American Telephone & Telegraph Co. yesterday cited increasing competition by large corporations in offering communications services as evidence that the federal government's massive antitrust case is unwarranted.

In a three-volume, 2,850-page response to the government's lawsuit, filed at U.S. District Court here, AT&T lawyers said that such "large sophisticated and integrated companies" as International Business Machines Corps., RCA Corp., Burroughs, Corp., Exxon Corp. and Xexox Corp. have begun to offer services "which blur the old distinctions between data processing and telephone service."

Moreover, AT&T claimed, allegedly anticompetitive practices in prior years, outlined by the Department of Justice in its 1964 lawsuit, were carried out during regulation by the Federal Communications Commission.

"The Bell System's fundamental defense is that . . . behavior reflects not a continuing course of conduct to monopolize any market but, instead, a good-faith effort to discharge common-carrier obligations -- that is to provide the public with high-quality telecommunications services at reasonable rates . . ." the AT&T brief emphasized.

In addition, the AT&T response painted the picture of a government divided over the antitrust issue. In particular, the brief pointed to a statement by President Carter on telecommunications regulation in which he called the Bell System "crucial to our society," and providing "better services, lower costs and improved productivity in an economy that depends more and more on information transfers."

Said AT&T general solicitor Harold Levy: "Tracing the factual history of our industry and its technological and regulatory realities, we have shown that our performance in the marketplace has been eminently fair, reasonable and legal."

The Justice Department has argued that AT&T not only operated with a monopoly power over interstate communications but also sought to block entry into various aspects of the business by potential competitors -- a charge repeated in several separate antitrust cases filed privately against AT&T in recent years.

One such case was settled out of court yesterday. Dallas-based Wyly Corp. said it and other parties to a case against the Bell System agreed to dismiss charges in exchange for a $50 million payment by AT&T -- about 15 percent of the alleged damages.

The Wyly suit was filed in 1976 and involved a Washington-area subsidiary at that time, Data Transmission Co., a digital data transmission firm that filed for bankruptcy. The suit charged AT&T with monopolizing data transmission services and offering rates so low that Datran was forced into insolvency.