FOR FOUR YEARS, Rep, Lionel Van Deerlin and the House communications subcommittee have been trying to rewrite the Communications Act of 1934. It is an enormous undertaking, and the bill approved by the subcommittee this week represents real progress. But the consequences of the bill would be so great -- because of the size and the developing technology of the industry the act regulates -- that the Commerce Committee and the House itself should make sure they understand what is going on.
The legislation would increase compeition in the field of telecommunications -- the transfer of information by telephone, radio or other means. (The subcommittee has given up for the time being its effort to rewrite the broadcasting provisions of the Communications Act.) But changing the rules means doing something for, to or with the American Telephone & Telegraph Co. And therein lies the challenge to congressional ingenuity.
AT&T, the nation's largest corporation, has been restricted almost totally to the telephone business since 1956. But that business -- the transmission of signals and the equipment to do it with -- is now only a part of the communications industry that is being transformed by dat processing, computers, satellites, and so on. AT&T wants in on that other business and, given its record of innovation and service, probably ought to be there. One problem is how to neutralize its economic power (its assets are larger than those of the five biggest oil companies combined, and its annual revenue is equal to almost 2 percent of the gross national product) so that it competes with rather than overwhelms smaller companies.
The subcommittee's bill attempts to do this by requiring AT&T to set up a subsidiary to handle the new lines of business it will be entering. But questions have been raised about whether this new company would be sufficiently insulated from its parent to be a true competitor and whether more than one subsidiary should be established. Similarly, questions have been raised about the changes the bill would mandate in the internal accounting practices of AT&T and of its existing subsidiaries that determine what costs and pricers are allocated to local and long-distance service.
These questions, like most of the others being raised about the subcommittee's bill, are technical and complicated. There is general agreement on Capitol Hill, and elsewhere, on the basic principle the subcommittee is trying to establish: competition, not regulation, should to the extent possible be the governor of the telecommunications industry. The bill appears to accomplish this. But it is so complex and so detailed that it needs the closest possible scrutiny to make sure it does not fix too firmly the structural shape of an industry that is still in transition.