Privileged monopolies always squeal like stuck pigs whenever their cosy world is threatened, and AT&T Co chairman Robert Allen has been whingeing to Congress that it would put consumers and the telecommunications industry at potential risk if the bills that would allow the Baby Bells to manufacture were to pass into law. Time is short because the Senate bill is already through and the House bill is not too far behind it. Under the American system, once the two bills have been passed, their sponsors get into a huddle to agree compromises where they differ, and a composite bill is presented to both houses with every prospect of being nodded through.
Veto
President Bush has warned that his Administration will veto any bill that contains clauses, as the Senate one does, excluding the use of foreign components and requiring that all manufacturing be done in the US. Speaking before the House (of Representatives) Telecommunications Subcommittee, Allen said global and domestic competition in manufacturing communications equipment has intensified, investment in research and development has increased, US equipment exports have risen 29% and the trade deficit for telecommunications equipment has dropped 70%. By contrast Allen said, legislating a return to yesteryear, with all the possibilities for abuse, will wash out these gains. Worse, it will take American jobs – and American high-tech leadership – with it, as the Regional Bell Operating Companies inevitably partner with foreign competitors. It is unclear which yester-year he is talking about, because the Baby Bells have never been permitted to manufacture: they were formerly part of AT&T, and AT&T still manufactures – and how! There is some speculation that allowing the Baby Bells to invest in manufacture would cause them to rethink many of their adventures in Europe and other parts of the world, since it would place a competing demand for capital – but phone companies generate such enormous cash flows and have such enviable credit ratings that it is unlikely that any change would cause the Baby Bells to pull out of anything they wouldn’t have abandoned anyway. Testifying on the proposal to combine manufacturing and local telephone company monopoly operations, Allen commented that it would cripple today’s competitive industry, not help it flourish. He added the proposals would recreate the very structural relationship that stagnated the industry in controversy for nearly three decades – a relationship where local monopolies own their own manufacturer. Strange, that AT&T, a mighty manufacturer, still has over 70% of the US long distance market, and most definitions of a monopoly start at just 25% of the market. Allen commented that the Department of Justice under Republican and Democratic administrations in the past contended that this relationship was anti-competitive, which makes it sound as if he is asking for AT&T to be stripped of its present right to make telephone exchanges and transmission equipment. And he added that the government, in splitting apart AT&T and the Bell Companies in 1984, decided that severing the bond (was) the only way of protecting consumers from problems inherent in having local telephone monopolies owning captive manufacturing suppliers.
