A Cabinet-level committee is considering the possibility of dropping the government's antitrust suit against American Telephone & Telegraph Co., sources said yesterday.
Abandonment of the suit -- considered to be one of the most significant antitrust cases ever brought by the federal government -- is one of several communications policy options under consideration by the Commerce and Trade Council. The council consists of the Cabinet officers of the key federal economic agencies.
The administration decision, which may be made within the next few weeks, comes as the government is nearly done presenting its evidence in the case. At the conclusion of the government's case -- probably within the next several weeks -- AT&T is expected to move that U.S. District Court Judge Harold Greene dismiss the case or throw our parts of it.
The issue is further complicated because no one can gauge precisely the political consequences of dropping the case, a move certain to elicit fierce criticism from almost every sector of the communications business.
Herbert Jasper, executive vice president of the Ad Hoc Committee for Competitive Telecommunications, a lobbying coalition that is antagonistic to AT&T and that represents long-distance companies with sales of about $7 billion, warns that closing the antitrust case -- now in its fourth month of trial -- would send the wrong signal to American business and consumers.
Commerce Secretary Malcolm Baldrige and William Baxter, the assistant attorney general for antitrust, are already at odds on the issue. Baldrige has endorsed a telecommunications bill now before the Senate Commerce Committee, while Baxter opposes it. In addition, Defense Secretary Caspar Weinberger has told a Senate committee that the AT&T case should be dropped because the government's suit is designed to force a breakup of AT&T -- the nation's largest company and a vital cog in the nation's defense communication system.
Further complicating the issue is the position stated in an April 28 letter to Jasper by Edwin Meese III, counselor to the president. "Please be assured that the [Justice] Department will continue to seek effective relief whether by settlement or litigated judgment," Meese wrote, responding to a Jan. 27 letter from Jasper.
In his testimony last week, Baldrige said the administration opposed the Justice Department's divestiture mission, a move that prompted AT&T Chairman Charles Brown to tell the same panel this week that it "appears the Justice Department antitrust people are lawyers without any client."
Nevertheless, President Reagan's attendance eight days ago at a meeting of the Cabinet-level council has elevated the importance of the issue, one never truly debated in such high quarters. That meeting also was attended by Baxter; Jonathan Rose, assistant attorney general for legal policy; and Weinberger.
No decision was made at that meeting, although sources say Baldrige and Weinberger staked out positions reaffirming their unhappiness with the Justice Department's divestiture plan.
At issue in the legislative debate is the future regulatory structure of the telecommunications industry in general and AT&T in particular. The Justice Department has argued since the suit was filed seven years ago during the Ford administration that the industry cannot be truly competitive until the giant company separates its virtual national monopoly over home and business phone service and its guaranteed revenues from those fields from competition businesses in which it engages such as equipment and long-distance services.
The Senate plan, similar in many ways to legislation considered over the past several years, would permit AT&T to participate in a variety of new fields through a separate but totally owned company designed to provide AT&T competitors access to the AT&T local network under the same circumstances as other communications concerns.
Critics of the legislation -- an increasing number of competing telephone, computer, newspaper and longdistance concerns -- say that only divestiture or a structural solution offering stronger protections against the natural inclination of a company like AT&T to favor its own interests over those of its competitors would solve the industry's problems.
It is increasingly important to AT&T that its complex legal problems be resolved as soon as possible. These problems also include a court challenge to a restructuring plan approved by the Federal Communications Commission last year. The company already has begun to set up the separate subsidiary ordered by March 1, 1982, in the FCC decision. Company officials say it is one of the most complex restructuring plans ever undertaken by an American company.