The Council of Economic Advisers has raised serious questions about the Reagan administration's support for legislation to revamp regulation of the telecommunications industry and restructure the operations of the Bell System, officials said yesterday.
CEA Chairman Murray Weidenbaum and council member William A. Niskanen have told other administraiton officials that they are concerned that the legislation, now before the Senate Commerce Committee, would result in more regulation of the telecommunications industry rather than less, officials said.
Similarly, William Baxter, assistant attorney general for antitrust, said in a letter to the Office of Management and Budget that the legislation would "enhance, rather than diminish, the complexity" of Federal Communications Commission regulation of the industry.
"Our general preference is that when you have options like this, unless, the opposing interests are overwhelming, you try to regulate down," Niskanen said in an interview yesterday, acknowledging the council's concerns about the Senate bill.
Baxter and apparently the CEA members are concerned that regulation -- which is designed to prevent AT&T's guaranteed telephone revenues from being used in other AT&T projects -- would create more rather than less federal bureaucracy.
The legislation, which was endorsed earlier this month in general terms by Commerce Secretary Malcolm Baldrige, is sponsored by the Republican leadership of the Senate committee, including Sens. Robert Packwood (R-Ore.), the committee's chairman, and Barry Goldwater (R-Ariz.). The bill, which is supported by AT&T, would permit the company to enter new markets through a separate, though wholly owned subsidiary.
The administration is attempting to develop a detailed position on the complex legislative and judicial situation surrounding AT&T. On one hand, the legislation would permit AT&T to set up a new company to market a variety of products and services in an unregulated setting, while the Justice Department is simultaneously seeking to split up the company in an antitrust case.
But, Niskanen also said he is concerned about the Justice Department's position on the future structure of American Telephone & Telegraph Co. In its antitrust suit against AT&T, the Justice Department is seeking a federal judge's order forcing AT&T to divest its equipment and long distance subsidiaries. The government is expected to conclude presentation of its case this week before U.S. District Court Judge Harold Greene.
"I don't believe in casually tinkering with successful operations. Divestiture is not something you should do casually, particularly with an organization like Bell, which is a very good one. We have a remarkably efficient telephone system," Niskanen said.
The council has not taken a firm position on whether or not the Justice Department should drop its suit, although Niskanen said he is "concerned that there be some recognition of why the Justice Department has made its case -- the present and continuing potential for cross subsidy."
Other sources, however, say that some economic policy makers have expressed reservations, largely political, about dropping the case. "It sounds like you're soft on antitrust," if the case is terminiated, one top official said.
Niskanen's remarks come as the administration is embroiled in an internal dispute about its position on the antitrust case and the legislation. Bladridge has publicly said that the adminstration does not support the Justice Department's divestiture plan, and Defense Secretary Casper Weinberger has urged that the suit be dropped in light of defense concerns and national security issues.