The Justice Department's Antitrust Division has begun a preliminary investigating of proposals by American Telephone & Telegraph Co., General Telephone & Electronics Corp. and other telephone companies to establish revolutionary portable telephone systems.
The division has sent inquiries to the companies seeking information and documents on the agreements reached last month to set up the mobile-phone services. The Justice Department reportedly is concerned that the agreements would give AT&T, GTE and their telephone company partners at least an 18-month lead over other competitors outside the telephone industry in offering the new mobile-phone service, which seems certain to be a popular, highly lucrative advance in communications.
The Federal Communications Commission, which must approve the mobile-phone ventures, has decided to approve two systems in each city, one to be operated by telephone companies, the other by companies outside the telephone industry. The AT&T and GTE agreements divide the telephone industry's half of the mobile-phone market in the nation's top 30 metropolitan areas so that none will have competing applications before the FCC.
As a result of these agreements, AT&T would have majority control and operate the service in 23 of the nation's top 30 cities, and GTE would have majority control and operate the service in the remaining seven cities. Local telephone companies will be minority partners in the various cities. Presumably, these companies would be off and running while the nontelephone companies still were battling before the FCC for control over the other half of the city markets, government sources say.
The civil investigative demands--as the preliminary requests for information are called--do not mean that the Justice Department has concluded that the agreements violate antitrust laws. The current inquiry is a fact-finding process to determine whether a full investigation is warranted.
A Justice Department spokesman confirmed the existence of the investigation yesterday although he refused to confirm or deny that the agency has sent inquiries to the telephone companies.
However, AT&T, GTE and several other telephone companies, including United Telephone System Inc. and Continental Telephone Corp., confirmed yesterday that they received the Justice Department's requests late last week.
The request is "reasonably routine," said AT&T spokesman Pic Wagner. "We don't look at it as anything extrordinary; just as a fact-finding request."
Both AT&T and GTE officials say they are confident they did not violate the antitrust laws. "It is no different from the kinds of actions the industry has engaged in for many years, where we worked together to come up with a unified position to serve the public quicker and better," commented Wagner.
Besides, both companies added, all they were doing was responding to a Federal Communications Commission request to come up with agreements with competitors so companies could avoid lengthy and costly commission hearings on cellular radio system licenses.
This new portable-phone system promises better service for consumers because it will permit thousands of consumers to obtain mobile phones. Existing mobile-phone systems, which use high-power transmitters to cover a whole city area, are so overloaded that would-be customers are on six- to seven-year waiting lists for service. The new cellular system uses low-power transmitters and rapid-call-switching equipment to handle thousands of calls simultaneously rather than the score of calls that can be handled at one time on current, high-powered systems.
The FCC, which must approve the service before it goes into effect, plans to approve two cellular systems for each city--one to be owned and operated by a telephone company, the other by a non-telephone company.
With as many as 13 non-telephone companies seeking permission to operate a cellular system in some cities, it may be years before these companies obtain government permission to begin service. Meanwhile, if the FCC approves the telephone company agreements, their service could begin as soon as 1984.
The Justice Department's investigation is not surprising to industry officials, who note that the agency has challenged the FCC's decision to set aside at least one system in each city for the telephone company.