Does Ma Bell's Breakup Mean Consumers Will Be Paying Through the Nose?

updated 01/25/1982 AT 01:00 AM EST

originally published 01/25/1982 AT 01:00 AM EST

The recent antitrust agreement between the Justice Department and the American Telephone and Telegraph Company could be a boon to consumers—or an expensive bust. The choice is up to the public, claims Lee Richardson, vice-president of the Consumer Federation of America, an umbrella organization for over 200 advocacy groups with a total of 20 million members. The settlement requires AT&T, the world's largest corporation, to divest itself of 22 local operating companies within 18 months. (A federal judge last week temporarily postponed any action, but the divestiture is expected to take place on or close to schedule.) Many experts have predicted that the agreement will mean huge increases in local telephone rates, but Richardson says these can be prevented. A former director of the U.S. Office of Consumer Affairs, Richardson, 41, is now a teacher of consumerism at the University of Maryland. He spoke with PEOPLE'S Marsha Dubrow in the Columbia, Md. row house he shares with his wife, Maureen, and their four children.

As a consumerist, what do you think of this settlement?

It is one of the best things since canned 7-Up. Splitting the local operating companies from the long-distance system will, in the long run, be tremendous for the consumer because it opens up a lot of honest-to-goodness competition. In long-distance, for example, new companies will be able to compete on the same terms as AT&T. Previously AT&T restricted access to its system in many ways. One was to require competing companies to dial many digits to hook into their long-distance system. Only one digit was technically necessary.

What kind of technological breakthroughs can you envision after a divestiture agreement?

The best answer to that question can be found in science fiction books. In the future your telephone will be used to reach the world through a TV set hookup. On the screen you will be able to see pages from books at the Library of Congress, as well as prices in local stores on everything from hamburgers to vacuum cleaners. That sort of thing can happen now because companies will be able to get into these activities without fear of the old AT&T-local company ties keeping them out.

But isn't there a danger of huge increases in local telephone rates?

There is a real danger that consumers could get a raw deal on local rates—unless the public gets involved, primarily through Congress, but also through the press and consumer organizations. Local telephone rates could double simply because of changes a divestiture agreement could bring. In rural areas, the rates could increase 400 to 500 percent, which is truly staggering.

Why could this happen?

Currently about $20 billion a year in long-distance tolls is divided between AT&T and local Bell operating companies as well as independent companies. If this arrangement is substantially altered so that AT&T would be able to keep most of the revenue, the local companies would have to raise rates enormously to make up for the losses. The impact would be greatest in rural areas.

Is this an inevitable by-product of the agreement?

No. This agreement need not cause rates to go up. The biggest mistake people are making now is to think that the final details of the agreement have all been decided.

AT&T claims that it has been subsidizing the local rates with long-distance revenues. Is that true?

That's just not so. It is not a subsidy or a gift. AT&T has been paying its fair share of the cost of using the local companies' facilities to complete long-distance calls. The local companies have built switches, put in wires, etc., for long-distance hookups.

Should local companies continue to receive revenues from long-distance calls?

They absolutely should, because long-distance will still have to use the local companies' facilities. The most important issue now is to preserve the system of dividing long-distance revenues so that a local company can maintain the kind of local rates we have now.

What, then, is the problem?

I'm afraid that AT&T will submit a plan for approval by the Justice Department and the court that will call for a division of income benefiting AT&T and not your local operating company. It is here that reasonable telephone rates will be kept or lost for residential users.

What can the federal government do to protect the consumer?

Congress has got to get its experts in there to make sure that we don't lose out in the fine print over dividing revenues, property and other assets. These are billion-dollar accounting details.

What can residential users do to protect themselves?

We have to get off our duffs and try to influence the process on Capitol Hill. Visit, write or call your Representatives and Senators. If the final agreement gives consumers a bad break, the public can scream loudly and force Congress to enact laws to see that local rates don't become prohibitively expensive.

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