A profound revolution in the nation's telephone business began last week, casting industry giant American Telephone & Telegraph Co. into an uncharted and unfamiliar ocean of competition.
Without fanfare, the Federal Communications Commission put into effect what that agency called a "telephone equipment registration program."
In simple terms, the agency's order means that residential and business customers no longer must use the telephone company's equipment in their homes or offices. A new option has been created; All equipment, from sigle-desk telephones to complex switchboards, may be purchased independently. All that is needed from the local telephone company is a wall jack into which the equipment is plugged.
But the FCC order also means that state regulatory agencies around the nation soon may be deluged with requests for higher basic telephone service rates, as AT&T seeks to combat the potential lost revenues.
AT&T, which controls most of the nation's telephone business and which owns the Chesapeake & Potomac Telephone Companies of the District, Maryland, Virginia and West Virginia, was joined by the industry's smaller companies in fighting the FCC decision all the way to the Supreme Court.
And the FCC's action last week came in the wake of one final industry attempt to dampen the impact of potential competition in the sale of telephone equipment. AT&T and other telephone industry companis urges the FCC to amend its requirement so that at least one telephone, a so-called "primary instrument," was provided by the local telephone firm and connected into the nationwide communications system.
The FCC made no mention of this concept in its order despite a letter to former agency chairman Richard E. Wiley from key members of Congress, suggesting consideration of the industry's program. Although congressional review of the FCC order now is possible, the new program already has gone into effect and may be difficult to halt for some time.
Competition of this sort for AT&T started in 1968 with a landmark FCC decision permitting use of equipment not provided by telephone companies. In the 90 years of industry history before that decision, the only equipment that could be attached was that provided by a local telephone firm. Moreover, the telephone company continued to own the equipment and charged monthly rental fees.
In various rulings since 1968, the FCC has expanded its drive to open up the telecommunications business for competition. The order permitting installation of any equipment was announced originally on Nov. 7, 1975, but it was blocked by court action.
Although AT&T and its local operating subsidiaries obviously must now comply with the FCC order, the industry establishment remains unconvinced that consumers will win in the end.
For one thing, AT&T officials are concerned that lost rental revenues from local telephones could lead to new requests for higher telephone rates. For another, they continue to emphasize their belief that the nationwide telephone system may be damaged by connections of "foreign" equipment. What's more, if customers buy their own equipment and if repairs subsequently are needed, the telephone company won't be responsible.
But, as often happens, the public still may hold the telephone companies responsible for te upkeep of equipment. And the public image of AT&T, already tarnished, could suffer.
Finally, the FCC order requires that all manufactures of telephone equipment register new products before the devices can be installed. This order also applies to AT&T, which buys most of its equipment from a subsidiary, Western Electric Co. Said an AT&T spokesman last week: "Registration of our own equipment will unnecessarily increase the cost of service to the consumer."
By design any AT&T equipment "is certainly compatible with - and provides adequate protection to -our network," said AT&T's Jack Gertz.
The FCC's order "runs directly counter to the expert testimony of scientists and engineers who, having designed the (telephone) network, built it and exercised responsibility for its day-in and day-out operation, might be presumed to know something of the risks involved in the course the commission appears determined to pursue," AT&T chairman John D. deButts said last year.
AT&T officials claim that the actual cost of a telephone is a minor part of the total investment and that consumers wont save much by telling the local telephone company to come and remove its equipment and install jacks instead. But AT&T says the new FCC order could cost the giant utility $88 million in the first year.
Because profits could suffer from a substraction of these costs. AT&T last week said it may be necessary for local operating companies to seek increases. Although some two-thirds of telephones are installed in homes, where the savings from installing purchased equipment may not be so great, the big loss feared by AT&T executives is from the world of business.
For example, when the MGM Grand Hotel in Reno, Nev., opens next year, a central switchboard will serve 1,800 telephones, about 1 per cent of the total in Nevada because a competing firm submitted a lower bid for the equipment.
