A Federal Communications Commission law judge yesterday ordered American Telephone & Telegraph Co. to pay MCI Communications Corp. more than $930,000 in damages for refusing to provide the District-based company a special low-cost long-distance service.
FCC Administrative Law Judge Joseph Chachkin ruled that AT&T placed "unjust, unreasonable and discriminatory" restrictions on MCI's request to use the discount service, Telpak, to set up a private long-distance system--separate from the Bell System--for General Motors in 1975.
As a result, the judge ordered AT&T to pay MCI $931,880--the difference between the amount MCI would have paid had AT&T offered the Telpak discount and the amount MCI ultimately was billed by an AT&T subsidiary on a nondiscount basis.
The judge's decision came the same day AT&T and another one of its growing competitors, TeleSciences Inc., announced they have reached a tentative agreement to end an antitrust suit filed by the telephone equipment firm 14 months ago.
The suit accused AT&T of trying to monopolize the equipment market by restricting TeleSciences' ability to sell traffic measuring and monitoring equipment to the Bell System.
Under the agreement, AT&T has agreed to purchase $300 million of TeleSciences-manufactured products for eight years, beginning in 1982. An advance payment of $40 million will be given to Telesciences when the agreement is signed, probably next month. Telesciences' annual sales now range near $40 million, of which 25 percent come from sales to AT&T and its affiliates.
Although pleased with the settlement, AT&T officials were disturbed by the FCC ruling. "The administrative decision is incomprehensible and flies in the face of the facts in this case. We do not expect it to stand up under appeal," commented AT&T spokesman Pic Wagner.
Once AT&T appeals, the seven-member commission will review the decision, which involves a complicated series of events dating to 1975.
At that time MCI, among other things, sought to lease 120 AT&T circuits under the high-volume, low discount Telpak service to link GM's Detroit and Chicago offices with its Oakland offices. AT&T refused MCI's order, arguing that under the rates then, Telpak was not available to be resold by another long-distance company to another firm.
Subsequently, AT&T's local operating company, Pacific Telephone & Telegraph Co., supplied MCI with the circuits MCI sought--but not at the low Telpak rate.
According to the FCC judge, these circuits were physically and technically the same as the Telpak circuits. What's more, the judge said, AT&T discriminated against MCI because it made Telpak available to the government and some international communications firms under the same type of arrangements it refused to give to MCI.
As a result, the FCC judge said MCI should be required to pay only the Telpak rate, and AT&T should be forced to pay MCI the difference between that rate and what it was charged. Ironically, MCI has paid only what it thought it should have under the Telpak rate, refusing the pay the higher fee. That refusal is now being challenged in court.
MCI officials were pleased by their victory, "We're not at all surprised by winning the case, but we're gratified nonetheless," said John R. Worthington, MCI's vice president and general counsel.
This was not MCI's first victory against AT&T. Eighteen months ago, a federal judge ordered AT&T to pay MCI $1.8 billion in damages after a jury found the Bell System guilty of violating federal antitrust laws in an effort to keep MCI out of the telecommunications market.
That case is on appeal and a decision is expected shortly.