AT&T Decision

The great New York Times photographer, George Tames, took the picture that captured the event. There was Charles Brown, chairman of the American Telephone & Telegraph Co. (AT&T), with his hand patronizingly on the shoulder of President Reagan’s antitrust chief, William Baxter, who wore a Cheshire cat smile. The occasion was the joint announcement at a Washington press conference by Brown and Baxter that the giant Antitrust lawsuit by the government, filed under the Ford administration in 1974, was settled.

Both gentlemen agreed that the settlement was a plus for competition in the telecommunications industry and both agreed that your local telephone service bill would go up as a result. This sequence should be a non sequitur, but such is the upside-down, inscrutable world of AT&T that the inconsistency was not questioned at the news con­ference.

Last November, Brown said local telephone rates could double in five years. A few weeks later, the C&P Telephone c o., servicing the greater Washington, D.C. area, applied for a 70 percent local service increase in one fell swoop. Now AT&T officials think that rates could double in 24 to 30 months. So millions of Americans have a direct stake in what is going to happen this year following the j an. 8, 1982 agreement.

First, the settlement is really only a preliminary to any final settlement. A federal judge still has to approve the preliminary agreement between the Justice Department’ and AT&T to divest its 22 Bell system companies and be allowed to keep western electric, its manufacturing subsidiary, and the bell laboratories.

The great New York Times photographer, George Tames, took the picture that captured the event. There was Charles Brown, chairman of the American Telephone & Telegraph Co. (AT&T), with his hand patronizingly on the shoulder of President Reagan’s antitrust chief, William Baxter, who wore a Cheshire cat smile. The occasion was the joint announcement at a Washington press conference by Brown and Baxter that the giant Antitrust lawsuit by the government, filed under the Ford administration in 1974, was settled.
Both gentlemen agreed that the settlement was a plus for competition in the telecommunications industry and both agreed that your local telephone service bill would go up as a result. This sequence should be a non sequitur, but such is the upside-down, inscrutable world of AT&T that the inconsistency was not questioned at the news con­ference.
Last November, Brown said local telephone rates could double in five years. A few weeks later, the C&P Telephone c o., servicing the greater Washington, D.C. area, applied for a 70 percent local service increase in one fell swoop. Now AT&T officials think that rates could double in 24 to 30 months. So millions of Americans have a direct stake in what is going to happen this year following the j an. 8, 1982 agreement.
First, the settlement is really only a preliminary to any final settlement. A federal judge still has to approve the preliminary agreement between the Justice Department’ and AT&T to divest its 22 Bell system companies and be allowed to keep western electric, its manufacturing subsidiary, and the bell laboratories.

A host of telecommunications companies and several consumer groups will try to participate in the court deliberations in order to have their interests respected because of how AT&T is allowed to carry out its set­tlement-whether, for example, to create one giant holding company for the local Bell companies or several regional firms or whether to allocate billions of dollars of its assets and depreciation calculations one way or another-will mean billions of dollars for consumers to pay or not to pay every year.

Presently, AT&T propaganda is setting up local telephone users for massive rate increases-as much as fourfold in 1987. Then consumer psychology will feel relieved if the increases are less than that.

First a few facts about AT&T’s profits. Between Dec. 1, 1980, and Nov. 30, 1981, AT&T had gross revenues of $57.2 billion and net profits of $6.9 billion. Exxon, by com­parison, grossed $103 billion and reported $6.24 billion in net profits. In short, the regulated company, AT&T, reported the greatest after-tax profits of any U.S cor­poration. It helps, of course, for AT&T to have a federal tax burden of only eight percent.

Second, it is a myth that AT&T’s long-distance business subsidizes local telephone service, notwithstanding what accounting tactics may produce. A competitor of AT&T, William McGowan, chairman of MCI Corp., had this to say in a Jan. 15, 1982 address:
“Bell is a horribly inefficient company…Unless the divestiture is properly done, the results could well be higher local rates. Yet if the costs are properly assigned, local rate-payers should be due some rate relief-not in­creased bills…

“Above all, it is important for consumers to challenge bell’s underlying claim that you are getting a free ride on local service. If you don’t, you will play into the hands of their attempt to brainwash the American people into expecting huge local rate increases as a matter of course. Those claims can be challenged, because they are founded on the sand of improper cost allocations, double counting, and insufficient information.”

Well said, Mr. McGowan but how can telephone consumers organize to challenge AT&T? For information about a practical proposal that will put consumers in the driver’s seat, send a self-addressed, stamped envelope to the National Citizens Committee for Broadcasting, P.O.
Box, 12038, Washington, D.C. 20005.

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