Stirrings From a Sleeping Giant

A T& Treacts to a billion-dollar telecommunications shake-up

When it comes to go-getter companies for the 1980s, the name Ma Bell does not leap readily to mind. For years the world's largest business enterprise, with assets of more than $114 billion, has also been one of the dullest. Its deserved reputation is that of a lumbering pachyderm, content with its status as a Government-protected monopoly that controls 83% of the U.S. telephone market.

That situation is now changing, and fast. Regulatory reform in Washington and the breakneck advances of computer technology have conspired to create a far-reaching shake-up in the U.S.'s $100 billion-a-year telecommunications industry. This will probably mean big markets as well as potentially huge problems for A T & T.

On the one hand, the company's privileged monopoly status is under attack in the courts by the Justice Department as well as some 37 private companies, which are pressing their own antitrust suits against Bell. In June, upstart little MCI of Washington, D.C. (sales: $144 million annually), won a staggering $1.8 billion in damages from a federal court in Chicago after charging that A T & T had conspired to block its entry into the long-distance telephone market. Now MCI is selling its phone service in such leading markets as New York City, Houston and San Diego. The company's brashly imitative advertising campaign tells customers to "reach out and touch someone. But do it for half of what Bell charges." Meanwhile, ITT, Western Union and even the parent corporation of the Southern Pacific railroad have started up similar operations.

More unsettling still for Bell, Congress currently has bills before it that will loosen up regulation throughout the entire industry and invite even more competition. In fact, companies such as General Telephone & Electronics and ITT are already challenging AT&T's dominance over phone equipment by selling telephones themselves, as are a host of smaller firms that have been cranking out toylike phone gadgets that look like beer cans, Mickey Mouse and Superman. The devices connect right up to the Bell lines in homes or offices. AT&T is fighting back through its 1,800 PhoneCenter retail outlets around the country, which offer an equally broad array telephone designs to customers.

Yet even as the company's competitors multiply, new and enticing opportunities for A T & T are proliferating elsewhere. The most promising field is microcomputer electronics--that arcane world where the telephone meets the computer.

Until now, Bell has been blocked from moving full force into the lucrative new market of data communications, in which information is transferred directly from one computer to another, thereby eliminating, among other things, the need for companies to shuffle bulky reels of electronic tape back and forth between offices by mail or messenger service. But in April the Federal Communications Commission ruled that the restriction was stifling the growth of the entire communications industry. Thus the FCC declared that the company could start offering just about any sort of computer-based telephone service it wished.

The FCC decision, which is almost certain to provoke a rash of court attacks by angry Bell competitors, is nonetheless likely to speed the development of a host of fascinating new uses for the telephone. Before the decade is over, telephones will become the central components in entire home computer systems, programmed to turn on and off household appliances on cue, store family financial records or pay bills, and even scan data banks for shopping bargains at neighborhood stores.

The FCC required that by 1982 the company set up a wholly independent subsidiary, which has already been nicknamed Baby Bell, to manage its new computer-based services. Even at birth, Baby Bell will be a behemoth, with fully 15% of A T & T's total assets; and size alone will give it advantages. But tough competitors are getting together. In October a $375 million joint venture of IBM, Comsat and Aetna Life and Casualty Co. will launch its first voice, data-and image-transmitting satellite, almost overnight becoming A T & T's biggest single competitor.

To hold its own, Baby Bell will have to develop the marketing and sales finesse that AT&T, as a regulated monopoly, has never needed. Unlike the top executives of aggressive, growth-oriented companies like IBM, who tend to rise through the ranks of sales and marketing, Ma Bell's managers from Chairman Charles L. Brown on down have traditionally had engineering and technical backgrounds. But the new frontier of communications is too promising to ignore. Says Chairman Brown: "We are going to draw a bead on the information market, the dimensions of which had hardly been perceived a half-dozen years ago." With that sort of eagerness beginning to percolate through Bell, the coming telecommunications battles of the 1980s are shaping up as some of the biggest, most colorful slugging matches in U.S. corporate history.

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