AT&T's cellular purchase raises new questions

August 18, 1993|By New York Times News Service

WASHINGTON -- AT&T's plan to take over the nation's biggest cellular telephone company will confront policy-makers in Washington with some of the most vexing telecommunications issues since the old Bell System was dismantled almost 10 years ago.

Few people seem worried that American Telephone & Telegraph Co. is trying to rebuild the monolithic empire of Ma Bell, even though the acquisition of McCaw Cellular Communications Inc. for $12.6 billion will plunge AT&T back into the local telephone market.

Rather, for Washington officials,the real questions have to do with AT&T's offspring -- the regional Baby Bell companies.

Has the time come to end the seemingly sacred prohibitions, embedded in the federal consent decree that broke up AT&T, barring the local telephone companies from providing long-distance and cable television service? And should the Baby Bells be forced to accept greater competition by letting rivals freely plug into their local networks to siphon off lucrative traffic?

Few questions are more important to the creation of the touted "information superhighway," because the answers will affect the way billions of dollars are invested in advanced communications networks.

Although these are not life-and-death matters, from a political standpoint the issue may be almost as thorny for Congress and the Clinton administration as health care, for the telecommunications debate will involve scores of huge interest groups, each of which is capable of mounting expensive and even nasty lobbying efforts.

AT&T, with annual revenue of $65 billion, has emerged in recent

years as one of the most forceful opponents of the Baby Bells, which have combined revenues of more than $80 billion.

AT&T executives argue that local telephone companies still control a communications "bottleneck" through which 99 percent all calls -- whether local or long-distance -- pass at one point or another on their journey through the network.

AT&T and other long-distance companies point out that they pay local telephone companies tens of billions of dollars a year in "access charges" to reach their customers, and they have little ,, say over whatthose charges are.

The Bell companies counter that they are being besieged by new competitors, with AT&T and McCaw merely the latest examples.

If they are not given more freedom, they argue, they will be left to atrophy while their unrestricted brethren dominate the most exciting new areas of telecommunications.

Both sides are probably right to some extent. The challenge for policy-makers is planning for the future.

Most experts agree that the local telephone companies still have a monopoly, but they also agree that technological and market forces mean the monopoly has only a few years of life left. Is it more prudent to keep the Bells leashed for a few years to protect new competitors? Or would continuing to restrict the Bells hinder future competition by keeping a major group of contestants out of the market?

"We believe the march of competition is pretty much inevitable," said Lisa Rosenblum, vice chairman of the New York Public Service Commission, which regulates New York Telephone Co., owned by NYNEX, one of the Baby Bells. "The question is how to manage the transition."

While AT&T's plan to buy McCaw bears a superficial resemblance to a rebuilding of the old Bell System, few groups seem concerned about that. The strongest criticism came from Rep. Edward Markey, D-Mass., chairman of the House Energy and Commerce subcommittee on telecommunications.

The Justice Department, Mr. Markey said Monday, should "review this deal with an arched eyebrow."

But an aide to Mr. Markey stressed yesterday that the lawmaker had no interest in blocking the deal. Rather, he said, Mr. Markey wanted the government to address narrow issues, such as whether AT&T would let its cellular customers pick a rival long-distance service.

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