The North Texas Daily (Denton, Tex.), Vol. 65, No. 58, Ed. 1 Friday, January 22, 1982 Page: 2 of 6
six pages : ill. ; page 23 x 16 in. Digitized from 35 mm. microfilm.View a full description of this newspaper.
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ommentarv
Editorial
Phone improvements
The recent attempt at out-of-court settlement
between the Department of Justice and the world’s
largest corporation, American Telephone & Telegraph
Co., marks the beginning of improved competition
and better telephone service in the communications
industry.
Under the proposed agreement, now under federal
judicial review, AT&T must submit to the Justice
Department a plan that will divide Ma Bell's 22
local operating companies. The local companies may
become a united corporation, or they may become 22
separate entities at the discretion of Ma Bell.
Despite popular belief, monthly phone rates would
not increase because of the independence of local
phone companies.
Common sense seemingly leads the average con-
sumer to believe that as a corporation as large as
AT&T relenquishcs its financial base and forces the
local companies to provide service without the fiscal
suport provided by the long lines, rates for phone ser-
vice would rise. Because AT&T will retain control of
the Long (distance) Lines branch of the telecom-
munications network, many people maintain that
long-distance charges could go down.
Nothing could be farther from the truth.
In the past, AT&T financed its expenses through
subsidization. Local expenses were accounted through
AT&T’s three other branches: Western Electric,
manufacturer of telecommunications equipment
Outlook
branch. Long Lines, the long-distance branch, and Bell
l.abs, the research and development branch.
Because AT&T held a monopoly on telecommunica-
tions, its local companies were required to purchase
telephone equipment from AT&T’s equipment branch,
Western Electric, at unnatural, noncompetitive high
prices.
With the release of these local companies from the
bonds of AT&T’s monopoly, the localities will now
have the opportunity to purchase telecommunications
equipment from more competitive equipment
manufacturing companies at cheaper prices. This ac-
tion allows companies such as Texas Instruments,
Radio Corporation of America and some Japanese
companies to offer valuable equipment to the local
phone companies at competitive prices.
Because AT&T does not control the market in the
area of long distance, competition h is forced the price
of long-distance communication down. AT&T must
price its long-distance service competitively, because it
must compete with new telecommunications methods.
The agreement between the Justice Department and
AT&T should be approved by presiding Judge Harold
Greene and result in healthier competition in pricing
and service. The busting of the world’s largest corpora-
tion marks the end of an era of big business regulation.
At the expense of the taxpayer and AT&T, an overdue
agreement should create advantageous results for the
consumer, corporate sector and the government.
YOUVE ALWAYS MAKING SUCH BIG PROMISES
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NOHTW TEXAS 04LY
Antitrust settlements
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AT&T benefits from plan
Suit proves costly, lengthy
By R \I PM (
Stuff \\ riter
(, \| ER
When a reporter asked Assistant At-
torney General William F. Baxter if his
antitrust division had won the AT&T
trust case. AT&T Chairman Charles L.
Brown leaned in front of Baxter and
over the microphone to reply: "It’s ex-
actly what the government wanted."
While the decision to end the seven-
year-old suit can certainly count as a vic-
tory for the Justice Department’s an-
titrust division, which secured in conces-
sions almost exactly what it sought
originally in its suit filed during the first
week in December, 1974. Analysts
believe the final arrangements of the
agreement between the communications
giant and the government will benefit
AT&T as well
The final resolution of the antitrust
case has not been struck, however, as
Federal Judge Harold Greene has ruled
that the government’s case is valid in
part and has requested that AT&T at-
tempt to refute the evidence.
The antitrust history of AT&T
predates the 1974 Justice Department
suit and includes a 1956 case against the
firm, which was settled by a consent
decree that denied the company access
to the computer field.
Violation of that decree was one of the
alleged improprieties the Justice Depart-
ment’s Attorney General’s office cited in
the 1974 suit. Officials also charged the
company had conspired to monopolize
local and long-distance phone service,
the “interconnect” industry — special
telecommunications services designed to
hook into the Bell System — and the
manufacture of telecommunications
equipment.
AT&T formed in 1885, only nine
years after Alexander Graham Bell in-
vented the telephone.
At the time of the suit the corporation
had assets of $67 million. It controlled
80 percent of all telephones in the
United States.
