The Reagan administration wants to take responsibility for the future of the nation's telephone system away from the federal courts that have overseen the breakup of the Bell System and give it to the Federal Communications Commission.
At the urging of the White House, Senate Majority Leader Robert J. Dole (R-Kan.) yesterday introduced legislation to end the courts' authority to regulate the seven regional telephone companies created as the result of the federal antitrust case against American Telephone & Telegraph Co.
The Justice Department, which brought the case and had long supported continued control of the phone companies by U.S. District Court Judge Harold H. Greene, reversed its position earlier this month. Justice yesterday endorsed the Dole legislation to let the FCC regulate the regional phone firms.
These companies have wanted to diversify into non-telephone businesses much faster than Greene, largely on the advice of the Justice Department, has permitted in his role as the administrator of AT&T's divestiture agreement with the government.
The proposal to transfer Greene's oversight of the breakup and the resulting industry structure to the FCC is being pushed by key Reagan administration appointees, including Attorney General Edwin Meese III and FCC Chairman Mark S. Fowler.
It also has the strong backing of former Reagan officials, who are now working on behalf of the regional companies seeking the jurisdictional change. Chief among these officials is former secretary of Interior William P. Clark, who, as a member of the board of directors of Pacific Telesis, has twice written Meese to support the change in policy. In a letter last fall, Clark told Meese he was seeking his "personal attention" to Justice's "theoretical, inflexible and burdensome" approach to limiting the Bell companies' diversification plans.
On the board of Pacific Telesis along with Clark is William French Smith, who preceded Meese as Reagan's attorney general. Meese's younger brother Clifford also works for PacTel, as director of executive compensation and benefits. But the brother said he has made no effort to influence the attorney general on the matter. "I think someone is reaching pretty far," he said.
Justice Department antitrust chief Douglas H. Ginsburg argues that the transfer of jurisdiction is a procedural matter that not only would consolidate all telecommunications policy in one place, but also would eliminate the unanticipated role of Justice and Greene as telecommunications regulators. This role has drawn inreased criticism over the past year from key industry executives.
But numerous opponents of the switch -- ranging from AT&T and the other long-distance phone companies to computer and telephone equipment manufacturers to the American Newspaper Publishers Association -- contend that such a move could radically change the highly competitive and volatile industry.
Consumer advocates charge that, at worst, the jurisdictional transfer could further increase local telephone rates, which have risen 35 percent since 1984, when AT&T was split up. Rates could go still higher to finance new business ventures by the local phone companies or to cover losses should these ventures fail, contended Gene Kimmelman, legislative director of the Consumer Federation of America. "This bill strips the courts of power and opens the door to dramatic local rate increases. If Congress doesn't like what the courts are doing, it should state its concerns, not just send the decision elsewhere," Kimmelman said.
FCC Chairman Fowler, who industry officials say has been lobbying hard for the transfer, has said he disagrees with Greene's refusal to let local telephone companies enter new businesses, such as computerized answering services, electronic publishing and long-distance service.
Judge Greene, who must approve any new business investments by the regional phone companies, has refused to let the local companies diversify substantially, saying local telephone companies could still "use their local monopoly advantage to decimate the competition."
A week ago, Fowler -- repeating a theme he has voiced over the past year -- said: "There is growing sentiment in the United States that these constraints should be loosened so that the companies may use their resources to benefit the public. . . . " Fowler contends that telephone usage will increase if the local phone companies are allowed to offer new telecommunications services, thus helping to keep rates down.
Meese's support for the jurisdictional transfer represents a change in policy for the Justice Department, which until now has been vigorously enforcing the divestiture agreement and rejecting some of the new business ventures proposed by the regional telephone companies.
A Justice Department spokesman said yesterday that Meese did not initiate the crucial change in antitrust policy. "The Justice Department's current position came from the antitrust division -- it was truly a bottoms-up effort, not from the top down," said spokesman Patrick Korten.
"Mr. Meese did not at any time in ny way suggest the antitrust division should take action on it. He has had no personal involvement except for routinely approving it."
He said Meese has "had no contact, no discussion with his brother. He has had no contact at any time in any way with William French Smith on this subject. He has had two letters from Bill Clark . . . and has only dim recollections of it. He referred it down to the antitrust division."
Two weeks ago, Ginsburg, the assistant attorney general in charge of the antitrust division, informed the lawyers in charge of the AT&T case of the agency's decision to support the proposal to take jurisdiction over the phone breakup away from the Justice Department and the courts.
Ginsburg's announcement stunned the staff. "We were blissfully innocent as staff lawyers," said one Justice attorney who said the division was instructed to continue its vigorous enforcement of the divestiture agreement until the Justice Department won the legislation it was seeking.
"The court has done an extraordinary job through divestiture," Ginsburg said in an interview. But with the regional telephone companies now filing about three requests a month to enter new businesses, he said, "the fact is we have a regulatory agreement , and we ought to have a regulatory agency responsible for its implementation," he argued. Ruling on each request "is not a law-enforcement function that requires the expertise of lawyers."
Ginsburg denied suggestions made repeatedly by industry officials that Justice changed its mind at the urging of Clark and Smith. The jurisdictional transfer "is the absolutely correct thing to do; it's hard to resist," said Ginsburg, who insisted that he, and not Meese, had come up with the idea. Ginsburg added that as far as he knew, Smith had not contacted any Justice officials about the proposal.
Both Clark and Smith declined to return telephone queries about their role in the proposed legislation. Pacific Telesis' director of federal relations, Brian Kidney, said, "Both Clark and Smith have been at the board meetings when the issue has been discussed, but to our knowledge, there hasn't been any active involvement" on their part.
Also supporting the transfer is William Baxter, the former assistant attorney general in charge of antitrust who coauthored the divestiture agreement.
"I think it's the sensible thing to do at this point," he said. By requiring court decisions on each of the local telephone companies' proposed new business ventures, Greene "has turned himself into a little administrative agency and kidnapped the antitrust division as his mini-FCC staff. That is an inappropriate function for the court to be playing."
Dole's staff members say the majority leader decided to introduce the bill after reaching the conclusion last fall that "Congress, or its agency, should be settling telecommunications policy, not a single judge."
Virtually all segments of the industry, including AT&T and most of the regional companies, say they were caught off guard when Dole's proposal was announced 10 days ago. Since then, a coalition of 10 trade organizations of equipment manufacturers and consumer groups has been formed to block or substantially modify the legislation.
Other opponents include the ANPA -- the newspaper publishers trade group -- which fears the FCC would permit the local telephone companies to expand into electronic publishing and thus possibly siphon business away from papers. The phone companies have the technology to create electronic Yellow Pages, accessible by telephone or personal computer, which could compete directly with newspapers for advertising. Five years ago, the publishers blocked legislation that would have allowed AT&T to offer electronic publishing.
AT&T, meanwhile, has "asked senators not to make a commitment to the bill until there has been an opportunity to hear all sides of the issues in Senate hearings."
Although Judge Greene declined to comment on the legislation, he let his views be known last week in a June 4 speech to the congressional study group at the Georgetown Center for Strategic and International Studies.
"From a personal point of view, nothing could please me more. The requests are technical, they are time-consuming, they are of little interest from a legal point of view. . . . "
However, he said, "the FCC is still a relatively small agency with relatively small staff compared to these giants the regional telephone companies . . . . There is no reason to believe that the FCC could effectively detect and remedy problems of the kind" that led to divestiture in the first place.