Regional telephone companies will be forced to go much slower than expected in providing new, computerized services over their phone networks and must concentrate their attention on offering high-quality local phone service, according to a federal court order released yesterday.
Regional phone companies have been seeking to diversify into new businesses, such as cellular radio services outside their geographic regions, computerized answering services and sales of telecommunication packages for office buildings. The companies wanted to be free to offer these services without approval of the court that oversaw the breakup of American Telephone & Telegraph Co.
But U.S. District Judge Harold H. Greene ruled that the companies still need specific permission to offer services not explicitly provided in the agreement that broke up the Bell System.
The ruling specifically barred the companies from providing computerized services and long-distance service.
"The prohibition has far from outlived its usefulness," said Greene, who presided over the Bell System breakup.
"AT&T was imbued with a service mentality," said Greene. "By contrast, the regional companies, or some of them, indicate by their public statements, their advertisements and their rush to diversification, combined with their relative lack of interest in basic telephone service itself, that an ascent into the ranks of conglomerate America rates far higher on their list of priorities than the provision of the best and least costly local telephone service to the American public," he said.
Greene cautioned that the local companies could still "use their local monopoly advantage to decimate the competition" in markets such as computer services. The companies' diversification into real estate and foreign consulting ventures already makes it easier for them to hide the use of telephone charges to subsidize new ventures, he said.
The ruling yesterday met with objections from regional phone companies, such as Ameritech, Pacific Telesis and US West, as well as from federal regulators and Capitol Hill sources.
"It appears to be an excess of the court's authority and could be unlawful," said Jim Smiley, a spokesman for regional company US West, based in Denver. US West is waiting for permission for its subsidiary, NewVector, to offer cellular radio services outside of its service territory.
Pacific Telesis expressed "pure disappointment" with the ruling. The San Francisco company is awaiting Greene's final ruling on its announced acquisition of Communications Industries, a $98 million national paging and cellular-service company.
The Justice Department has recommended the waiver be granted by the court.
Ameritech, based in Chicago, called the decision "a setback for consumers." The company had hoped to provide "better service to our customers and more equitably compete with marketplace competitors unrestricted by the modified final judgment," said Bill Hensley, spokesman for the company.
Bell Atlantic Corp., owner of the Chesapeake & Potomac Telephone Co., said it would not comment until today.
Bell Atlantic has said it wants to provide long-distance and data services as a way to buoy sources of revenue and compete with International Business Machines Corp. and AT&T.
The ruling also threw into question whether Bell Atlantic Corp. must ask for permission to keep its share in A Beeper Co., a national radio paging company.
The Federal Communications Commission, which is examining how to allow phone companies to offer computerized services such as answering services, said the ruling puts a damper on its plans in that area. The ruling "would limit the ability to take advantage of whatever might be done in terms of voice storage or telephone answering services . . . absent a waiver" from Greene, said Albert Halprin, chief of the FCC's Common Carrier Bureau.
Halprin also said Greene's remarks that the regional companies are setting a low priority on providing top-quality local phone service are "contrary to the facts."
An aide to Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, said the ruling "appears to have the potential to produce a powerful backlash in Congress in the form of increased pressure for congressional . . . action."
Several members of Congress have introduced bills that essentially would overturn provisions of the consent decree to allow companies to compete in the face of what appears to be increased competition at home and abroad.