Bell Atlantic and DSC sue AT&T for $3.5 billion Equipment-making is sore point

February 16, 1996|By BLOOMBERG BUSINESS NEWS

PHILADELPHIA -- Bell Atlantic Corp. and DSC Communications Corp. filed a $3.5 billion lawsuit in Texas yesterday against AT&T Corp., claiming that AT&T impeded competition in the telephone equipment-making business.

The suit says that AT&T, the largest U.S. long-distance company and one of the largest makers of phone equipment, has refused to build equipment that's easily compatible with gear made by other companies.

Bell and DSC claim that such practices make AT&T customers reliant on AT&T's equipment for future purchases, such as software.

The suit comes at a bad time for AT&T, which plans to soon spin off its equipment-making business, now called Lucent Technologies Inc. Meanwhile, Bell Atlantic is set to compete head-to-head with AT&T in the long-distance market.

For DSC, which makes phone equipment and competes against AT&T, the suit is an attempt to spark sales of its equipment to the Baby Bells.

One analyst said the suit is frivolous.

"Bell Atlantic fully knew that AT&T's switches locked them into future AT&T purchases when they bought them," said Daniel Briere, president of TeleChoice Inc., a Verona, N.J., market research firm. "Either their engineers are the dumbest people or this is just flippant positioning in light of deregulation."

The suit was filed a week after President Clinton signed a bill designed to increase competition in the U.S. phone and cable-TV industries, and is the first of many that are expected as companies battle it out in the courts and in the fast-changing U.S. telecommunications market.

The lawsuit is an effort to show regulators that it's not going to be easy to allow competitors to interconnect to Bell Atlantic's local phone network, as the new bill requires.

"They are trying to lay the groundwork to why there will be a delay in opening up their networks," Mr. Briere said, adding that there will be many similar lawsuits filed.

He said AT&T had the largest percentage of the U.S. market for switches the Bells put in their central offices.

In 1995, AT&T had a 44 percent share, followed by Northern Telecom with an 11 percent share and Plano, Texas-based DSC, with a 9 percent stake.

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