Divestiture and a dramatically deregulated telecommunications industry aside, the future success of AT&T as a competitor -- and the company's very structure -- are still being shaped by federal regulators.
Not only does the Federal Communications Commission still regulate AT&T's long-distance rates, but its Computer Inquiry II ruling effectively splits AT&T into two parts: AT&T Communications, which handles the company's long-distance services, and AT&T Technologies, which oversees the giant Western Electric manufacturing facilities, Bell Laboratories and the Information Systems group launching AT&T into the computer marketplace.
The original justification for the schism was to prevent AT&T from using its regulated business to subsidize its foray into unregulated markets. There also were concerns that AT&T would unfairly use its existing base of equipment to capture customers.
The Computer Inquiry II ruling effectively bars AT&T Communications from jointly marketing its services with AT&T Technologies. That prevents AT&T from going to a large potential Fortune 500 customer and offering a complete line of telecommunications products and services. In effect, regulation prevents AT&T from being a vertically integrated supplier.
"Without its removal, we can't hope to compete with IBM," says AT&T Technologies Chairman James Olson. "IBM can walk into a company with SBS on one arm and Rolm on the other . . . " -- a reference to the giant computer company's tie with Satellite Business Systems for telecommunications services and the newly acquired Rolm Corp. for office switching systems.
Olson asserts that AT&T needs that kind of service breadth.
There is increasing sentiment, though, that the Computer Inquiry strictures are too harsh. The FCC recently dissolved the staff group assigned to monitor Computer II abuses by AT&T, and there are unconfirmed reports that AT&T's request to loosen the joint-marketing prohibitions will be honored.
"These restrictions . . . are completely anachronistic," says Morris Tannenbaum, who runs AT&T Communications. "We would hope that they would be removed very, very quickly."
Not only would the ability to joint market give AT&T a boost, but also it would enable the company to better blend its communications and processing technologies into a single package. For example, AT&T Technologies could easily link its local area networks to AT&T Communications for long-distance communications. Currently, the Computer II rules prohibit simultaneous technical endeavors of that sort.
Just as importantly, lifting the regulated separation of the two groups would lead to a restructuring of the company, says AT&T Communications' Tannenbaum, adding, "That's an area to which we give continuing thought."
The company itself estimates that the imposed separation costs it about $1 billion to maintain separate facilities. Merging the two would enable a newly organized AT&T to achieve internal economies -- and would probably lead to thousands of additional layoffs as AT&T tries to lower its overhead.
In long distance, AT&T still faces a cost disadvantage until the end of 1986, when "equal access" is supposed to be provided to all long-distance carriers. AT&T now pays a premium to the local phone companies for its links into the local networks because it enjoys a higher quality of technical interconnection. Equal access is designed to ensure equality of technical interconnection for AT&T's competitors, but it will help AT&T's lucrative long-distance business by eliminating the premium.