supply them billions of dollars of equipment annually. Moreover, there is every reason to believe that they would push manufacturing offshore, or favor foreign partners

over domestic ones.

Mr. Chairman and Members, removing the protections afforded this industry by the antitrust laws would endanger the benefits competition has brought, and lead once again to the monopoly abuses of the old Bell System Experience has shown that a monopoly provider of

era.

services has the ability and incentive to abuse its

bottleneck control to the detriment of competing providers of products and services.

Time has shown that Congress knew what it was doing when it passed the Sherman Act. That was almost one hundred years ago. Five years is long enough to

demonstrate how well this industry has performed since the Court approved a structural solution to the Bell System's antitrust violations.

Indeed, five years have made a difference. But

some would argue that in five years the world has changed so much that we should unravel the fabric of this historic antitrust decree. 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.

We at

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, though we must pay prices significantly above the actual costs for access to our customers on these facilities.

even

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 tumultuous times. Consumers and employees in this industry faced the confusion of the breakup of the Bell System. 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.

So

It should greatly concern the Members of this subcommittee that the antitrust principles they hold in highest regard free competition, open markets, incentives for innovation, and consumer choice dismissed by the Regional Bell Operating Companies as somehow inconsistent with "telecommunications policy."

-

are

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