In the spring of 1976, an obscure bill innocuously named "The Consumer Communications Reform Act" was introduced in Congress and quickly attracted the sponsorship of 192 senators and representatives. The legislation, unobtrusively drafted and promoted by the American Telephone & Telegraph Co., would have guaranteed AT&T's historic monopoly over the telephone business, just as that lucrative industry was opening up to competition.
Although the bill eventually died -- competitors labeled it a brazen power grab -- it startled a somnolent Congress into taking a look at the mysterious world of high-technology communications. Today, five years, hundreds of hearings and a thousand witnesses later, Congress finds itself mired in the most complex regulatory reform effort in history.
Rewriting basic laws governing the overlapping industries of telephones, television, newspapers, computers, satellites and electronics is a heady business. It involves asserting congressional power over a huge sector of the economy, a $300 billion market; and it entails a massive restructuring of AT&T, the largest company on earth with 1 million employes, 3.5 million stockholders and 72 million customers.
Communications law has remained essentially unchanged since the 1934 Communications Act, written to regulate communications systems that seem almost primitive today. The "bell Bill" of 1976 awakened Congress to the implications of the new technology, which until then it had left to the governance mainly of the courts and the Federal Communications Commission, an independent regulatory agency.
Flashed with its success in deregulating trucking, railroads and airlines, Congress has turned to a far more difficult task: deciding how to let a mammoth company -- which dominates a market far more than any railroad, airline or trucking company -- expand beyond simple phone service into computers, data processing and even electronic Yellow Pages in a controversial effort to become the nation's total cummunications network.
At stake is nothing less than "the control of information in a democratic society," says Timothy E. Wirth (D-Colo.), chairman of the House telecommunications subcommittee. "In the economy of the 1980s, more than half of our gross national product is based on the development, storage, transfer and use of information."
David K. Aylward, the subcommittee's chief counsel, says, "We're talking about billions and billions of dollars and the future of the American economy."
Explosive political pressures are mounting around the issues.President Reagan's closet advisers are urging him to drop the government's seven-year-old suit against AT&T, the biggest antitrust case in history.
The Defense Department, which depends on AT&T for military communications, is championing the company's cause in the name of national security.
And, at a time when the Japanese and Europeans are energetically trying to surpass the United States in telecommunications, industry says the legislation will affect America's global economic power for decades.
Paving the way for its lobbying campaign, AT&T's 23 political action committees gave $622,252 to candidates during the last election -- more than twice as much as the PACs of any other coroporation in America.
The Communication Workers of America, the union that covers AT&T employes, supports the company's legislative position and gave another $449,720.
Sen. Barry Goldwater (R-Aris.) recently said that in 30 years in Congress he had never seen such "outlandish efforts" from all sides to influence legislation.
Despite the grandiose scope, for the public, telecommunications is still a sleeper issue, much like energy in the 1960s. "Everyone who has a telephone, a television set or a radio is affected," says Sen. Harrison H. Schmitt (R-N.M.), a cosponsor of Senate legislation. "But so far the user is a passive bystander."
W. J. (Billy) Tauzin (d-La.) shook his head wearily after a recent hearing entitled "Status of Competition and Deregulation: Defining Markets." "Our constituents don't understand this stuff, so there's no political capital in it. They get mad if you spend time looking into long-range issues that you could be speinding on their immediate problems."
Probably few more than a dozen members of Congress understand the complexities of the legislation. Mention the words "telecommunications," "semiconductor," "cross-subsidization," fiber optics" or "interconnection," and most politicians' eyes glaze over.
Even one of the most knowledgeable, Rep. Al Swift (D-Wash.), a former broadcaster, walked into a discussion recently on AT&T's "installed base migration strategy" (how much the company can change for obsolecent equipment) and declared, "I don't know if I've been eating magic mushrooms or wandering around Alice's Wonderland, but the more I learn about this field the bigger it gets. I'm always losing ground. I think I'm going to cry."
A major Senate bill, introduced in April by Robert Packwood (r-Ore.), would allow AT&T to move into the lucrative fields of computers and data processing, which it had foresworn in a 1956 settlement of a government antitrust suit. The bill also would deregulate key portions of the telephone industry, including the manufacturing and supply of equipment and certain long-distance services.
AT&T's competitors, which range from tiny telephone equipment firms to highly specialized electronics outfits to ITT and Exxon, contend that unshackling a giant, regulated monopoly to compete in the free market will touch off corporate star was in which small and large companies alike would be destroyed.
