U.S. District Judge Harold H. Greene ruled yesterday that the nation's seven regional phone companies cannot design or develop equipment, a right they had been seeking and which they say is crucial to the development of the industry.
In a 33-page opinion, Greene also chastised the chairman of the Federal Communications Commission, Dennis R. Patrick, saying that he had exhorted the regional companies in an Oct. 13 speech to refuse to comply with the court's orders.
Patrick denied Greene's allegation, calling it "astonishing." The obvious meaning of his speech, Patrick said in a statement, was that the companies might pursue avenues such as legal briefs, appeals and legislation.
Greene oversees the 1982 consent decree that broke up American Telephone & Telegraph Co. and barred the new regional companies from engaging in manufacturing.
AT&T had petitioned for a clarification of the term in June this year. The regional companies argued in subsequent proceedings that manufacturing referred only to the actual "fabrication," or physical assembly of equipment, giving them the right to engage in design. They also used the proceedings to try to overturn the ban on manufacturing.
"We said that product design is a function we can perform and it's critical that we have a role in that phase to ensure that customer needs are met," said Michael Brand, spokesman for the Chicago-based regional company Ameritech.
Greene disagreed, reaffirming the manufacturing ban and also ruling out design. "If they could engage in design and development of telecommunications and customer premise equipment, they would have the same incentive and ability to undermine competition and competitors as did the Bell System," he wrote in his opinion.
Greene said the companies could handle the design, maintenance and operation of telephone networks, but not the design of "specific products."
Bell Atlantic Corp., the regional company that owns the Washington area's C&P companies, reacted with disappointment, as did other regional companies.
"Bell Atlantic believes the court's decision unlawfully expands the scope of the manufacturing prohibition in the AT&T consent decree," company chairman Thomas E. Bolger said in a statement. He said the decision would be appealed.
In his opinion, Greene quoted Patrick as saying in an Oct. 13 speech before the U.S. Telephone Association that he was "quite frankly surprised by the apparent acquiescence of some of the Bell operating companies in the ongoing administration" of the decree. "An incitement to noncompliance, if successful, could have serious consequences," Greene wrote.
Patrick has publicly disagreed with major portions of Greene's positions and has suggested that telecommunications policy should not be set by a court.
Patrick confirmed the basics of Greene's quote, but said "it does not follow and I did not say that the Bell operating companies should disobey the terms" of the decree.