Revolution in the U.S. Information Infrastructure (1995) / Chapter Skim
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Antitrust Enforcement and the Telecommunications Revolution: Friends, Not Enemies
Antitrust Enforcement and the Telecommunications Revolution: Friends, Not Enemies
Pages 63-79
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From page 63... ...
Within the United States, telecommunications products and services are powering economic growth. According to the Council of Economic Advisers, firms engaged in the information-services sector of our economy -- including computers, software, telecommunications services, and equipment -- accounted for 9 percent of the nation's Gross Domestic Product in 1993.
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From page 64... ...
Instead, I would like to concentrate on two very simple but powerfully important objectives that government policy makers should focus on as the telecommunications revolution proceeds. First, policies should be in place to assure that firms in all parts of the telecommunications industry -- those building the infrastructure and those developing the content that will travel over it -- have the maximum incentive to innovate and to develop and deliver products and services of the highest quality at the lowest cost.
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From page 65... ...
By making sure that competition governs the telecommunications marketplace, the federal government can both provide incentives for innovation and encourage widespread availability of new telecommunications services. This is an objective shared by all government agencies responsible for telecommunications policy: the FCC, the Department of Commerce, and the Antitrust Division of the Department of Justice.
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From page 66... ...
In fact, according to published accounts, President Reagan, Secretary of Commerce Malcolm Baldrige, and Secretary of Defense Casper Weinberger believed that the AT&T monopoly was a national treasure that should not be broken up. But William Baxter, then the assistant attorney general for antitrust at the Justice Department and now professor emeritus at Stanford Law School, insisted that only by divesting the regional telephone monopolies from AT&T's long-distance monopoly would long-distance competitors to AT&T have a fair chance to hook up to local telephone networks.
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From page 67... ...
It is possible, if not likely, that within a few years the coaxial cable owned by cable television operators will be delivering local telephone traffic, just as it is doing today for nearly 400,000 customers in the United Kingdom. In addition, a variety of wireless technologies -- including cellular, specialized mobile radio, and the new personal communications services portions of the spectrum -- could create powerful competition to land-line telephone services.
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From page 68... ...
The Justice Department sued Microsoft because these practices, coupled with restrictive nondisclosure agreements imposed on developers of applications software, unlawfully entrenched the company's monopoly and thereby deprived competitors of a fair shot at becoming the next standard. Microsoft has signed a consent decree, which the District Court for the District of Columbia disapproved in February 1995 but which I fully expect the Court of Appeals to approve on appeal.
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From page 69... ...
In September, Canadian regulators took a major step to promote competition by allowing telephone companies to transmit video images and by opening up local telephone markets to competition from cable television operators and other sources. If the United States wants to continue to lead the world in telecommunications innovation, it must act soon to move in a direction similar to Canada's; that is, it must clear away the remaining obstacles to fair and effective competition throughout the telecommunications industry.
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From page 70... ...
As a result, many of the high-technology mergers we have seen so far involve the marriages of firms dominant in one market with firms in related markets -- such as RBOCs proposing mergers with cable companies, telephone companies active in different geographic areas proposing mergers, and so on. The critical question posed by these mergers is whether they will allow one or both of the firms with dominance in one market to extend market power to a second market -- a special danger where the acquiring firm is a regulated monopoly.
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From page 71... ...
The additional danger posed by the merger was that AT&T could exploit its position in the cellular-equipment market by raising prices or denying or delaying the delivery of parts and other services to RBOCs that compete with McCaw in local cellular service. Knowing this, rival cellular carriers and AT&T/McCaw could implicitly decide to keep cellular prices high.
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From page 72... ...
If BT did not have market power in telecommunications services in the United Kingdom, it is unlikely that either the proposed equity investment by BT in MCI or the joint venture would pose any competitive risks. But BT was and remains the dominant telephone company in the United Kingdom.
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From page 73... ...
If, for example, local telephone companies were permitted to merge with their cable television competitors in the same service territory, neither firm would retain the incentive to develop and supply the new interactive services that consumers have been promised. This situation may change once technology affords consumers more ways to receive information in the home.
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From page 74... ...
This is good news, for only through vigorous competition will the telecommunications revolution we are now witnessing bring its full benefits to American consumers. The Justice Department's Antitrust Division is working hard to make this happen.
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From page 75... ...
ANTITRUST ENFORCEMENT 75 REFERENCES Hamilton, D.P. Wall Street Journal.
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From page 77... ...
Prior to Mr. Dorfman's Space and Communications Company assignment, he was president and chief executive officer of Hughes Communications Inc.
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From page 78... ...
Justice Department, where he supervised the division's civil non-merger enforcement program and the development of the division's policies affecting regulated industries. He came to this position in September 1993, following 9 years as a senior fellow at the Brookings Institution, where he also was director of two research centers in the institution's Economics Studies Program.
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From page 79... ...
He directs the company's strategic planning and business development activities, including acquisitions, joint ventures and alliances, advanced market research, and technology assessment. He is also responsible for coordinating legislative policy issues and Compaq's involvement in various technical standards-setting organizations and trade associations.
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