At C&P Telephone headquarters in Washington, officials last week had no definitive answers on how they will respond to the FCC order. Rate proposals are being drafted for submission to the local regulatory agencies.
AT&T spokesman Gertz provided evidence of the general direction his firm's subsidiaries will take, however. Although "an appropriate credit" will be given to customers who move away from Bell Systm equipment. "Most of the telephone company's investment in telephone service is in the customer's wiring, the drop line that runs to the telephone line outside the customer's home, the line that leads to the central switching office, the switching office itself, the switching equipment in that office, the trunk lines between the offices," he said.
Many expenses won't change, either, he added. Maintenance of the lines and the offices, record work, number services, "the loist goes on and on, must continue to be paid for," he asserted.
From Gertz comments, it would appear that AT&T and C&P are planning to seek major increases in underlying rates to counter potential losses of revenues from rental on equipment. For home user, that could wipe out the savings of buying telephones rather than renting. In any event, the debate over such local charges promises to be one of the hottest issues before state regulatory agencies.
Currently, basic residential service in the District for one telephone costs $9.90 a month. One extension costs an additional $2.14 a month.
C&P itself is selling telephones to customers at its growing network of phone stores, set up to counter the competition for specialized telephone instruments permitted by earlier FCC decisions. C&P does not sell, yet, at basic black desk telephone and its cheapest "design line" model is called the "Exeter"." It sells for $39.95 but C&P retains ownership of the mechanical parts and guarantees repairs.
At non-Bell System retail outlets, customers may purchase standard desk telephones for less than $30; touch-tone sets run as high as $50 on the open market.
Obviously, if the basic monthly rate would be reduced by more than $1 a month per telephone, the charge now for extensions, it wouldn't be long before customers could benefit economically from buying their own instruments. But all this may change in C&P's future rates and the guarantee of service doesn't apply to non-Bell equipment.
A spokesman for the North American Telephone Association discounted AT&T's suggestion that higher rates would be needed. He forecast "no serious impact" on a firm now earning more than $1 billion of profits each quarter. At the same time, he suggested that consumers aren't likely to remove Bell System main phones because of the absence of savings. But consumers probably will switch to other vendors for extension equipment, he said.
What follows are some quesions and answers about the new FCC order and what it means to average customers. The answers are compiled from the agency's orders and responses from AT&T to queries last week:
Q. What if consumers want to install their own equipment?
A. The telephone company must be notified of exact lines to which connection is to be made and, in the case of registered equipment, registration numbrs and other data must be provided.
In addition, the telephone must be connected through a standard telephone jack, provided by the company (as in some new residences). Defective equipment must be removed and , if the telephone company notifies a customer about a hazard or harm from the equipment, it must be diconnected.
Q. But what if I already own some non-Bell System equipment? Can it be connected or must it first be registered with the FCC?
A. Existing equipment has been "grandfathered" by the FCC and may be connected. Only a new equipment requires an FCC registration, a program designed to provide uniform, minimum standards. Grandfathered equipment may be used but the telephone company will require you to provide details on name and model number.
Q. HOw can I find out what equipment has been "grandfathered"?
A. The FCC has issued a consolidated list, dated Oct. 3. and available for inspection in Room 544 of the agency's headquarters, 1919 M st. NW. Any equipment grandfathered may be connected up to Jan. 1 and may remain connected for life without registration.
Q. How is new equipment registered?
A. Manufacturers and suppliers apply at the FCC by sending information describing the devices, which the agency will evaluate. If approved, a registration number will be issued and must be permanently affixed to the equipment.
Q. What if the the non-Bell equipment doesn't function properly?
A. You're on your own, as in any free marketplace.The FCC says customers who buy or lease their own equipment "assume the risk that this equipment will not perform adequately."
Q. What if C&P orders a disconnection of my own telephone and threatens to discontinue service?4
A. The telephone company has the burden of proving that discontinuance is reasonable, and customers will be notified in writing of a right to appeal.