The Reagan administration, ignoring the six-year Justice Department effort to break up the Bell System, yesterday gave qualified support for congressional legislation deregulating key facets of the telecommunications industry.
Commerce Secretary Malcolm Baldridge, ending weeks of controversy within the administration, told the Senate Commerce Communitte, that with amendments -- some of them crucial to the legislation -- the administration is prepared to support the effort.
Responding to questions, Baldridge also said the administration does not support the Justice Department's stated goals to seek divestiture of key subsidiaries of American Telephone & Telegraph Co. at the close of the government's ongoing antitrust suit against AT&T. Presentation of the case could conclude by the fall.
Sen. Robert Packwood (R-Ore.), the Commerce Committee chairman, was sharply critical last week of Baldridge's last-minute cancellation of testimony on the bill. That delay was announced after Assistant Attorney General William Baxter wrote a stinging letter to the Office of Management and Budget charging that the bill would undermine the antitrust case and not solve the regulatory problems facing the industry.
The Commerce and Justice departments were also at odds during the Carter administration over similar legislation that frees AT&T from the constrainsts of a 1956 consent decree with the Justice Department. These legislative proposals, instead, permit AT&T to offer computer-like services though a separate subsidiary.
"communications regulatory reform legislation patterned after S.898 [this legislation] is urgently needed and should be enacted this year," Baldridge said.
Asked by Sen. Howard Cannon (D-Nev.) about divestiture, Baldridge said he "expressed a preference against divestiture in support of the bill. . . . I'm supporting this bill and I'm going to truly support it. . . . This bill doesn't address the merits of the antitrust case."
Packwood, who yesterday called the Justice Department rationale "specious and illusory," has consistently maintained that Congress cannot await years of court antitrust action in revamping the 47-year-old law governing the industry.
Baldridge also said that his department would provide the committee with specific recommendations, although he hinted that the legislation should grant the Federal Communications Commission power to monitor the industry after the bill is passed.
Baldridge, like Defense Department witnesses who testified later, said the legislation "must be amended" to consider emergency telecommunications concerns of Pentagon planners.
Dr. Richard Delauer, undersecretary of Defense for research and engineering, said the bill "must be amended" so telephone companies can better meet national preparedness needs. But Delauer refused to address the concerns of Defense Secretary Caspar Weinberger, who has asked that the Justice Department drop its suit against AT&T.
But following the administration testimony, a series of witnesses, including representatives of the nation's largest corporate telecommunications users and retailers, said they had a series of problems with the bill. In fact, little business support for the legislation has surfaced.
The bluntest opposition to the legislation came from Robert Bennis, manager of communications for Westinghouse Corp. and chairman of the regulatory committee of the International Communications Association, a trade group representing about 500 of the largest telephone and other communications users.
Bennis said the legislation is based on an incorrect premise that the communications industry is today truly competitive and charged that the bill "proceeds from the dominant carriers' point of view.
It assumes, he added, "that communications carriers, particularly the Bell companies, have been a resourceful element of the industry, needing merely to be freed from useless regulation. However, it may come as a surprise to some that in putting research to work for business, Bell has been far behind the innovation of the users and many of the other suppliers," Bennis said.
The members of Bennis' trade group, whose problems with the bill mirrored those in testimony of the National Retail Merchants Associations, could be a significant political force in the legislative debate, since ICA represents companies with nationwide offices and affiliates.
Richard Vande Merkt, telecommunications manager for Montgomery, Ward & Co. Inc., said the bill "has serious deficiencies that could impose serious inflationary pressures on business telecommunications expenditures."
In addition, the National Association of Regulatory Utility Commissioners, the group representing state regulators, proposed a series of amendments that are counter to the bill's efforts to sharply curtail state regulation of many types of telephone services.
Edward Hipp, a North Carolina regulator who heads NARUC's communications committee, also said that a piece of the legislation barring state commissions from considering unregulated telephone company operations such as directory advertising could increase local phone rates by at least $1.8 billion, the AT&T's 1978 revenue figure from Yellow Page advertising.