A Bill for Ma Bell

Ma Bell has never kept secret its desire to monopolize U.S. telephone service. Arguing that competition fostered waste, duplication and higher phone rates, the American Telephone and Telegraph Company in 1908 launched an ad campaign with the theme "One system, one policy, universal service."

That goal has never been realized. Although AT&T and its subsidiaries have 118.4 million telephones in 6,722 exchanges in 48 contiguous states --about 82% of the U.S. total--the nation's 1,618 independent companies control the rest: 26.8 million phones in all states except Delaware and Rhode Island. Together, AT&T and the independents make up the U.S. "telephone establishment." In recent years the courts and the Federal Communications Commission have allowed newer competitors into a field that Ma Bell and friends would love to call their own.

Hearings Begin. This week the boldest move yet to eliminate some major sources of competition for AT&T and the independents will surface in Congress. Exploratory House hearings will begin on a bill that would effectively abolish newer forms of communications competition. Officially, the bill is called the Consumer Communications Reform Act. But because it seems so heavily weighted in favor of the telephone establishment, critics refer to it as the "Bell Bill" or, worse, the "Monopoly Protection Act of 1976."

If passed by Congress in its present form, the bill would squelch several annoying bits of static on the phone companies' line. One of them: the so-called specialized common carriers--non-Bell communications companies that grew out of a 1959 FCC decision opening a new spectrum of microwave channels to private business. Currently, there are three such carriers in operation--the biggest is MCI Telecommunications Corp., based in Washington, D.C.--that run microwave transmission facilities for Government and business clients in competition with AT&T. The bill, by ruling out "wasteful or unnecessary duplication of communications lines," would apparently ban any new SCCs and would probably throw existing ones off the air when their licenses expire.

Competition would also be lessened for Ma Bell's Western Electric manufacturing subsidiary--currently the target of a massive Government divestiture suit (TIME, Dec. 2, 1974). The bill might knock out some of the 400 independent telephone-equipment suppliers that have sprung up in the past eight years since the FCC first allowed non-Bell gadgetry, from entire corporate phone systems to replicas of antique French telephones, to be plugged into AT&T lines.

One growing market: Wall Street, where stock traders can reach one another at a touch of a button, using consoles made by non-Bell companies. Present regulations require approval of these devices by the FCC. That is not a major burden even to small manufacturers, but the new bill would take the FCC out of the picture and require equipment approval by utility regulators in all 50 states. Ma Bell is well prepared for these laborious procedures; the smaller companies are not.

In lobbying for congressional support of the bill, Bell and its allies have argued that home-phone rates will go up dramatically--perhaps as much as 79% by 1985--unless competition is reduced.

The reasoning: basic home-phone service is a money loser and is made possible mainly by high revenues from its other services--long-distance tolls, special private lines, commercial phone equipment and fancy Design Line telephones that AT&T introduced two years ago. If part of that business is lost to competitors, rates to home subscribers will have to go up. A T & T claims it subsidized home service to the tune of $4.6 billion last year.

Opponents of the bill question Bell statistics. One public study in Massachusetts showed that Bell's local phone service was returning 26% on investment.

The notion that home phones were subsidizing other services, instead of the other way around, was supported in a report last week by the FCC. Opponents of the bill also point out that in the company's third quarter (ending Aug. 31), AT&T earned $1.01 billion, up 25% from the same period last year--the largest amount ever earned in a single quarter by a U.S. company.

Industry United. The bill has already gained the nominal backing of 16 sponsors in the Senate and 175 in the House. Also supporting it is the Communications Workers of America, whose members stand to lose jobs to foreign equipment makers. The independent phone companies back the bill because they receive substantial revenues from traffic over AT&T long lines.

Some small companies get as much as 85% of their revenues that way. Says Jack E. Herington, chief lobbyist for the independents: "This is the only time the industry has been united on an issue."

Currently, the competition the bill seeks to eliminate is not big. Between them, the specialized communications carriers and the equipment makers had revenues last year of only $178 million, v. Bell's $28.9 billion. Clearly--although AT&T Chairman John D. deButts denies it--the bill is aimed at stifling newcomers to the lucrative communications markets of the future. Those potential billion-dollar markets are in such areas as facsimile communication, satellite transmission and computers that "talk" to each other over great distances. With its bill, the telephone establishment wants a guarantee that it will have the biggest slice of the action.

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