Two long-distance companies yesterday charged that the transition to a competitive long-distance telephone system is not working and called on the Federal Communications Commission for stricter regulation of the American Telephone & Telegraph Co.
Representatives from Allnet Communication Services Inc. and United Telecommunications Inc., both of which have been losing money, said that their companies are in danger of being driven out of business because AT&T still holds a monopoly on long-distance phone service.
"AT&T has much more than market share," said William T. Esrey, president of United Telecommunications Inc., at the first of two Senate hearings on long-distance competition. "It has market power, the power to manipulate prices so as to restrict competition."
AT&T responded to the allegations by arguing that the same companies that called for the breakup of AT&T now are asking for protection.
"Our competitors in the long-distance market asked for the ability to compete, and, now that competition is here, they're asking for more protection and more restrictions on AT&T, and that doesn't make sense," said Edith Herman, a spokeswoman for AT&T. Charles Brown, chairman of AT&T, will testify before the subcommittee next week.
Officials from Allnet and United Telecommunications told the Senate Commerce subcommittee on communications that by deregulating too quickly, the FCC might extinguish long-distance telephone competition. Increasing competition was the primary rationale for the breakup of AT&T.
"The FCC, in its zeal to push toward deregulation, is dismantling the constraints that prevent anti-competitive behavior by AT&T, long before the environment in the industry permits the other long-distance companies any possibility of competing on a fair and equal basis," said Melvyn J. Goodman, president of Allnet Communication Services Inc. of Chicago.
Goodman and Esrey said AT&T still controls about 90 percent of the market and that only one of its competitors, MCI Communications Corp., is operating profitably. "Unless AT&T remains constrained from exercising this market power, it will devour the competition," said Esrey.
AT&T maintained, however, that since divestiture the marketplace has become competitive. "There's absolutely no question that this has become an extremely competitive marketplace," said Herman. "We have some 500 competitors now in the long-distance market. And in this highly competitive market, AT&T is the only company that faces regulatory barriers."
The competing long-distance companies asked the subcommittee to pressure the FCC to help them by allowing them to continue paying less than AT&T to connect to local phone systems. These companies usually charge their customers less for long-distance calls, partly because of lower connection charges.
FCC rules require the other companies to pay the same rates as AT&T as when they hook up to the "equal access" system, which allows customers to use a phone company other than AT&T without dialing a long access code. The companies said they are worried that they will be forced out of business if they must match AT&T rate reductions at the same time they are being forced to pay higher prices to connect to local telephone networks.
The Consumer Federation of America also called for more FCC regulation yesterday, blaming the breakup of the Bell system for increased telephone costs and consumer confusion.
"Nearly two years after the divestiture of AT&T, consumers remain confused and frightened about the state of our telephone system," said Gene Kimmelman, legislative director of CFA. "What was once one-stop shopping for telephone service has become a consumer nightmare.
Kimmelman said that consumers faced a 19 percent local residential rate increase in the first year after the divestiture of AT&T. "That means a $2 billion to $2.5 billion increase, with $2 being added to each consumer's phone bills each month."
"Consumers have been bombarded with rate increases and new telephone charges that threaten the availability of affordable phone service for all Americans," said Kimmelman. "Consumers must now buy or rent a phone, purchase their inside wiring, pay to insure the wiring or pay to repair it later, and in some cases pay usage charges for local calls, in addition to the basic service charge."
Sen. Barry Goldwater (R-Ariz.), chairman of the Senate communications subcommittee, said the breakup of AT&T was a "great mistake. "If divestiture was supposed to lower prices for consumers, why am I now paying a phone bill of $30 instead of $4?" he asked.