The Federal Communications Commission cleared the way for American Telephone & Telegraph Co.'s long-awaited entry into the computer business yesterday by approving the Bell System's plans for a new subsidiary to mass-market a data-processing network.
AT&T officials said they hope to launch the subsidiary formally within the next few weeks, and begin this summer to offer the innovative communications network that will enable incompatible computers to talk with one another. It will be AT&T's first unregulated business venture.
The commission's action "is a big step because we're sanctioning AT&T's first entry into unregulated fields," Gary Epstein, chief of the FCC's common carrier bureau, said at the start of yesterday's meeting.
Yesterday's action was a final step in the FCC's long campaign to allow AT&T to sell computer-processing and telephone equipment without government scrutiny. Two years ago, the FCC ruled that AT&T could market data-processing services, computer terminals, telephone equipment and other telecommunications services now offered by a growing number of its competitors, but only if these services were sold through a completely separate subsidiary.
However, before this subsidiary could be started, the FCC had to approve AT&T's plans for capitalizing the new corporate entity. The FCC also had to approve AT&T's plan to keep the subsidiary's operation separate from the parent company to ensure that AT&T was not using money from its regulated local and long-distance services to subsidize its competitive ventures.
By a 6-to-0 vote, the commission approved AT&T's capitalization plan, which will give the new subsidiary a capital infusion of $570 million over the next 3 1/2 years. The initial assets will be comprised of a $3 million short-term loan from the parent company and $56 million in equipment, which will be transferred from AT&T subsidiaries. Under the FCC's order, AT&T's subsidiaries will have to be reimbursed for this equipment.
The additional $511 million in funding also will come from the parent company and will be borne by shareholders, not ratepayers.
The commission also approved AT&T's plan to allow the parent company to provide some services to the new subsidiary, including corporate finance and accounting, public relations, legal services and personnel-management services.
However, several commissioners expressed serious doubts that the FCC would be able to police the sharing of these services adequately to guarantee that the parent company was not subsidizing the subsidiary to the ratepayer's disadvantage.
The subsidiary does not yet have a name--AT&T officials are dubbing it XYZ Inc., while the communications industry calls it Baby Bell. It will have 850 employes at the outset, many of whom have been involved with the development of the data-processing network.
The network, called Advanced Communications Service, will facilitate the transmission of computerized data by allowing otherwise incompatible terminals to speak with one another. Customers will call a special service point within the Bell System complex to obtain access to this network which, among other things, will store and transport data as well as manage data communications networks.
Several communications companies, including General Telephone & Electronics Corp., already offer similar services.
But AT&T's entrance--with $59 million in assets to start, its relatively easy access to capital and its large telephone network--could dwarf the services now being offered by the other companies.