Breaking up the Bell System into more parts than originally contemplated by the Justice Department may be required to restore true competition to the telecommunications industry, the department now believes.
In a lengthy document filed with the United States District Court here, the Department contends, for instance, that divestiture by American Telephone & Telegraph Co. of Western Electric Co., its manufacturing subsidiary, may not be enough to spur competition in that area because a divested Western would start with such a large market share.
"Consequently, the government may request that any final decree include a provision requiring the dissolution of Western into more than one entity," Justice said. The department also is seeking to separate ownership of AT&T's intercity and local facilities.
The department's views were made known in a 628-page "statement of contentions and proof" outlining its antitrust case against AT&T. The statement indentifies the evidence Justice has and what other evidence it will seek during additional discovery proceedings.
Justice said it expects to be ready for trial by April 1980 and that its case "will not require a protracted presentation."
The document outlines the ways in which Justice alleges that AT&T sought to preserve and maintain its monopoly in telecommunications services and telecommunications equipment, and the evidence it believes will show AT&T's efforts to meet and destroy competitive threats.
According to the document, AT&T even has been able to exploit state and federal regulatory processes in order to maintain its monopoly control over the telecommunications industry.
AT&T routinely opposes potential competitors' license applications to the Federal Communications Commission, Justice notes. "Such opposition has increased barriers to entry, and delayed entry of those who succeeded in overcoming these barriers, while AT&T continues to derive revenues from their existing service and equipment monopolies," the document states.
"The knowledge that AT&T would oppose and drag out regulatory preceedings discouraged potential entrants who could not afford the costs' inherent in such proceedings."
Firms that desire to compete with AT&T ususally require access to facilities controlled by it, too, so AT&T denies such access as well, Justice notes, generally claiming the access requested would "harm the network."
"These claims were baseless and repetitive and amounted to a sham," Justice says, claiming that AT&T knew it would lose in the end. The document quotes from an AT&T memorandum about refusing to furnish intercity facilities to other common carriers even though it recognized that, "for the long pull," expected AT&T this refusal to "become untenable." Another AT&T document says the primary reason for a policy was "to serve as a delaying action and afford time to do what is necessary."
Justice argues that dual regulation of communications by state and federal governments lets AT&T choose the forum "most suited to their anticompetitive activities." In order to require would be competitors to respond in a multitude of different forums, AT&T has tended to pick state public utility commissions, Justice says.
"While all of these processes are occurring - typically consuming large amounts of time - AT&T attempts to catch up to consumer demand with competitive service offerings," Justice complained.
In other words, AT&T is able to use the regulatory process, together with its existing telecommunications monopoly - particularly the local telephone franchises, to prevent or at least delay a competitor from establishing itself in the marketplace until AT&T has finally developed its own competing offering," Justice said.
In addition, Justice alleged, AT&T cuts its prices far below those of the competition.
AT&T's contentions of law and fact are to be filed on Jan. 1.