The original desire of the government
was for AT&T to divest itself of Western
Electric Co., its manufacturing arm, and
The North Texas Daily
65th Year North Texas State University Denton, Texas
Printed by the North Texas State University Printing Office
Southwestern Journalism Congress
PACEMAKER 6 TIMES
ALL-AMERICAN 73 TIMES
KAREN BALL, editor
MARIE JACKSON, advertising manager
The NT Daily, student newspaper of North Texas State University, is published daily Tuesday
through Friday, during long terms and weekly during summer terms, except during review and
examination periods and school vacations The NT Daily Is a non-profit newspaper providing
information entertainment and "immentary fo- the NT community The newspaper serves as
a laboratory educational expe e for stud reporting, writing, editing advertising and
photography classes in the lour .ism department
a3
to split off from all or most of its long-
distance department or to give up some
of its local operating companies.
Litigation in the suit has kept a small
army of lawyers employed by both the
government and by AT&T, and the legal
battle has cost the company $360 mil-
lion, or approximately 5120 for each of
the company’s shareholders. The cost to
federal taxpayers for the battle was $15
million.
I awyers for both parties remained at
odds for much of the seven-year battle
and generated warehouses full of docu-
ments pertaining to their cases.
I he case came close to resolution dur-
ing the waning days of President Jimmy
Carter’s administration, when Carter’s
antitrust specialist, Sanford Litvak,
agreed to drop the government’s case if
Bell System divested itself of two or
three operating companies and possibly
part of the Bell Laboratories system.
Baxter, who was awaiting confirmation
as Ronald Reagan’s Assistant Attorney
General, told Litvak he would not sup-
port the plan once he took office. The
proposal was dropped.
Baxter took charge of the govern-
ment's case against AT&T when both
Attorney General William French Smith
and Deputy Attorney General Edward
C Smith removed themselves from the
case because of prior relations with Ma
Bell.
Shortly after assuming his post, Bax-
ter promised to “litigate (AT&T) to the
eyeballs,” but by late December he had
broached a proposed divestiture plan
with AT&T Vice President Howard
I rienens By New Year's F.vc 1981,
preliminary negotiations were underway
between representatives of the firm and
federal attorneys, whi 'i tllv 1 ■
to the fin I wording of the oui-ol c> .
settlement.
By.It TIE JEROME
Staff Writer
After countless hours of study, reams
of evidence, $350 million in corporate
legal fees and several reprimands bv
judges, the American Telephone &
Telegraph Co. antitrust suit was nearly
settled out of court earlier this month,
with both sides, the Department of
Justice and AT&T claiming victories.
The government’s victory was the ap-
parent finalization of a trial that had
streched over seven years. President
Ronald Reagan’s promise to loosen cor-
porate competition from government
regulation can be considered fulfilled by
this trust-busting move.
The arrangement calls for AT&T to
submit a plan for divestiture of its 22
local communication companies.
The move will leave AT&T with three
major branches: Western Electric, Long
Lines and Bell Labs.
BECAUSE of its regulation, AT&T is
a natural, vertically integrated monopo-
ly holding shares in the equipment
market, the research market and
production or service.
Western Electric, the equipment
manufacturer of telecommunications,
has controlled a natural monopoly on
communication equipment until now.
said Dr. Ken Gray of the economics
faculty.
Because AT&T controlled the local
companies, Western Electric was able to
sell equipment to them at unnaturally
high prices. With the prospective split in
the corporation, local companies will
not need to look to Western Electric for
equipment, Gray said.
“The effect will be that Western
Electric can no longer force the local
companies to pay higher prices for
equipment,” he said. If the local com-
panies seek other suppliers, the local
prices for equipment will be lower.
ANOTHER division of AT&T, its
long-distance lines, is experiencing
heavy competition from companies such
as MCI Telecommunications Co.
’’Long-distance lutes do not increase
as rapidly as the home monthly rates,”
Gray explained. “Bell (Systems) has
been under pressure from the long-
distance phone companies, so it had to
keep the rates down.”
Bell Laboratories, the research end of
AT&T, is a combined entity with annual
revenue estimated at $42 billion.
Financing of AT&T is through sub-
sidization. For example, profit from
long-distance service can go toward
local service, or profit from local service
can help pay for long-distance service.
“Before the telephone became a
household necessity, subsidizing made
sc because part of the home monthly
rales were used to get a phone installed,”
Ciray said. “But now, there is no such
reason.” Because most everyone has
telephones, the cost of telephone service
no longer is the difference between hav-
ing and not having.
“THE 1*1 Bl l( benefit of everyone
having a phone justified the subsidiza-
tion in the past,” he said.
Without the splitting of AT&T, local
and long-distance expenses would have
to be subsidized; therefore, local rates
probably would have increased
regardless of court action, he said.
“While competition is whittling away
at the long-distance protits, where would
total profits come from?” he asked.
The long standing belief that there will
he a rate increase in local rates is over-
stated, Gray said. “In the long run, there
will be more competition and increased
service.”
