Bells can hear opportunity calling--if legal decree falls

June 16, 1991|By Leslie Cauley

The seven regional Bell phone companies are close to doing what they have been hankering to do since the breakup of AT&T: forcing U.S. District Judge Harold Greene to cry uncle.

Judge Greene, who oversaw the breakup of AT&T's monopoly phone system in 1984, has refused to waiver from the consent decree that spells out what the Bells may and may not do. Despite heavy lobbying and litigating by the Bells, not to mention the millions of dollars they have spent to bend ears in Washington, he has remained stalwart.

The consent decree, a sort of Bill of Rights for the Bells, bars them from providing long-distance service, owning or producing electronic information, and making telecommunications hardware of any sort, including telephone sets.

In exchange for those concessions, the consent decree granted the Bells a financial plum: a monopoly on local phone service.

Now Congress is eyeing a proposal that, if passed, would overturn the restriction against manufacturing. The bill, introduced by Sen. Ernest F. Hollings, D-S.C., chairman of the Senate Commerce Committee, and heartily endorsed by the Bells, would permit the companies to design, develop and manufacture telecommunications equipment under certain restrictions.

The Hollings bill requires 60 percent of Bell products to be manufactured domestically, a provision aimed at preventing the companies from moving jobs offshore.

A slew of bills aimed at ending the manufacturing ban have been introduced every year since divestiture, but so far none has passed. The Hollings bill was approved by the Senate on a 71-24 vote earlier this month, but it still must clear hurdles in the House and with the White House before it becomes law.

Bell Atlantic and its siblings claim that ending the manufacturing ban will boost competition and create U.S. jobs.

Sen. Barbara Mikulski, D-Md., who voted for the bill, says that the Hollings bill can help get the United States back on track in the international game of equipment manufacturing, a $50 billion-a-year business that is dominated by AT&T and a half-dozen foreign companies.

"In this country, we win Nobel prizes while other people win markets," Senator Mikulski said. "I want to make sure we win both."

The billion-dollar Bells consider the Hollings bill to be a strong legislative antidote for what ails them.

The manufacturing ban prevents the Bells from engaging in research and development on telecommunications products, or even discussing hardware ideas hatched in-house with manufacturers. Likewise, the Bells are precluded from forging alliances or investing in other companies that engage in research and development. Such a ban has cost smaller companies plenty in the form of lost opportunity.

Take International Mobile Machines Corp., located near Philadelphia, for example. BellSouth Corp., the regional phone company that serves the South, asked IMM to come up with next-generation cellular phone technology a few years back, and offered to hand over $50 million to see the project through.

But Judge Greene, citing the manufacturing ban on research and development, nixed the plan.

"We never got in to the cellular marketplace, and we're not profitable yet," said William Hilsman, IMM's chairman. "We were not able to finance this company for growth, but we could have if we'd been able to do that."

Nobody expects the Bells to open factories overnight if the Hollings bill becomes law. Entry into the market would be exorbitantly expensive. And the Bells might not have the expertise or incentive to handle day-to-day management of factories.

But freedom from the manufacturing restriction opens up a world of possibilities for the Bells, said James Young, a vice president at Bell Atlantic Corp., the parent company of Chesapeake & Potomac Telephone Co.

Besides striking up relationships with smaller companies like IMM, Philadelphia-based Bell Atlantic would use its new freedom to work more closely with manufacturers to come up with customized equipment, he said.

Bell Atlantic, he said, would like to develop phones with special buttons and keypads to promote the use of enhanced services. Such Bell Atlantic services as three-way calling, home intercom and call forwarding are currently activated by dialing two or three-digit codes.

According to Mr. Young, the ability to customize equipment to make it easier to use enhanced services would mean better service for customers -- and more profits for Bell Atlantic.

Other items on Bell Atlantic's wish list: A phone that works by verbal commands, a "prescription"

phone that automatically modulates sound to a particular tone and pitch for customers with hearing problems, and a compressed video offering that could be shipped over cable or regular phone lines.

The Bells also would like to work more closely with manufacturers to develop customized central office switches, which route and sort local calls. The Bells now buy most of their expensive switches from AT&T and a few foreign suppliers.

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