American Telephone & Telegraph Co. was cleared in federal court yesterday of conspiring to prevent Southern Pacific Communications Corp. from successfully competing with it in the long-distance phone business.
In a 602-page decision, Judge Charles R. Richey ruled that the business practices of AT&T that SPCC had challenged are immune from antitrust law because the Bell System is under "pervasive" federal and state regulation. Southern Pacific Communications, founded 12 years ago, had charged that AT&T thwarted its growth by not permitting its long-distance service to connect to the Bell System's local telephone network.
"This court believes that the antitrust laws were never intended to destroy an essential public utility such as we have here," Richey said.
Richey, furthermore, issued a plea in his ruling for the reversal of two decades of activity of the Federal Communication Commission that has led to the deregulation of telecommunication and, with the help of a Justice Department antitrust case recently settled here, an end to the AT&T monopoly position in the field.
"This court believes that sound and honest regulation of telecommunications at the federal and state level is our only guarantee of access to this necessity throughout the whole country and not just part of it. Regulation in this area of telecommunications up until the 1970s at the federal and state level has served this country well and it is hoped sometime in the future it will again do its proper job without abdicating to the greed of the few," the judge said.
"It may be necessary for Congress and the Justice Department . . . to bring about the return of responsible regulation so there will be no more contrived competition in profitable areas only," he continued.
Richey's decision appears to run against rulings by other federal judges in a series of cases in which the Bell System was found to have violated antitrust law.
These include the massive Justice Department antitrust case that AT&T recently agreed to settle. On another antitrust case, considered a carbon copy of the SPCC dispute, MCI Communications Corp. won a $1.8 billion jury verdict against AT&T that currently is under appeal.
"It's the same case, absolutely the flat same case. Judge Richey says the jury in that case is wrong," said AT&T's lawyer, George L. Saunders of Sidley & Austin of Chicago. He added that he plans to file the decision in the SPCC case with the appeals court considering the MCI case.
MCI, the largest of several long-distance phone companies, is about twice the size of SPCC, the number-two rival to AT&T. Three months ago Southern Pacific Corp. agreed to sell SPCC and its sister company, Southern Pacific Satellite Co., to GTE Corp., the nation's second largest phone company. The Justice Department and FCC must approve the $950 million sale.
AT&T called Richey's decision a "complete vindication" and said it "reflects what has been our position all along."
Stephen Ailes of Steptoe & Johnson, lead attorney for SPCC, said his client plans to appeal Richey's decision.
SPCC said it had suffered $230.2 million damages, which under antitrust law would have been tripled to $690.6 million if it had won the case. In its original filing, SPCC had claimed far higher damages -- $567 million, which would have tripled to $1.7 billion.
The case is part of a revolution in national telecommunications policy prompted by a series of decisions by the FCC over the past 20 years that gradually have eroded AT&T's monopoly position. The decisions have ended AT&T's monopoly over supplying telephone equipment, giving customers the right to buy their own phones, and have led to the proliferation of companies offering long-distance service at lower rates.
In his decision, Richey said every AT&T action that SPCC complained about was subject to either state or federal regulation and should have been handled by those agencies, which the judge accused of having "miserably mishandled or failed to handle" the issues.
"The court finds that SPCC failed to prove that defendant (AT&T) engaged in any predatory or unlawful acts with the intent of excluding competition," Richey said. "The court concludes, therefore, that defendants have not unlawfully maintained or abused monopoly power as a federally and state regulated public utility."