Calling American Telephone & Telegraph Co. an "elephant" that has repeatedly tried to "reach out and crush someone," a government attorney yesterday opened the Justice Department's landmark antitrust case against AT&T with a barrage of charges aimed at convincing a federal judge to split up the Bell System empire.
Gerald Connell, the lead government attorney in the six-year-old case, charged the firm, the nation's largest, with anticompetitive practices in the long-distance calling and telephone equipment markets that were carried out to insure the telephone company's historic industry monopoly.
"This case is about deliberate choices made by the Bell System at important junctures," Connell said during a 2 1/4-hour opening statement. "This case is about regulation that didn't work. . . . It is about how Bell fought off each new wave of competition. The case is about . . . a pervasive course of conduct by a company that exploited the obligations of regulated monopolies."
Noting that "clearly in a case like this some form of structural relief would be necessary," Connell asked U.S. District Judge Harold Greene to issue a decree to "ensure that the opportunities for the practices to continue are gone."
A record of 4,000 pages has been developed in the case, which was filed under the Ford administration. Since then it has moved slowly, as attorneys for the government and AT&T, at the direction of Greene, have attempted to agree on the parameters of the massive case. The government says it has spent close to $10 million on the AT&T suit, while defending the case has cost the Bell System about $250 million. The two parties say the case could last two years.
What is at stake is the structure and the future of the mammoth company, which has more than 1 million employes and assets of more than $100 billion.
The government's aim is to break up the company, which controls about 80 percent of the local phone market and now more than 90 percent of the long-distance market. Through its Western Electric Co. and Bell Laboratories facilities, the company is a dominant force in both the manufacturing and research ends of the telecommunications business.
The charges are based primarily on a period since 1968 when the Federal Communications Commission and the federal courts were at the forefront of an erosion of the AT&T monopoly over telephone equipment and long-distance calling businesses. Decisions on those two fronts led to the ability of consumers to purchase their own phones from a variety of entreprenuers and choose from companies, like MCI Communications Corp., which offer long-distance calling rates below those of AT&T.
In beginning his opening argument yesterday, George Saunders, the AT&T lead attorney, called his client the "greatest business enterprise the world has ever produced" and said the company's concern since the introduction of increased competition in the telecommunications field has been with maintaining the quality of the telephone network and insuring the public of stable pricing for home telephone service.
"There is no substantive basis in law or fact for this case," Saunders said."We will prove it in this court."
Saunders opened his presentation, which he said could last six hours, by saying that the telecommunications industry and the data-processing, air frame and farm implement industries are the nation's only industries that are competitive in world markets.
"It is shocking to me that of the four industries in which this country remains competitive, the Department of Justice of the United States is attempting to destroy the competitive ability of two of them," Saunders said, referring to the government's ongoing antitrust suit against International Business Machines Corp. which seeks to force similar structural changes in IBM.
Responding to Connell's assertion that the regulatory system under which AT&T has operated means "never having to say you're sorry," Saunders cited repeated changes in the regulatory environment. "We were constantly being told by the regulators not only that we were going to change the rules, but that we should have known it to start with," he said.
In outlining the government's case, Connell repeatedly cited procurement, rate structure, regulatory and other policy decisions by the Bell System, which he charged thwarted competition from companies attempting to market telephone attachment, switching and other equipment, most of which required hookups to the AT&T national network.
Connell said the Bell System would purchase equipment from Western Electric even if that machinery had higher price tags and was "inferior." AT&T was able to pass "inflated prices to the subscribers to maintain its regulated rate of return."
Connell also charged that the Bell System's 23 local telephone companies, despite "an obligation to buy the best equipment at the lowest prices," ignored that obligation in violation of federal antitrust laws.
Further, the phone company -- by announcing new products after competitors were already in the marketplace -- foreclosed the other firms' development, he also said. In the manufacture of PBX machines, large telephone call-switching devices, "Bell engaged in a crash development of what was acknowledged to be a carbon copy of the trade equipment," he charged.
AT&T filed several key tariffs that Connell claimed were below costs and consistently fought the entrance into the market of the new long-distance competitors, Connell said. Those policies, he charged, were found to be "unnecessary and unlawful" by the FCC and the courts.
AT&T has "fought in every way to maintain its monopoly of intercity services through the denial" of connections to the local phone system, Connell said.