Assistant Attorney General William F. Baxter said yesterday the agreement to break up American Telephone & Telegraph Co. eliminates the need for legislation protecting newspapers, cable television operators and other media from competition by AT&T.
The government's chief architect of last week's settlement that ended the eight-year-old antitrust case against the Bell System said "any kind of intellectual case for that kind of protection that previously existed is now gone.
"In the past there was some justification because AT&T through its affiliation could cause the local companies to favor AT&T as a transmitter of information," Baxter said in a telephone interview. "But after the decree, AT&T will have to compete on equal terms with anyone who wishes to transmit information over local telephone wires."
The landmark agreement forces AT&T to spin off 22 local operating telephone companies within the next 18 months, a plan involving $80 billion in AT&T assets, the largest divestiture in the nation's history. In exchange, AT&T will be freed from government restraints that have kept it from entering unregulated areas such as data processing. As a result of the agreement, the Justice Department dismissed its suit, which was nearing final defense arguments.
Baxter contended that, contrary to assertions of telephone industry analysts, it is unlikley that the settlement will in itself cause local phone rates to rise sharply. Many analysts and local telephone company officials have argued that long-distance rates have been priced above costs to subsidize local service. With the divestiture, that subsidization, they add, would be removed, thereby increasing rates.
But, Baxter argued, state regulators who approve local phone rates, will want to keep local bills down. To do that, they can, among other things, order an increase in the fees the long-distance companies will have to pay the local ones in order to obtain access to the local network and end-user, Baxter said.
In other comments on the settlement, Baxter said:
* He is not concerned that either the new AT&T or any amalgamation of the operating companies that emerges from the settlement will exert inordinate power. The new AT&T "will be a large company with very, very good technology and a lot of economic resources. But large companies as long as they're functioning in markets where they're subject to competition do not bother me."
* He hopes the remaining regulated segment of AT&T's business, the long-distance branch, is regulated "for only a short period of time." Baxter was thus suggesting that the Federal Communications Commission lift all remaining long-distance regulation in the near future, just as the FCC relaxed its controls on AT&T's long-distance competitors last year.
* He acknowledged that the settlement may make it more costly for some of AT&T's competitors to operate their business. However, he said, the purpose of the agreement was not to aid AT&T's competitors but rather to spur competition. "I wasn't attempting to aid or to hurt anybody becasue in the long run the pressure of competition is going to bring all these costs down."
* AT&T agreed to the divestiture only after realizing "that the case trial of the suit was not going particularly well" from its point of view. "They eventually concluded that it was better for the company, better for the shareholders and better for the country."
"They set the scene," he added, when chief AT&T lawyer Howard Trienans "finally came around a little before Christmas and said 'maybe we ought to talk seriously about divestiture.' "
Perhaps Baxter's most politically sensitive comments, however, were addressed to the question of AT&T's future role in delivering information to the home.
The American Newspaper Publishers Association has led a battle to get Congress to bar AT&T from entering that field as long as the phone company controlled the local phone lines over which information was distributed.
Legislation that included this provision was passed by the Senate, 90 to 4. Identical restrictions were included in legislation under consideration in the House.
But the legislation containing these restrictions was intended to restructure AT&T and appears to have been made moot by the settlement. Nonetheless, many communications lawyers predict the newspaper publishers and cable television industry will now be asking Congress for similar restraints, since AT&T would still control conventional long-distance and other data networks capable of being key links to home and businesses.
Baxter argued, however, "there is no justification for that."
The need for congressional action on revamping the structure and regulation of the telecommunications industry is greatly diminished because Congress no longer needs to worry that AT&T will use rate-payers' funds to finance its competitive ventures, such as its plans to enter the data processing business, Baxter said.
The "great bulk" of the telecommunications legislation passed by the Senate "was addressed at a cross-subsidy problem that has been cleanly eliminated," Baxter said.