Last week, four of the regional Bell telephone companies filed a court motion to overturn the consent decree that has governed their actions since the breakup of the Bell system a decade ago. Administered by U.S. District Judge Harold H. Greene, the decree prevents the seven Baby Bells from offering long distance service, manufacturing telecommunications services
and, the Bells contend, prevents them from moving fully into information services.
With the court action, the Bells are pursuing two paths to overturn the decree: one in the courts and one in Congress. The House recently passed a bill that would replace the consent decree with some of the changes the Bells seek, but the Senate's version is expected to put more restrictions on the companies.
Was their strategy last week the correct move and is it likely to work?
Barry A. Friedman
Semmes Bowen & Semmes
My feeling is that the field where the Bells will get relief will be in Congress. The House moved a bill so it seems like a good possibility there will be legislative relief this year. Will they get what they want? Nobody ever gets as much as they want.
There are competing forces -- the cable people, the rural folks concerned about power of the Bells, AT&T; -- so these forces all come to play in the Senate. I think the litigation is probably a strategic move on the Bells' part to pressure Congress by showing that if we don't get relief in one form then we will get it in another.
I don't see Judge Greene giving up his role as the arbiter of telecommunications in the near future. There was a consent decree, all parties agreed to it, it has been modified but certain elements remain in force.
The Bells are big and strong and well-financed. They are operating in every forum that exists to get the result they wish.
Any action by Judge Greene would be appealed, by at least one player to the Supreme Court. Congress has not been known for moving quickly, but legislation passed the House with only around five negative votes, that gives a good feel that something will happen in the worst case next year.
This year is a short year because of the election season, so if not this year, clearly with the new Congress.
I don't think [the Bells] will be successful. I would be terribly surprised if the court ignored the market realities. Local phone service continues to be a monopoly: the Bells are still the only local telephone service for every residential consumer and for virtually every business. That has not changed measurably.
I suspect none of The Sun readers have an alternative to Bell Atlantic, and until that changes Bell Atlantic can take advantage of captive customers and compete unfairly.
So long as every other company who wants to reach customers has to go through Bell Atlantic then you will not be able to have a fair competitive situation. I don't care what business you are talking about, if you are a supplier, and the only distributor is also a competing supplier, that's a tough competitive test.
So long as there are no other legitimate competitors for local service, I think they will keep the decree in place.
The Bells were lobbing a grenade into the Senate more than anything. I still don't believe they expect to get significant relief through the courts, it is more of a public relations move. And if you look at the legislation, its underpinnings flow directly from the consent decree.
Liam D. Burke
Vice President and analyst,Ferris, Baker Watts Inc.
The Bells have recently had some victories in the courts that have chipped away at the prohibition of the court decree. They won a specific case, which is the ownership of cable properties, but it is not a blanket lifting of court's interpretation of the prohibition on information services.
In order to maintain growth, they need to pursue overturning the decree. I don't care how the Bells win, the only thing I care about is how long it will take. It will take a while, and right now time is of the essence. Because they have competitors in the area of monopoly services, and these monopoly pockets have begun to erode around local access. Most major markets now have competitors.
Are the local companies responding to that. Yes, with value- added access, but it is an area of revenue at risk. You want to be able to protect territory and find out where to get new pockets of revenue.
They are prohibited from participating in three major areas of growth, so the longer they wait, and the longer prohibition is in effect, the better position the competition is in to take revenue and create new products and services.