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impact on other local exchange telephone companies and the provision of nationwide network service especially if the BOC's are not required to share new technology and standards.
We are cognizant of the argument being made by some parties that Congress and not an unelected Federal judge should make national telecommunications policy and we generally agree with that notion, but, in this case, we believe that the proper focus is on Federal antitrust policy which was established and has been refined by Congress over the past hundred years.
The MFJ was not a declaration of Federal telecommunication policy but the settlement of an antitrust case which has been endorsed and enforced by the Court. The MFJ does, though, reflect the strong national public policy favoring competition whenever possible. Since divestiture, the benefits of the implementation of that competitive policy have been many and they have been significant.
Local telephone subscribership has risen to all-time highs. Long distance telephone rates, as has been repeated this morning, have dropped by over 40 percent. An amazing array of technological de velopments like fiber optics, digital transmission, SS-7, ISDN and so forth have been brought to the market.
The consuming public is taking active advantage of the choices in quality, service and price that are now available and overall usage is increasing every year. Accordingly, we believe that Congress and the FCC should continue to monitor the application of the MFJ to assure that the public interest is protected. Based on all available evidence, there has not been sufficient information developed to justify any further modification of the MFJ at this time.
If such a study is undertaken, Mr. Chairman, United Telecom and U.S. Sprint will pledge to you and this subcommittee our full participation and support. Thank you.
Mr. BROOKS. Thank you very much.
of the Judiciary Committee
Modified Final Judgment
Prepared Statement of
WILLIAM T. ESREY
Thank you, Mr. Chairman and members of the Subcommittee, for this opportunity to provide you with the views of United Telecommunications, Inc. ("United Telecom") and US Sprint Communications Company Limited Partnership ("US Sprint") on the Modification of Final Judgment ("MFJ") entered by the U.S. District Court for the District of Columbia on August 24, 1982 (Civil Action No. 82-0192). The MFJ represents perhaps the most significant non-technological change experienced by the telecommunications industry since its inception over 100 years ago. Indeed, the MFJ is in some respects responsible for the existence of competition in the interexchange market today and the viability of companies like US Sprint. The MFJ created the concept of LATAS (Local Access and Transport Areas, which facilitated the design of competing long distance networks), established equal access requirements, and mandated fairness and uniformity of access charges, as integral parts of the fundamental structural separation of the providers of exchange access within the Bell System from the competitive provision of interexchange service by AT&T.
In order that you may better understand our positions on these matters, I would like to briefly describe the business and operations of United Telecom and US Sprint.
United Telecom is diversified telecommunications company headquartered in the Kansas City, Missouri area. United Telecom owns and operates local exchange and long-distance telecommunications companies, as well as complementary businesses, nationwide. Altogether, the United Telecom companies have 37,600 employees located in all 50 states.
United Telecom's local telephone operations are comprised of sixteen subsidiary companies providing local exchange and related telecommunications services to over three thousand rural and suburban communities in seventeen states. Last year, local access lines in these companies grew by 4.8% to 3.7 million. Moreover, by the end of 1988, 74% of these companies' central office lines were served by digital technology and more than 1.4 million access lines were converted to equal access (1plus dialing) service. By the end of this year, the United Telecom companies plan to be 80% digital, and to have converted a majority of their customers to equal access capabilities.
US Sprint, the nation's third largest long distance carrier, has become recognized as the leader in bringing advanced technology to the telecommunications marketplace. US Sprint was the first and only company to design and construct a nationwide all-digital fiber optic network that provides much greater transmission speed, clarity and accuracy than traditional telecommunications technologies. US Sprint was also the first carrier to utilize Signaling System 7 ("SS7") throughout its network. SS7 is an advanced technology which sends routing information on a separate path from the actual call to ensure an open transmission circuit before the call itself is completed, creating a more efficient network. SS7 will also enhance the opportunity to provide an Integrated Services Digital Network ("ISDN"), which will lead to a vast array of new state-ofthe-art telecommunications services.
US Sprint's accomplishments in the long distance market recognized late last year when the General Services Administration awarded US Sprint a forty percent (40%) share of its FTS 2000 procurement. FTS 2000 is the largest civilian non-space contract ever awarded by the government and, beginning in October, 1989, will replace the Federal Government's current outmoded FTS communications network with state-of-the-art technology providing broad range of telecommunications services voice, data and video at a substantially lower cost to the government.
More recently, US Sprint agreed to purchase a fifty percent (50%) share in a transAtlantic fiber optic cable venture known as PTAT. The PTAT acquisition positions US Sprint as the first domestic carrier other than AT&T to own significant international transmission capacity. More importantly, it provides US Sprint with the unique ability to extend its advanced products and technologies to the international market, thereby enhancing US Sprint's ability to provide integrated digital services on a world-wide basis.
Just US Sprint has become leader in long distance telecommunications, its wholly owned subsidiary, Telenet Communications Corporation ("Telenet"), is one of the world's largest providers of data communications networks, products and services. Telenet has installed more than 130 private data networks in over thirty countries. Telenet also owns and operates the Telenet Public Data Network ("PDN"), the largest public packet network operating in the United States today. Through Telenet's PDN, information services subscribers access more than 2500 host computers, i.e., information providers, at a rate of approximately 1.6 million terminal sessions a day. The PDN is accessible via a local telephone call in over 19,000 local exchanges (serving over 75% of all U.S. telephones) and through toll free "800" numbers in all other areas, as well as from 88 foreign countries. Telenet also provides an electronic mail service known as Telemail and information "gateway" service known the Information Connection.
United Telecom also owns a number of other companies which compliment its two core businesses. Included in this group is North Supply, a distributor of telecommunications, security and electrical equipment. DirectoriesAmerica, another complementary business unit, is the tenth largest directory publishing company in the country. To supplement its successful yellow pages business, Directories America last year introduced an innovative voice information service called Talking Fingers
To complement its long-distance business, United Telecom late last year created Sprint Services to provide operator services. Sprint Services officially commenced operations in Kansas City last month, and other regional operating centers are being established in the Nashville, Phoenix and Richmond areas. Further, Sprint Gateways, a division of Sprint Services, is establishing a family of "900" services using the US Sprint network.
When reviewing the applicability of the provisions of the MFJ to current circumstances, it is useful to have an understanding of their origins. In 1974, the U.S. Department of Justice ("DOJ") filed an antitrust suit against AT&T, contending that the integrated Bell System had violated Section 2 of the Sherman Act by using its monopoly power in local exchange telephone service markets to exclude competition in the telecommunications equipment and intercity services markets. The complaint alleged that AT&T, through various forms of discrimination, had monopolized both intercity telecommunications and the sale of customer premises equipment through discriminatory refusals to interconnect the local operating companies with equipment or services provided by AT&T's competitors, and had monopolized the manufacture of telecommunications equipment used by its operating companies through discriminatory purchasing practices. To remedy these violations, the DOJ asked the