Regional Bell telephone companies have long been wishing restrictions imposed during the Bell System breakup would be lifted, but a congressional subcommittee today will begin to weigh their desires against consumer protections.
The consent decree governing the Bell System breakup prohibits the companies that control local telephone service from manufacturing equipment, providing long-distance service, or a variety of new data services. Overturning the ban will be discussed today at hearings before the House Telecommunications subcommittee.
Leading subcommittee member Rep. Al Swift (D-Wash.), whose legislation seeking to lift some restrictions enjoys about 90 cosponsors, said consumer protection must first be in place.
"If we're going to write legislation, there has got to be consumer protection written in," said Swift. "Obviously, you shouldn't permit regulated entities to subsidize services" with ratepayer money, he said. The legislation, offering no explicit consumer protection, is a starting point for debate, he said.
Rep. Timothy E. Wirth (D-Colo.), chairman of the subcommittee, said new service offerings are fine "so long as the local telephone consumer is not left picking up the tab for competitive services."
In recent months, the Bell companies have lobbied Congress for an easing of the restrictions -- but sources say the object has been to pressure U.S. District Judge Harold H. Greene, who presides over the decree, rather than get legislation passed.
But this may not wash among members concerned that the courts and regulators might not provide needed protections.
Rep. Ron Wyden (D-Ore.), who has introduced a bill with protections, said, "The danger is that without explicit consumer protections, low-income, elderly, small businesses and others would have to subsidize failing business ventures of Bell companies that consumers would never use." Local rates would then rise, threatening universal telephone service.
But the companies argue that AT&T is gobbling up the largest and most profitable customers with packages of communications services they cannot yet offer.
Rep. Tom Tauke (R-Iowa), who introduced legislation together with Swift, said, "It's very important for us to move the Bell companies away from shrinking business . . . we don't want to find the Bell companies are losing all their major customers, meaning they have to raise their rates."
The companies also argue that consumers are being deprived of new computerized services that could be provided over phone lines like medical history storage or alarm service.
"We are seeking total economic freedom," said Roberta Bhasin, spokeswoman for U S West, based in Denver. "We consider the decree the greatest obstacle in making business decisions other companies can make."
According to Gary McBee, vice president of Pacific Telesis' Washington operations, "It's time to drop the restrictions . . . the Justice Department should not be regulating the business."
Pacific Telesis, based in San Francisco, has offered to use profits from competitive services to offset rising local telephone rates, but not all the regional companies are offering to do the same.
Dropping the restrictions "is a bad idea and shouldn't happen now," said Philip Verveer, a lawyer with the Washington firm of Willkie, Farr & Gallagher, who is representing the United States Telecommunications Suppliers Association.
"The companies still enjoy monopolies that provide them the special ability and incentive to discriminate against competitors."
Verveer also said that, contrary to phone company arguments, "the profits aren't going to go to ratepayers, they are going to shareholders, but if some of these ventures begin to crater in there is no way to insulate the utility's cost of raising new equity -- which means rates could go up."
Consumer advocates say the companies want to maximize profits by letting ratepayers pay for the actual costs of telephone equipment used to provide new computerized services that won't benefit everyone.
This would allow the companies to underprice competitive services.
"Unless all services connected to the network by local companies help cover costs, the goal of universal service will be obliterated," said Gene Kimmelman, legislative director at the Consumer Federation of America.