Smith, because that might be in your field, but an electronic information system

Mr. SMITH. Maybe I would, maybe I wouldn't. I would have to understand the question.

Mr. MAZZOLI. Mr. Moir.
Mr. Moir. It comes down to the same thing.

They refused to conduct dialogs and we have not had any dialog in any congressional hearing room that would satisfy ratepayer concerns.

Mr. MAZZOLI. We had the additional question about bottlenecks as to whether or not there is any alternative.

very low.

Mr. MOIR. Our problem isn't that we want safeguards. Our prob lem is we don't want to lose all the benefits that we have achieved with the regulatory and court decisions of the seventies and the benefit that was put on those by the consent decree.

Mr. MAZZOLI. If you are receiving benefits, I don't know why I should protect those for you unless you are in the public interest.

Mr. BROOKS. You represent only users?
Mr. MOIR. End users.
Mr. BROOKS. Ordinary people?
Mr. MOIR. Yes.
Mr. BROOKS. That is what it is all about.
Mr. MOIR. The people who compete in the world market-
Mr. MAZZOLI. Do you represent me? I am an end user.

Mr. MOIR. No. Mr. Kimbleman, I believe, represented you yesterday afternoon. I represent the business users, a small 18 billion dollars' worth of purchasing power in the industry.

Mr. MAZZOLI. I don't think anybody-

Mr. MOIR. We don't want to lose Mr. Spievack's members as suppliers.

Mr. MAZZOLI. Do you see more concerns there raised because of the bottleneck problem?


Mr. SMITH. Our bottleneck consists of their trying to take over the monitoring part of our business, which U.S. West said they wanted to do, which aroused us 4 or 5 years ago.

That is what got us scared. The monitoring is our profit.
Mr. MAZZOLI. Thank you, Mr. Chairman.
Mr. BROOKS. Thank you, Mr. Mazzoli.

I want to thank you and all the witnesses who have appeared before the subcommittee yesterday and today. After 2 days of rather lengthy hearings, it is clear to me that our task is just beginning.

We have a responsibility to deal head-on with the issues raised by the public policy debate and in doing so, we will have to constantly screen out rhetoric in favor of informed opinion.

In the end, whatever decision we make, it will be in the public interest and the interest of all Americans. That must be our ultimate guide in this task.

Without objection, the hearing record will remain open for additional submissions and materials.

The meeting is adjourned.
Thank you, gentlemen.

[Whereupon, at 3 p.m., the subcommittee adjourned, to reconvene subject to the call of the Chair.)

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During the August 1, 1989 hearing of the House Judiciary Subcommittee on Economic and Commercial Law on the AT&T Consent Decree, several issues where raised as to which I would like to offer some additional comments. I would respectfully request that this information be made a part of the hearing record.

The first issue relates to an article which appea ed in the Boston Globe alleging improprieties in the arrangements between NYNEX's two telephone companies and our procurement subsidiary, NYNEX Materiel Enterprises. As I indicated during the August 1st hearing, these allegations were unfounded, and for some additional background I'm enclosing with this letter copies of responses to the Globe from the president of NYNEX Materiel Enterprises and the retired president of New England Telephone as well as a copy of an internal NYNEX newsletter about the articles. As one response states, our interactions are continuously scrutinized and we have invited our various state regulators to review all aspects of the relationship (many of which have already been explored in state affiliated interest inquiries).

I would also like to offer some further thoughts on a question asked of Mr. Zeglis regarding any potential legal impediment to Congress taking action on the AT&T Consent Decree. Enclosed is a memorandum of law which was requested by NYNEX from outside counsel, Robert Pitofsky, the former Dean of the Georgetown University Law Center. It concludes that no constitutional issue exists which prevents legislative action with respect to the Consent Decree while a U.S. District Court continues to enforce and implement it.


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