Phone firms get OK to sell information Effect of ruling delayed to give foes chance to appeal

July 26, 1991|By Keith Bradsher | Keith Bradsher,New York Times News Service

WASHINGTON -- A federal judge lifted a legal bar yesterday that had prevented the seven regional Bell telephone companies from offering services such as home banking and electronic shopping, known collectively as information services.

The decision was a victory for the so-called "Baby Bells," which hope to raise profits by selling Americans many new, high-technology services. But opponents, including the newspaper industry, some long-distance companies and consumer groups, vowed to fight the decision, contending the phone companies could abuse their positions as local monopolies.

"An alarmist would say that the implications are Orwellian," said David E. Easterly, president of Cox Newspapers, who also said that he expected the newspaper industry to appeal the decision and then, if necessary, to carry the fight to Congress.

"If we are going to enter a world in which a great deal of information passes through telephone lines, then those providing the phone lines should be neutral; they shouldn't be one of the information providers," Mr. Easterly said.

The Consumer Federation of America has argued that removing the restriction on information services could prompt the local telephone companies to spend too much money on fiber-optic cables and other sophisticated equipment that is used most heavily by businesses.

Households could then end up footing the bill because local telephone rates depend in many states on how much money the local phone companies invest in their networks.

Judge Harold H. Greene, who oversaw the 1984 breakup of the American Telephone and Telegraph Co. and issued yesterday's

decision, blocked his ruling from taking effect until all appeals have been exhausted.

That process could take more than a year. But Judge Greene's ruling seemed to stand a good chance of being upheld because the initial appeal would be to the U.S. Circuit Court of Appeals for the District of Columbia, which has considered the issue. The appellate court prompted yesterday's ruling by directing Judge Greene last year to reconsider his position on ownership of information services.

Judge Greene indicated in his decision that while the appeals court's decision last year left him little choice about lifting the restriction, he remained doubtful about the wisdom of the move.

"It would hardly make sense or be in the public interest to cancel an important part of an antitrust decree forged after several decades of on-and-off litigation, and turn a key ingredient of the emerging information society over to corporations who not so long ago were involved in major violations of the antitrust laws, and who even now seem ready to engage in anti-competitive practices whenever the opportunity therefore presents itself," he wrote.

The phone companies have contended that their enormous financial and technical resources make them the best qualified to offer information services such as news, stock quotes and other data to home users.

They contend that only by owning these services will they have adequate incentive to invest in advanced technologies and ensure that the United States does not lag behind other nations in developing such services.

Mr. Easterly of Cox said the most immediate impact on the newspaper industry was likely to be creation of electronic Yellow Pages that could hurt classified advertising.

But he said he expected the Baby Bells to try to expand into creating news, video programs and an array of electronic services that would compete with the companies who now use the phone lines to deliver such services.

His argument touches on part of the original terms of the $H antitrust consent decree between the AT&T and the Justice Department. The Bell companies were barred from three industries to prevent them from using their monopoly control over local telephone service to subsidize new services unfairly or to bar other companies from the market.

The three industries are long-distance telephone service, telephone equipment manufacturing and the creation -- but not transmission -- of information services.

Ronald F. Stowe, vice president of Washington operations for the Pacific Telesis Group, one of the seven Baby Bells, praised yesterday's decision in a statement as "a major step forward for American consumers, American business and the American economy." But he expressed disappointment that the judge postponed the effect of his decision by issuing an immediate stay and said his company might ask the judge to cancel that part of his ruling.

The Bell companies own five-sixths of the nation's local telephone networks. For example, the Nynex Corp., one of the seven Bell companies, is the parent of both the New York Telephone Co., which serves New York, and the New England Telephone Cos. The other regional Bells are Ameritech, Bell Atlantic, BellSouth, Pacific Telesis, Southwestern Bell and US West Inc.

Yesterday's ruling did not change the restrictions that bar the Bell companies from entering the long-distance telephone industry or manufacturing telephone equipment. But the appeals court ruling that prompted yesterday's decision also recommended that Judge Greene apply more flexible legal standards in considering these restrictions.

Herb Linnen, a spokesman for AT&T, said that the telecommunications giant had never objected to the Bell companies' entry into the information services market, provided that they remained excluded from the equipment manufacturing and long-distance industries. But smaller long-distance carriers, led by the MCI Communications Corp., opposed the move.

Some state regulators have favored lifting the information-services restriction, hoping that they would be profitable enough that local phone companies would not ask for politically controversial rate increases.

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