Antitrust and communications deregulation

• Author: Donald I. Baker,Beverly G. Baker
• Published date: 01 March 1983
• Date: 01 March 1983
• DOI: 10.1177/0003603X8302800101
• Subject Matter: Article

The Antitrust Bulletin/Spring 1983

Antitrust and communications

deregulation

BY DONALD

I.

BAKER· and BEVERLY G.

BAKER··

I. Deregulation and divestiture: 1959-1983

There is a fundamental tension between market-dictated results

and economic regulation; between "competition based on effi-

ciency": and assuring broad

"rapid,

efficient, Nation-wide and

world-wide

..

. . communication service with adequate facilities

at reasonable charges";" between a rule

of

law administered by

generalist judges and a rule

of

man administered by experts.

Partner, Jones, Day, Reavis &Pogue, Washington, D.C. Mem-

ber

of

the Massachusetts and District

of

Columbia bars. Former

Assistant Attorney General in charge of the Antitrust Division,

V.S.

Department

of

Justice.

•• Attorney, Common Carrier Bureau, Federal Communications

Commission, Washington, D.C. Member of the Ohio and District

of

Columbia bars.

AUTHORS' NOTE: The views expressed are those

of

the authors

and

do

not necessarily represent those

of

the Federal Communications Commis-

sion.

Connell Construction Co. v. Plumbers &Steamfitters Local 100,

421

V.S.

616, 623 (1975).

2Communications Act

of

1934, as amended, §

1,47

V.S.c.

§151.

©1983by Donald I. Baker and Beverly G. Baker. All rights reserved.

2 The antitrust bulletin

Where competition can work effectively in an economic sense, a

market can be deregulated and the antitrust laws alone left to

protect market efficiency. The economic regulators can be quietly

set to other tasks, as they have been in airlines and should be in

trucking.

But the task is often not so easy. Where free competition can

work in some sectors

of

an industry but not in others, a more

thoughtful accommodation must be found between the competi-

tive and regulatory regimes. Complete industry deregulation

could produce distorted results in both monopolistic and com-

petitive sectors, with bizarre antitrust cases as an expensive form

of

dispute resolution. By contrast, complete regulation would, as

it so often has in the past, sacrifice the efficiencies which market

pressures can spur. Therefore, both market and regulatory tools

must be used to limit monopoly and encourage competition. In

such an environment, both regulation and antitrust are needed,

but with a serious understanding

of

the effective limits

of

each.

This is where we are in telecommunications.

Under the Communications Act

of

1934,3

communications

common carriers have been regulated by the Federal Communica-

tions Commission (FCC) under a"public interest, convenience

and necessity" standard. Where the antitrust laws look solely to

competition and define the public interest in terms

of

economic

efficiency, the somewhat vague "public interest" standard

of

the

Communications Act has been held to require the

FCC

to

consider other

factors-technical

integrity, lower costs, more

consumer choice, or generally, how best to provide service to the

public.' Under this standard, the Commission has for years

regulated the service structure, pricing, and entry and exit deci-

sions

of

communications common carriers.'

It

has allowed high-

density routes to subsidize low-density routes and long-distance

services arguably to subsidize local telephone service.

47 U.S.C. §§ 151 et seq.

4See

FCC

v. RCA Communications, 346 U.S. 86 (1953).

47 U.S.C. §§ 201-224.

Communications deregulation :3

Unlike transportation

and

finance, deregulation

of

communi-

cations has proceeded without new legislation.' Even before

"deregulation"

became politically fashionable in the mid-1970s,

the Commission had begun to open various parts

of

the com-

munications industry to competition. Thus, in its 1959

Above

890

decision," it allowed large users to set up their own microwave

systems

and

hence

"compete"

with AT&T's long-distance mo-

nopoly. In its 1969-1973 Specialized Common Carriers' and

Domestic Satellite' decisions, it opened up long-distance private

line communications to new competitors, such as the now-famil-

iar MCI Communications

Corporation."

The Commission also

6For several years, studies have been under way looking to an

overhaul

of

the Communications Act of 1934. In 1981, the Senate

passed, by a 90-4 vote, a bill (S. 898) which would have substantially

changed the regulatory framework and mandated various deregulatory

changes already under way at the FCC. The settlement

of

the Justice

Department's

AT&T

antitrust suit (infra note 21) in January 1982,

however, precipitated a political battle in the House, especially as to the

rules

that

would apply to AT&T. Competing bills were introduced. In

the face

of

AT&T's strong opposition, the House Commerce Committee

ultimately abandoned the legislation.

7Allocation

of

Microwave Frequencies Above 890 Me., 27

F.C.C.

359 (1959).

829 F.C.C. 2d 870, 31 F.C.C. 1106 (1971),

aff'd

sub nom.

Washington Utilities and Transportation

Comm'n

v. FCC, 513 F.2d

1142 (9th Cir.), cert. denied, 423 U.S. 836 (1975).

9Domestic Communications-Satellite Facilities, 35 F.C.C. 2d 844,

recon.,

38 F.C.C. 2d 665 (1972).

10 In these decisions the Commission assumed it was opening the

market to innovative new services, not authorizing competition with

basic transmission services. The Commission declared

MCl's

"Ex-

ecunet" tariff unlawful when it found it was designed to permit MCI to

provide ordinary long-distance service. MCI Telecommunications

Corp., 60 F.C.C. 2d 25, 40-43 (1976). The court

of

appeals set the

decision aside, saying that the FCC had not justified any restriction on

the operating authority

of

the new carriers. MCI Telecommunications

Corp. v. FCC, 561 F.2d 365, 378-80 (D.C. Cir. 1977), cert, denied, 434

U.S. 1040 (1978).