Legislative and regulatory proposals permitting American Telephone & Telegraph Co. to set up separate, deregulated subsidiaries will not limit the corporation's power for anticompetitive abuses, according to a new study by the General Accounting Office.
The separate subsidiary proposals are the heart of the Federal Communications Commission's Computer II decision and of pending legislation now awaiting Senate floor action. A "huge deregulated entity that would be endowed from the moment of its creation with substantial market dominance, as well as significant potential for internal cross-subsidy and a host of other anticompetitive actions" would be created by the proposals, GAO concluded.
In a report to be released later this week, GAO charged that the FCC is not prepared to monitor its own telephone deregulation plans under the Computer II decision. That action is scheduled to go into effect March 1, 1982, and involves an AT&T reorganization plan and billions of dollars of company assets.
These conclusions are part of the massive 219-page report to Congress prepared at GAO's initiative. The report is considered the most signif icant work yet published by a team of GAO auditors who have been studying FCC for several years, and it is scheduled to be presented later this week at FCC oversight hearings before the House telecommunications subcommittee. Top staff members of the House subcommittee refused to comment or to release the report.
Publication of the report comes at a key time in the complex debate about the Senate telecommunications bill and in what is likely to be a difficult period for FCC regarding its telephone-industry policy. This week's hearing will touch on a number of controversial FCC actions involving AT&T, and key members of Congress are expected to challenge AT&T rate increase decisions sharply.
While the House is taking a hard look at the FCC's ability to regulate AT&T, representatives of the Senate Commerce Committee, which passed the telecommunications package 16-1 in July, and the Judiciary Committee have begun negotiations on amendments to the bill. The legislation, which permits AT&T to enter new and unregulated markets for the first time, may reach the Senate floor next week.
Those amendments, a number of which were prepared by AT&T competitors who were the primary opponents of the bill as it emerged from the Commerce Committee, include a proposal, rejected by the committee when it passed the bill, calling for public ownership of a portion of the subsidiary.
Other amendments endorsed by Sen. Strom Thurmond (R-S.C.), chairman of the Judiciary Committee, limit property sharing between the subsidiary and the parent company, force the subsidiary to carry the costs of its own advertising and marketing, and establish policies for encouraging AT&T to purchase equipment from other communications concerns.
But while Senate members and their staffs are negotiating over floor amendments to the bill, GAO, Congress' independent auditing arm, has concluded after years of study that FCC's concept of the separate subsidiary and its power to monitor the giant new AT&T offshoot are filled with flaws.
GAO repeatedly concluded that the separation between AT&T's regulated and unregulated operations under the FCC order were not stringent enough. For example, GAO suggested that FCC consider placing firm separations between AT&T's local exchange and long distance operations, a controversial proposal not a part of current congressional or FCC proposals.
In addition, GAO said FCC should consider forcing the phone company to install separate officers and directors and bookkeeping methods for the new competitive subsidiaries.
In directly criticizing FCC implementation of the landmark 1980 decision, GAO also said the FCC "has moved too quickly" toward implementing Computer II before regulatory oversight tools have been developed fully and before assessing "what will be required -- in the way of resources, staffing, functional organization -- to give the approach credibility and a realistic chance of success."