A year later, U.S. District Judge Harold H. Greene has absolutely no regrets about the breakup of American Telephone & Telegraph Co.
Despite the confusion and turmoil that has followed the breakup, Greene predicts that "divestiture will be more beneficial both to consumers and to the economy -- the country as a whole -- than if it hadn't happened," he said in a wide-ranging interview last week.
Greene -- who approved the AT&T divestiture and continues to exercise great influence over the industry -- said he stands by the principles he has followed since he took on the AT&T monopoly case six years ago. Those principles: to promote competition in long-distance service and new communications technologies while protecting "universal phone service" at a reasonable price for consumers.
"I don't want to minimize the complaints that people have," the judge said, but he feels the complaints about poor service, broken equipment and confusing choices are exaggerated.
"I'm sure it's aggravating. . . . People say it's confusing. They now have several companies they can subscribe to for long distance. They have several places where they can buy their phones. . . . They complain that their telephone bills are confusing. . . .
"The fact is they are being given all the information now" about the exact cost of telephone service and equipment. At the same time, they have more choices of telephone equipment and services than ever before, he said. Additionally, "long-distance competition is driving long-distance rates down, which is certainly one benefit that probably would not have occurred."
Greene's comments come nearly a year after the breakup of AT&T, the sprawling communications giant whose $152 billion in assets in 1983 exceeded those of Exxon, General Motors and Mobil combined.
On Jan. 1, 1984, AT&T was split up into eight different companies under a settlement between AT&T and the Justice Department, which Judge Greene modified and then approved.
AT&T retained its long-distance services, as well as its manufacturing arm, Western Electric, and its research and development subsidiary, Bell Laboratories. But the local phone service that AT&T had provided through 22 operating companies was spun off into seven newly created independent regional phone companies. Although it lost its control over 80 percent of the nation's local telephone service, AT&T was permitted to enter nontelephone business areas, such as computer services, from which it had been barred under an earlier government order.
In the eyes of the Justice Department, AT&T was using profits from its local telephone monopoly to beat back competition in the emerging long-distance and telephone equipment industries and had to be broken up. To most of its customers, however, AT&T was a model provider of efficient, dependable service and should have been left alone, public opinion polls show.
In the interview, Greene declined to take either credit or blame for the breakup. "The settlement was given to me, and while I did make some changes in it, basically I couldn't just start from scratch and dream up something else." Even so, Greene made it clear that he agreed with the rationale for the Bell System breakup.
The telephone industry requires a blend of competition and government oversight, and the court has an unavoidable responsibility for maintaining that blend, the judge said. "One of the purposes of this whole reorganization and the decree was to make sure that consumers of telephone services were going to continue to enjoy universal service at reasonable rates. And I'm obviously interested in seeing that continue.
"I think its basic thrust -- to divest the competitive long-distance functions from the monopoly local functions -- was inevitable. I don't see any way that could have gone differently. I'm convinced that if it hadn't come about in this lawsuit, it would have come about some other way," such as through legislation enacted by Congress or rules implemented by the Federal Communications Commission.
Although AT&T may not be cutting long-distance rates as much as it could at present, Greene believes technology will continue to reduce costs of phone service, and ultimately, produce lower rates. "I don't profess to be an expert in all these things on a technical basis," he said. But new developments -- such as fiber optics -- will drive telephone rates down, "even if, on a temporary basis, AT&T doesn't have to go along because they want to maximize their profits to maintain themselves," he said.
Greene is not impressed with complaints about broken telephones -- which are no longer repaired by the local telephone company, thanks to the breakup. "I'm not sure it happens quite that often. Telephones, at least in my experience, don't break that easily."
But even if they do, he said, "it isn't that much of a problem, because once you make a few telephone calls -- from another phone if necessary -- you can find out where to get it fixed."
Greene said that consumers dwelling on these problems are ignoring the short- and long-term benefits. "You can buy a telephone much more cheaply today than you could have when AT&T had a monopoly and only allowed you to rent a phone. You'd rent a phone and pay for it all your life and you never owned it. Now you can buy a phone for $10 or $15, more or less as you buy any other item."
He expressed little sympathy for consumers who now complain about being bombarded with too much information about competing long-distance services from AT&T, MCI Communications Corp., GTE/Sprint and others. "For years and years, we've heard that consumers aren't being given enough information and choice -- about what's in the cereal boxes and what's in their peanut butter. . . . Now they're being given some information for the first time on the telecommunications system and people say it's confusing. . . . "
And Greene is not particularly concerned that some of the competing long-distance companies may not survive. "That's the way the system works," he said, naming companies in other industries that have failed as a result of competition. "If some of the long-distance companies went out of business, there's no question that there won't be an AT&T or an MCI glad to take up the slack."
His belief in the benefits of long-distance competition remains firm. "Once competition became possible in long distance because of the technology -- microwave and satellites and all of that -- you couldn't put that genie back in the bottle." And the only way to ensure competition was to keep AT&T's local telephone companies from competing in areas where they could affect competition -- such as long-distance -- by its control over the local-telephone facilities.
"If it wasn't a good idea for AT&T to be in both the long-distance and local telephone business at the same time, it is somewhat -- on a lesser scale -- also a good idea for the regional companies not to be in both businesses at the same time," Greene said. That is why he rejected a recent request by one of the new regional telephone companies to enter the long-distance telephone business, he said.
Additionally, Greene said, it was equally important to make sure the new regional telephone companies kept to their primary business of providing local phone service. That is why he issued an order earlier this year limiting their ventures into new nontelephone businesses to 10 percent of their total revenue.
"One of the bases of this divestiture was to permit continued good telephone service at low rates to the American public. . . . The danger is that if the local companies -- which don't have competition -- were to neglect the telephone service and go into more exotic ventures, then the danger is there that telephone service will become a backwater and won't get the attention and capital" it deserves.
Ever since divestiture, local telephone companies have said they need a new fee system -- access charges -- to get more revenue from their residential and commercial customers to defray the costs of providing them access to long-distance networks. Failure to win these charges, they argue, will force them to raise their rates -- thereby giving their largest customers an incentive to leave, or "bypass," the local network by setting up their own, cheaper telecommunications systems to provide local and long-distance networks. Such bypass systems, they argue, threaten their financial viability.
Greene, however, said he was "skeptical" of the bypass threat. "All I know is that at the time when I was in that AT&T trial and at the time I was considering divestiture , no one said that bypass was an imminent threat. . . . The impression was always left that it was a fairly long-range problem."
As a result, Greene has, in the past, been highly critical of the FCC's efforts to impose an access charge system on residential customers that ultimately would have forced them to pay an average $6 a month for access to the long-distance network -- whether they used it or not. After mounting opposition in Congress, the FCC abandoned its $6 access fee plan earlier this year. Next month, the FCC is expected to approve a plan to phase in a $1 monthly access fee, beginning in January 1985 and going to $2 the year after.
Despite Greene's earlier criticism of access charges, he declined last week to comment on the FCC's newest proposal. "That's not my department. I have enough problems" with the regional companies' request to enter new ventures, he said.