Telephone rates will not rise as a result of the settlement agreement between American Telephone & Telegraph Co. and the Justice Department, officials of the Bell System and the government told skeptical Senate leaders yesterday.
The assertion was repeatedly made in simultaneous hearings called to review the agreement by the Senate Commerce and Judiciary committees.
Many communications industry regulators, executives and other experts have predicted that rates could double or triple under the settlement's terms, although AT&T, the Justice Department, and long-distance firms have been challenging that claim.
Local rates could go up as much as 8 percent to 10 percent in the coming five years, but that development is the result of inflation and competitive pressures on AT&T's revenues, said AT&T Chairman Charles Brown, calling the rises "relatively small" ones "having nothing to do with the consent decree."
Assistant Attorney General for Antitrust William F. Baxter, the government's chief architect of the agreement, told the Judiciary Committee that he believes regulators will be able to maintain subsidies of local rates by setting higher rates for long-distance companies who want to hook into local networks.
The agreement calls for AT&T to spin off 22 local telephone companies, assets totaling about $80 billion, in exchange for ending the Justice Department's antitrust suit against AT&T. It is a much more dramatic reorganization plan than the plan mandated by a bill sponsored by the Senate Commerce Committee's leadership, which was passed by the Senate last fall.
Sen. Harrison Schmitt (R-N.M.), citing "serious reservations" about the settlement, charged that the government "ignored" Congress in agreeing to the divestiture plan and said it "does not reflect the inclinations of the U.S. Senate or this committee."
Sen. Donald Riegle (D-Mich.), said his constituents have expressed "a great deal of alarm" about the local rate issue. "We're going to have a revolt on our hands, particularly from the elderly" if rates double or triple, Riegle said.
But one of the key contributors to that bill, Assistant Commerce Secretary Bernard Wunder Jr., praised the settlement, even though he acknowledged in prepared testimony that his agency does not know whether the settlement will result in massive rate increases.
Wunder and Sen. Robert Packwood (R-Ore.) raised concerns about the ultimate fate of the Yellow Pages, which wind up remaining with AT&T, instead of in the hands of the local companies. Without Yellow Pages, local companies would be deprived of the substantial revenues that are said to help keep local rates down.
Within hours after the hearing, Brown pledged to continue to "support" local rates from Yellow Pages operations during a four-year transition period.
At the close of the hearings, Packwood said enactment of the legislation he sponsored would alleviate the local rate concerns, but said further action is unlikely before a court review of the settlement is complete.
In other matters: AT&T General Counsel Howard Trienans said AT&T will not spin off the local operating companies into one new firm, although Brown and Trienans said AT&T is still evaluating the future structure. And Lt. Gen. William Hilsman, director of the Defense Communications Agency, told the Commerce Committee that legislation is needed to answer Defense Department concerns about the ability of the local companies to deal with emergency situations.