American Telephone & Telegraph Co. has asked the government for permission to nearly triple the rates it charges long-distance competitors to hook into the Bell System's local telephone network.
The tariff request, filed with the Federal Communications Commission this week, raises questions about AT&T's intentions during the 18-month period between now and implementation of a divestiture plan signed last week between the company and the government.
Calling the rate request "predatorily high," Mitchell F. Brecher, an attorney with Southern Pacific Communications Co., an AT&T long-distance competitor, said his company is "greatly concerned that the events within the next several months could undermine the procompetitive consequences anticipated" as a result of the proposed antitrust settlement.
What concerns Bell System competitors is the possibility that AT&T may be laying the groundwork for development of a rate system that would give it an unfair advantage when it begins competing with these new carriers in the open market for access to local phone lines. The rate proposal also may provide added ammunition for consumer group leaders and legislators who have expressed fears that the antitrust settlement could result in substantially higher local telephone bills.
The pact between the Department of Justice and AT&T, announced Friday, calls for dismisal of a government antitrust suit against the company. In exchange, AT&T agreed to divest itself of 22 local telephone subsidiaries, including the four Washington-based Chesapeake & Potomac Telephone companies.
One of the principal issues raised by the Justice Department during the trial phase of the antitrust case centered on the treatment AT&T gave to competing long-distance carriers who sought to hook into the AT&T local networks. Although those companies, firms like Southern Pacific and MCI Communications Corp., construct their own intercity communications networks, they are totally dependent on local telephone companies to reach consumers and nearly all businesses they serve.
Philip Nyborg, MCI vice president for regulation and industry relations, noted that companies filing tariff matters often apply for rates higher than what they expect to be granted. "Anything can happen," he said. The current rate agreement expires April 15.
But the MCI official also pointed out that his firm filed a rate-discrimination complaint with the FCC on Dec. 19, stating that long-distance companies pay higher rates to AT&T than the federal government, some computer industry concerns and several types of message services.
"This is all the more outrageous when you consider that Bell has said in sworn testimony to state regulators that this local exchange service costs them $49 per line a month," Nyborg said. MCI, for example, pays about 18 percent of its revenues to AT&T for these local connections, a figure that would exceed $60 million for the first three quarters of the current fiscal year.
"We expected them to increase the costs of that essential service as drastically as they could," he said. "Bell has every incentive to take a parting shot at MCI to provide advantages to its own operations. We can't assume that this is totally unrelated to the settlement."
The total charges for each line AT&T connected with its competitors would rise from about $137 to about $345 a month, under the plan submitted by the Bell System to the FCC. Although the competitors disagree, an AT&T official said yesterday the rate hike would bring the local companies' revenues from the service up to their costs.
"This is completely in line with what the FCC and state regulators have been doing--charging the customer with the service," said Pickard Wagner, AT&T's Washington spokesman.
The FCC, in evaluating the proposal, has a variety of options, including approving or rejecting the rates or beginning potentially lengthy administrative proceedings. Brecher said his company would petition the FCC to launch an investigation. "We will resort to every legal recourse we have," he said.
The decisions on these rates are particularly important because the settlement is designed to grant rate and access parity for local networks between AT&T's long-distance unit and competing firms.
One of the important questions the settlement left for either Congress or federal regulators is the development of a system to determine these fees in the new environment created by divestiture. AT&T, which would retain its long-distance arm under the settlement, would be negotiating in the future with its former local subsidiaries in the competitive market for the first time.
Negotiations over these rates are known as Exchange Network Facilities for Interstate Access or ENFIA talks. The current tariff is the result of a 1979 agreement between the carriers and AT&T.