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supply them billions of dollars of equipment annually. Moreover, there is every reason to believe that they would
Time has shown that Congress knew what it was doing
some would argue that in five years the world has changed
so much that we should unravel the fabric of this historic
They claim that in the past five years
the Regional Bell Operating Companies' bottleneck control
over the local exchange has been broken.
They also argue
that administrative safeguards can control anticompetitive
behavior by the Bell Companies.
But these claims just don't hold up to inspection. During the latest review of the consent decree the Court
found, and the Department of Justice conceded, that the
Regional Bell Operating Companies continue to retain their
monopoly power over the local exchange bottleneck.
MCI know that from first-hand experience. Over ninety-nine percent of our traffic originates or terminates over local exchange carrier facilities, even though we must pay prices significantly above the actual
costs for access to our customers on these facilities.
As recently as July 19, 1989, the Department of Justice in its opposition to the FCC's current proposal to implement price caps for the Regional Bell Operating
Companies and other local exchange carriers stated:
While AT&T faces increasing competition in nearly
all of its markets, the LECs (local exchange
companies) are virtual monopolies with respect to
residential and most business customers and appear
likely to retain their monopoly position for the
foreseeable future... The Department see(s) no
evidence at present that local exchange
telecommunications is not a natural monopoly.
The Court also rejected the notion that
administrative safeguards could replace structural
safeguards to prevent anticompetitive conduct. This matter was litigated during the antitrust trial, and in
essence was at the heart of the case and the settlement
agreed to by the parties.
If it were simply a matter of
instituting better regulatory controls over the bottleneck monopoly, then antitrust legislation would not have been
necessary in the first place.
But the Justice Department
of 1982 believed in its case and believed in the antitrust
decree it negotiated.
Mr. Chairman, this industry has gone through
Consumers and employees in this
industry faced the confusion of the breakup of the Bell
All the firms in the industry had to adjust to
new ways of doing business following that event. But these changes were worth it, because for the first time
competition is now the rule outside of the local exchange
market, not the exception.
It would be unwise to subject this industry to a
second major dislocation, both as a matter of antitrust and as a matter of telecommunications policy. The
problems of the past resulted directly from the vertical
integration of the local exchange bottleneck monopoly.
long as that monopoly remains in place, the risks to
competition are simply too great.
It should greatly concern the Members of this subcommittee that the antitrust principles they hold in
When it comes to the nation's telecommunications network, the underlying public interest goals embodied in
the Sherman Act and the 1934 Communications Act should be
essentially the same.
There is no policy dichotomy
between antitrust policy and telecommunications policy.
Effective antitrust enforcement is fully consistent with
the goal of a robustly competitive telecommunications
market... indeed, antitrust policy is a sine qua non of
competition in telecommunications.
I hope that this Committee and the Congress will
continue to support wise antitrust and telecommunications
policies in tandem, and will reaffirm the free-market
principles that lie at the foundation of both.
Mr. BROOKS. Mr. Esrey.
STATEMENT OF WILLIAM T. ESREY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, UNITED TELECOMMUNICATIONS, INC. Mr. ESREY. Thank you, Mr. Chairman and members of the subcommittee for the opportunity to provide you with United Telecom and U.S. Sprint's views on the AT&T consent decree or MFJ. I have submitted written testimony for the record and I would like to briefly summarize our position.
Until we have the benefit of new information or specific plans, we continue to support the MFJ as it has been applied and interpreted by the Court.
The MFJ was a product of a settlement by the parties, including the Department of Justice, of a complex antitrust case which was approved by the Federal district court and the U.S. Supreme Court. The implementation of the MFJ, particularly the establishment of LATA's, equal access and access charges has served to promote competition in the interexchange marketplace.
Since the implementation of the MFJ in 1984, competitive long distance companies like U.S. Sprint have made significant progress in the market, notwithstanding the continuing dominance of AT&T. The public today is clearly benefiting from better values, lower prices, increased choices and improved quality services.
We also believe that it is entirely appropriate for Congress to review the MFJ line-of-business restrictions and determine whether they remain in the public interest. The restrictions have served the public interest well and any change should be undertaken with great caution.
We believe that Congress should, before any legislation which would modify any provisions of the MFJ is considered, require the development of a detailed and comprehensive public record on (1) the public interest benefits, if any, to any proposed changes to the restrictions; (2) the risk associated with any such changes including especially the impact upon consumers and competition; and (3) the adequacies of proposed safeguards to minimize those risks.
With respect to the individual line-of-business restrictions contained in the MFJ, I would like to briefly summarize our position. The long distance or interLATA restriction was imposed because of the Bell operating companies' bottleneck control over local exchange access. That situation has not changed. We can see no justification for modifying that restriction at this time.
The information services restriction has been substantially relaxed by Judge Greene. The Court's action in that regard was supported by United Telecom. The BOC's can now provide information gateways, storage, electronic mail, voice messaging, audiotex and local packet switching with protocol conversion. We believe a comprehensive analysis of the market, of the potential effectiveness of existing and proposed safeguards, and of the consequences of further entry by the BOC's is necessary before any legislation is even considered.
The manufacturing restriction could be appropriately modified or relaxed but not until a thorough study of the risks and consequences has been conducted. Any such study should include the