The consequent stifling of competition, they say, would hurt the consumer by inhibiting innovative research and raising prices.
The latest in-joke among the communications crowd at conventions and law firms is the appearance of T-shirts and bumper stickers with the slogan "Reach Out and Crush Someone," a takeoff on Ma Bell's long-distance ad campaign, "Reach Out and Touch Someone."
Hardly a business in America will be unaffected by the outcome. Data communications, the information system whereby computers talk to each other through telephone wires, microwaves or satelities, is the central nervous system of the economy.
Farmers now call up weather and price information on home computers before planting crops. Doctors diagnose patients and do medical research through computers.
Bridge building and international banking, petroleum exploration and newspapers -- all depend on electronic data processing. Without computers and communications to handle payroll and Social Security checks, guide missiles and submarines track criminals and court cases, the government would virtually come to a halt.
Today the communications business is over-whelmingly dominated by AT&T, which controls about 90 percent of the market, although Comsat, ITT, MCI, IBM and others are trying to move in.
If AT&T can also make computers and market data software -- the information packages that travel over its telephone wires -- "it has Orwellian implications," Alan Pearce, a telecommunications economist, told the House subcommittee. "I don't think we can tolerate that kind of unchecked power in a democratic society."
At Boeing Computer Services in Fairfax, William Harris, the company's government relations man, shudders at the thought. Boeing leases large trunk lines from AT&T, which clients use to plug into Boeing to computerize records of gifts from foreign dignitaries. Alitalia calls in from Rome to make calculations for airplane building.
"We're looking at a company -- AT&T -- which controls our entire business," Harris said. "The idea that Bell wants to compete scares you."
It is small comfort, he adds, that the legislation would require Bell to set up a separate subsidiary for competitive services. "Can you believe that any company won't control its subsidiary and show favoritism?"
The idea of an unregulated subsidiary to include data communications, telephone equipment and certain long-distance business -- everything but basic phone service -- has already been approved by the Fcc, but is being fought ferociously in the courts.
Without waiting for Congress to act, AT&T already has begun to restructure itself. "Baby Bell," as its subsidiary has been dubbed, would take 100,000 employes and up to $15 billion in assets from the parent company.
Opponents fear, however, that Bell will use the enormous revenues from its regulated phone service, guaranteed by the rate-payers to Bell operating companies like C&P, to subsidize the new unregulated company.
Corporations such as MCI and Southern Pacific, which have survived ferocious competition will Bell in the long-distance and equipment markets thanks to the FCC, fear the new subsidiary will wipe them out by impeding their access to Bell's local phone networks.
The solution for many of these opponents is to break AT&T into smaller companies, which is what the Justice Department has been trying to do since 1974, alleging that Bell has followed a pattern of illegal monopolistic practices to stifle competition and force other companies out of business.
But divestiture is viewed as draconian in Congress, and the Justice attorneys' contention that the legislation would undermine its antitrust case has fallen on deaf ears in the White House, which supports the bill.
Newspaper comnpanies, including The Washington Post, are also opposed to the bill that would set up a second subsidiary to allow AT&T to offer its Yellow Pages over home computers.
Newspapers are just getting into the electronic business. Post and New York Times stories, for instance, are offered on Compuserve, an Ohio data bank that links home computers across the country by telephone. If Bell can offer a constantly updated Yellow Pages, amounting to an electronic ad section, over its own lines, would newspapers, offering their own ads electronically, be able to compete with the owner of the network they use? Would Bell eventually want to add, stock tables, sports scores, movie listings and even news?
AT&T officials say they have no interest in supplanting newspapers, and that it would be unfair to confine their Yellow Pages, a $2.3 billion a year business, to the print medium if electronic information is the wave of the future.
Indeed, since 1976, when Bell's bill would have, outlawed competition, the company has done an about-face, adopting an "if you can't beat 'em, join 'em" stance. Since it could not hold on to its regulated monoply, AT&T now advocates a virtual free-for-all.
The bill's passage, AT&T Chairman Charles Brown told a recent Senate hearing, "would make it plain that Congress means what the bill says, namely that it's for competition -- real competition -- and not for a mishmash of protectionist clauses that seek to define who may compete and who may not."
The bill's sponsors, citing such advances as Bell Laboratories' invention of the transistor, contend it would be crazy to lock the company that has done some of the most brilliant electronics research in history out of the booming data communications market.
