Ravenous Baby Bells

October 18, 1991

The former telephone behemoth, Ma Bell, got into trouble in part because of its size, business practices and the fact that government regulations shut out competition. The result was the 1980s birth of seven "Baby Bells," the regional telephone companies. Now there is disturbing evidence that the children have the same anti-competitive appetites as their mother:

* In May 1991, Georgia's Public Service Commission found Bell South had designed its voice message service to deny competitors equal access and impede market growth.

* The Federal Communications Commission recently levied a record $1.4 million fine against Nynex for self-dealing. Nynex' manufacturing subsidiary inflated prices for equipment sold to its New York Telephone and New England Telephone units by $118.5 million between 1984 and 1988. They passed those higher costs on to rate payers.

* Bell Atlantic tricked Pennsylvania customers into buying more services than they wanted. It agreed to pay $42 million to settle regulators' charges. Pacific Telesis was ordered in 1986 to pay $95.5 million for deceptive marketing. Its Pacific Bell unit had to refund $63 million to rate payers. Wisconsin Bell was assessed the largest fine ever claimed by that state's attorney general for deceptively "packing" options onto customers' bills.

These practices are troubling because a recent federal appellate court decision unwisely lifts former restraints on the Baby Bells' entry into "electronic publishing." This sizzling new business may transform the way consumers get information, both news and advertising, by using phone lines.

The appellate decision overturns a careful balancing act begun by U.S. District Judge Harold Greene when he broke up AT&T. The Baby Bells now may do more than just supply conduits for information. They may get into the business of producing and packaging the ads and news that are transmitted over phone lines.

We favor competition in selling both news and advertising. Newspapers already have plenty of it. But newspapers are opposed to "competition" from players carrying stacked decks, whose bets could be unwittingly staked by consumers.

Several members of Congress, led by Rep. Jim Cooper, D-Tenn., have proposed the Telecommunications Act of 1991. It would require the entry of viable competitors in a locality's phone service business before allowing phone companies to become electronic publishers.

The Baby Bells' competitors must have more than one way to deliver their information electronically to consumers. Otherwise, it's like telling Pizza Hut that it may offer home delivery only by using Domino's staff and auto fleet.

No one, least of all newspapers, wants to block new ways to speed information to the public. The Cooper plan offers reasonable protection for news publishers while preserving access to all comers to new electronic communications markets.

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