The negative side to the situation,
Gray said, is that during the immediate
aftermath of the split, AT&T’s ac-
counting system will become a night-
mare.
I HE WEEDING out process of the
split could create a situation whereby
Officials drop IBM case
By RALPH ( . (LAI ER
Staff Writer
Only four hours after U.S. Assistant
Attorney General William Baxter an-
nounced settlement with American
Telephone & Telegraph Co. over the
government’s seven-year antitrust case
with the communications giant, other
Justice officials conceded defeat in the
far lenghtier International Business
Machines Corp. antitrust case, which
had been snarled in litigation for 13
years.
Baxter, in Washington for the press
conference dealing with the AT&T case,
said the IBM antitrust suit, which has
cost the government more than $13 mil-
lion to prosecute, was without merit.
The decision to drop the case ends a
period of litigation dating back to the
Lyndon Johnson administration, and
which generated 2,500 court depositions,
66 million pages of documents and
employed 300 lawvers during the life of
the laws1
of President Johnsons admimstiui m
and was the largest such case presented
by his Justice Department. The lawsuit
came only 24 hours after IBM an-
nounced to its shareholders record
profits for 1968 — net earnings of
$871.5 million.
I he lawsuit alleged IBM had
monopolized the general purpose,
digital computer industry in violation of
antitrust regulations. Specifically, the
government charged IBM with pursuing
manufacturing and marketing policies
that denied other manufacturers ade-
quate opportunity for competition.
At the time of the lawsuit, IBM con-
trolled 74 percent of the computer
market, as compared to only 5 percent
for Sperry Rand, its closest competitor.
The government demanded in its suit
that the courts reguire competitive con-
ditions in the computer marketplace and
that they order any “divorcement,
divestiture or reorganization” needed to
achieve that goal.
The proceedings, the lenghtiest in the
L tor' <■ 'h lustier Department, did
. <o IBIY , which not only
had to d' lend itself against the federal
lawsuit, but against a flurry of similar
suits filed by competitors.
The normally bold marketing prac-
tices of IBM were replaced by safer,
more conservative policies, and rather
than continue attempting to provide its
computers at lower rates than its
competitors — for whatever reasons —
IBM consistently began to charge more
for its products.
Legal costs encountered by the com-
pany were undoubtedly huge as well.
AT&T spent more than $350 million in
defense in its case, which lasted only
seven years. The total cost for IBM’s
battle may be much higher, but the
ultimate cost may rest with American
taxpayers: IBM can write off its legal ex-
penses as tax deductions.
As a result of the lawsuit, a myriad of
other computer firms have in fact
entered into competition with IBM,
although it continues to hold a 62 per-
cent share of the market. Accoring to
Baxter, however, it would have been dif-
filcult for the government to promote
greater oompetii. n had the federal
prosecutors won their case.
( J
phone service in some regions of the
country could suffer, he said. Many
employees will be hired by AT&T, leav-
ing the local companies at a loss.
For this reason, local rates will go up
in the short run.
Gray said it is necessary to give the
government credit for its 10- year study
of AT&T and for applying pressure
against anti-competitive leanings.
In September, Federal Judge Harold
Greene rejected AT&T’s request that he
dismiss the government’s antitrust case
in midtrial, saying the government’s
evidence remaind credible.
Greene said the corporation has
resisted competition and had
monopolized business telecommunica-
tions equipment.
ORIGINALLY, the government
wanted to cut Western Electric from
AT&T, Gray said.
The injunction against Western
Electric was so vague, the company
wasn’t sure if it could sell telecom-
munications equipment in other
markets, he said. Because its rights were
vague, the company tended to step light-
ly and thought it was restrained in that
area.
In the agreement, AT&T is un-
restrained and has the potential to
become a major segment of the
computer industry.
The introduction to new telecom-
munications competition wiii open a
door to the foreign market, Gray said.
Japanese companies are experts in
electronics, and the competition between
them and American companies will be a
major factor in worldwide trade.
Setting a lean AT&T loose with
freedom to compete in any technological
market will have far-reaching implica-
tions on the corporate sector that no one
can predict. Although the trimming of
the world’s largest corporation was the
government’s intention, the result may
be to spur even greater market policies
at AT&T
I i
I 9 \
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Ball, Karen. The North Texas Daily (Denton, Tex.), Vol. 65, No. 58, Ed. 1 Friday, January 22, 1982, newspaper, January 22, 1982; Denton, TX. (https://texashistory.unt.edu/ark:/67531/metapth1003249/m1/2/?q=Lamar+University: accessed June 8, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Special Collections.