They argue that technology is moving so fast that it makes no sense for the law to draw artificial barriers between computers and the lines or microwaves that connect them. Touchtone phones use the same digital bits as computes to transmit the human voice. Long-distance switching takes place through computers. Computers are connected to each other by telephones that transmit data.
As for Bell's regulated arm feeding its unregulated subsidiary, Sen. Schmitt says, "We're trying to ensure that it can't happen. I'm convinced we can do it. The FCC will have the power to oversee it."
Schmitt opposes spinning off the new subsidiary as a separate company, as opponents advocate. "Telecommunications is becoming the number one industry in the world. We can't do anything to prohibit its growth," he said.
Politically, deregulation fever has seized the Congress. "My gut feeling is I'm against government," said Texas Rep. James M. Collins, ranking Republican on the telecommunicators subcommittee. "When you talk about government regulation, I'm against it. That's why I like the idea of Bell getting into" competitive fields.
Nonetheless, Collins said, he has begun to hear from Ross Perot and some of the smaller electronics firms in Texas. "They see that tank coming down the road and they say, 'You'll kill us off.' And the little guys are the ones who innovate."
The House held hearings on the issues last month, but is proceeding far more cautiously than the Senate. When Rep. Wirth submits the subcommittee bill in the fall, it is likely to have far stricter rules for the separation of Bell's new subsidiary and it may well outlaw the company's electronic Yellow Pages.
"We're not into deregulation for deregulation's sake," Wirth says. "We'll deregulate when the market is competitive. . . . It is nonsense to talk about a competitive market in long-distance when AT&T controls 90 percent of the business."
Meanwhile, Wirth acknowledges, "The politics are mammoth."
Members of Congress are acutely aware that Lionel Van Deerlin, former chairman of the House communications subcommittee, considered unbeatable in his district, was ousted in November after his opponent charged a few days before the election that Van Deerlin's support of communications legislation would raise residential phone bills. Although no one has proven that the phone comnpany was behind the ploy, it demonstrated the potency of the issue.
"Everybody I talk to on the Hill is afraid of AT&T," said Jack Biddle, head of the computer and communications industry association that represents 70 firms with $4 billion worth of business. "AT&T tells them, "If you move one hair on our head, this whole complex thing will come completely unglued and you won't be able to call your mother on the phone.'"
Virtually every congressman is in touch with the head of the telephone company in his district. Bell is known as a good corporate citizen that contributes to the Boy Scouts and United Way. "It's motherhood, apple pie and the Bell system," John Guttenberg, a consultant for the North American Telephone Association, a Bell opponent, says with some disgust.
Bell's message is that bigger is better. Its well-financed ad campaigns with the slogans "the system is the solution" and "the knowledge business" reinforce its argument that when you're competing against Japan, Inc., the French government and other nationally owned communications systems, "it's not a mom-and-pop deal," as AT&T lobbyist Mickey McGuire puts it.
Many computer companies, including IBM, have failed to join in the crusade against AT&T. "Bell spends $15 billion a year on outside equipment," Biddle said. "Many companies don't want to be public in their opposition. You don't bite the hand that feeds you -- even if it is about to choke you."
Nonetheless, the fact that in five years the committees have been unable to get a bill to the floor of the House or Senate is evidence of how fierce the opposition is. In both chambers, the Judiciary committees, citing antitrust concerns, have tried to claim jurisdiction from the Commerce committees.
This year, for the first time, General Telephone and Electric Co., the nation's No. 2 phone company, has come out against AT&T, as has the International Communications Association, a group of 430 companies who buy more than $1 million a year in communication services. ICA membes Westinghouse and Montgomery Ward have spoken out against the bill. If other, from Sears to General Motors, become active, At&t may meet its match.
Last year, the cable television industry and the newspaper industry, whose clout among media-conscious congressmen rivals that of AT&T, both won amendments in the House bill to prevent AT&T from entering the cable business or the electronic Yellow Pages.
Even the tiny burglar alarm industry, which uses electric alarm systems traveling through telephone lines, pushed through a clause to keep Bell out of its business.
Nonetheless, all sides seem to agree now that no bill will pass without AT&T's endorsement, "Bell doesn't browbeat, but it has enormous resources to persuade," says Rep. Swift.
"I'm trying not to be stampeded. Bell hits me once, then I get hit by 18 competitors. There's an incredible amount of paranoia. Everybody's terrified because there's so much at stake. It looks to me like what's developing is Bell against the world -- the world may lose."