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January 27, 1987


By CBR Staff Writer

AT&T Co has reacted with concern to reports that US government lawyers favour lifting the restrictions that have kept the regional Bell companies from making telephone equipment or selling computerised services, Associated Press reports from Washington. Government and industry sources familiar with the Justice Department’s position said they expected the department to tell US District Judge Harold Greene this week that the restrictions are no longer needed. The restrictions, plus a third one that bars the regional companies from providing long-distance service were established by the consent decree that broke up AT&T three years ago. The sources, who are outside the Justice Department, did not indicate what it would recommend on the long-distance question, but several said they would not be surprised if the government lawyers said the regional companies should be allowed to provide limited long-distance service to some customers. An AT&T spokesman, said such a recommendation would be unthinkable, adding that if the Justice Department acted as anticipated, it would be erasing the most basic tenet of the decree… It’s unbelievable that people are thinking about setting off another volcano in the telecommunications industry three years after the break-up. The seven regional Bell companies formed in the break-up were restricted from entering manufacturing and information services as well as long distance service because they were considered monopolies controlling access to local telephone lines: they have been arguing that the restrictions should be lifted because there is enough competition in the industry. They also claim they are captives of AT&T, from whom they buy most of their equipment. AT&T argues that the market has not changed much since the decree. The Bell companies also say that letting them into information services – message storing, electronic mail and burglar alarm protection – would increase their revenues, which in turn would hold rates down; Judge Greene is expected to act on the recommendations this summer. The judge, who presided over the AT&T breakup, has granted more than 100 waivers from the regional companies seeking to enter new, competitive businesses unrelated to regulated telephone service, including property, computer software and print media, but has so far refused to waive the restrictions on manufacturing, information service or long-distance. The sources indicated the Justice Department was inclined to recommend lifting most of the restrictions on manufacturing. The fear is that the Bell companies would join with foreign manufacturers to develop products overseas, thus hurting the US trade deficit. The total US trade deficit on all goods and services is expected to hit a mind-blowing $170,000m when the books come to be closed on 1986.

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