The Baby Bells Still Need A Guardian

Bit by bit, the consent decree that broke up American Telephone & Telegraph Co. in 1984 is coming apart. That's great news for the Baby Bells--and for a public that stands to benefit from new information services. But unleashing the Bells without proper safeguards could wind up costing average phone customers a bundle and putting competing companies at an unfair disadvantage.

The 1984 decree gave the seven regional Bell companies cash-cow franchises in local phone service. But they were banned from three businesses where they might exploit these monopolies: information services, manufacturing of phone gear, and long distance. Ever since, the Babies have fought to escape these restrictions. On July 25, they got one-third of what they wanted when the famous telephone judge, Harold H. Greene, feeling compelled by a previous appeals court decision, reluctantly allowed them to offer information services. A bill to let the Bells into manufacturing is moving through Congress, and pressure is building to allow them into long distance as well.

Unfortunately, the local Bells have occasionally abused their monopoly positions and used their power to cross-subsidize new business ventures. Earlier this year, U. S. West Inc. was fined $10 million--the largest civil antitrust penalty ever against a single defendant--for offering low-cost access fees to its phone customers in exchange for buying U. S. West's new switching services instead of AT&T's. In early June, the Georgia Public Service Commission charged that BellSouth Corp.'s Southern Bell unit used revenues from its local phone-service monopoly to underprice its competitors in its new voice-messaging business.

What to do? Deregulate--but retain a watchful regulatory eye. Allow the Bells into forbidden fields, but monitor them closely to make sure they don't squelch competition and sock phone customers with overcharges. Congressional legislation requiring the Baby Bells to operate new ventures out of totally separate subsidiaries is a good idea. So is limiting transactions between the units and making sure all their books are open to regulators. The Babies are growing up, but they've shown that a parental eye is still needed.