The Federal Communications Commission yesterday gave approval for International Telephone & Telegraph Corp. to mount the first serious competition to the American Telphone and Telegraph Co. in the long-distance telephone market.
FCC Chairman Charles Ferris said the government action paves the way for widespread competition in the domestic telephone market, which primarily has been a government-sanctioned AT&T monopoly.
The comission yesterday rejected a number of arguments raised by AT&T in an attempt to prevent ITT from setting up its own long-distance phone service initially in 11 U.S. cities.
While two other companies, MCI Communications and Southern Pacific Communications Co., already provide similar service to many U.S. cities, the ITT entrance to the field is considered highly significant for the communications industry.
"This adds another dimension of competition in long-distance telephone service," the FCC's Ferris said yesterday.
"It's an opening of competition," said ITT spokesman Chris Hoppin. "We're pleased to offer a viable alternative to the Bell system."
Hoppin said ITT's service will be available "within the next few months," and said the 11 cities involved at the outset will be Atlanta, Baltimore, Boston, Chicago, Cleveland, Dallas, Los Angeles, Newark, New York, Philadelphia and Washington, D.C.
Meanwhile, an AT&T spokesman said "having IT&T in the game is not unexpected," but cautioned that the battle is not over yet. "We're living in a competitive environment," he said "but it's not yet clear that such competition is in the public interest."
He said the future will be determined a great deal by Congress' rewrite of the Communications Act of 1934, expected to be completed shortly.
If widespread competition is allowed, however, AT&T "may have to make adjustments" in charges to its users, the spokesman added. The firm has told the FCC that, since longdistance subsidizes local service, longdistance competition will lead to higher basic service charges.
ITT and AP&T both are based in New York, and they are among the giants of American Business.
A broadly diversified conglomerate, ITT is the 11th largest industrial corporation, with 1977 sales of $13 billion. The company is engaged in international communications services, electronics and auto parts manufacturing, food processing, aerospace and research.
AT&T is the largest American utility firm, with annual sales of $36 billion in 1977 and assets of $94 billion. The telephone firm is the nation's largest private employer, and is owner of Western Electric, a manufacturing firm, and Bell Telephone Laboratories, a major research business.
The federal government is seeking to break up AT&T in the largest antitrust case in history, and has asked that AT&T's long distance business be separated from its regional telephone subsidiaries and/or Western Electric and Bell Labs as a potential settlement.
AT&T owns the Chesapeake & Potomac Telephone Co., based in Washington and serving most telephone dustomers in D.C., Maryland, Virginia and West Virginia.
A series of court cases in recent years has reaffirmed the right of the FCC to permit new forms of long-distance telephone service.
A Supreme Court decision a year ago approved the special MCI longdistance service, called Execunet. That service offers customers in 34 cities the opportunity to place longdistance calls over MCI's microwave transmission system.
The service offered by MCI, like that proposed by ITT, allows customers to pay a set fee for a microwave communications link between selected cities. The user then can use his local telephone to dial a local number, which connects him to the MCI system and its microwave link to the other city.
Then the signal is relayed through the system at the other system to the local number desired, and the traditional Bell system long-distance phone rates are circumvented.
Microwave technology was first employed in 1945 to transmit voice signals, and was extended to private use by railroads and other right-of-way firms in 1959.
Its basic advantage to the many companies that use it is cost savings. Firms with a high volume of telephone calls between certain cities are the primary beneficiaries, since their monthly rates are based on mileage, not usage.