Newspaper article THE JOURNAL RECORD

Proposed AT T Merger May Demolish Phone Regulations

Newspaper article THE JOURNAL RECORD

Proposed AT T Merger May Demolish Phone Regulations

Article excerpt

By Evan Ramstad

Associated Press

NEW YORK _ American Telephone and Telegraph Co.'s purchase of the nation's biggest cellular company will make existing phone regulations obsolete, experts said Tuesday, and produce competition needed for an interactive "information highway" to become more than the ballyhoo of politicians.

But some in the communications and computer industries wonder whether Washington is ready for it.

The $12.6 billion acquisition of McCaw Cellular Communications Inc., announced Monday, places a new burden on regulators and lawmakers already dizzied by the pace of change in the industries. Both the Justice Department and the Federal Communications Commission must approve the purchase.

"I got a feeling somebody in Congress is going to get up in arms in this," said Tench Cox, a Silicon Valley venture capitalist. "If they don't, I think it will be the first step in competition in the local phone companies."

If completed, AT T could handle a long distance call without involving the seven regional Bell operating carriers or other local carriers. AT T hasn't had that ability since before it was broken apart in 1984.

AT T said it could take years for such a development, if ever, and it does not plan to enter the local phone business in the meantime.

Nonetheless, several experts said the deal will cause a change in the phone industry on the magnitude of AT T's 1984 breakup, which was ordered by a federal judge after years of investigation by the Justice Department.

"They've really demolished the foundation of the whole regulatory structure in Washington, which is based on the idea that there's some kind of natural monopoly in local phone service," George Gilder, senior fellow of the Discovery Institute in Seattle and a noted author on technology issues, said of the deal.

The prospect excites interactive computer product developers, who for years have complained that the high cost of sending data through the phone system has inhibited growth of their businesses.

"A lot of technologies are being hindered," said Brian Dear, chief executive of Coconut Computing Inc., a La Jolla, Calif. …

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