There's A Baby Bell In Your Future   

Like it or not, the telephone companies will probably become competitors of newspapers and cable companies.

Even before they have spent their first dollar, the Baby Bells have been convicted by the newspaper industry of monopolistic, unfair and anticompetitive behavior in the electronic-information business.

Let the telephone companies in, the argument goes, and they will unfairly wield their power as keepers of the telephone-line gates to hamper newspapers and others that want to reach customers electronically.

This sounds a bit like issuing a guilty verdict before the trial has even begun. If the telephone companies have the legal right to get into this business – and court decisions reaching to the U.S. Supreme Court say they do – then how can newspapers and others argue that they should be kept out? After all, our capitalist system is founded on the ideal of entrepreneurial competitiveness: Let the best company win.

This sounds logical, and in fact forms the basis of the Baby Bells' massive lobbying effort. Advertisements placed in the Washington Post, the New York Times and elsewhere assert, "First, they tried to stop radio. Then they tried to stop cable television. And now they're trying to stop the benefits of the information age." Abroad, the advertisements say that "...America's largest newspapers are fighting to deny [the benefits of electronic-information services] to the American people. Why? Because they fear the threat of competition."

Newspapers do fear increased competition, which makes them no different from any other business. And the major services the Baby Bells have talked about providing would offer direct competition for newspapers: electronic Yellow Pages and classified ads. Imagine, for example, a Yellow Pages system in which the consumer can call up on a screen not only a listing of department stores but also their latest sale prices, perhaps updated each hour. Such services undeniably will benefit consumers, so why apart from self-interest should newspapers oppose them? All things being equal, newspapers should not. But all things are not equal.

The Baby Bell systems grew out of a monopoly culture. Their very existence stems from an antitrust consent decree in 1984 that broke up the American Telephone & Telegraph Company. While the decree did break AT&T's monopolistic hold on the telephone business, it left the seven Baby Bells with monopolies of their own. U.S. District Judge Harold Greene correctly foresaw back in 1984 that by creating seven smaller monopolies the potential for abuse would not be lessened, but merely made more complicated. Thus he imposed a moratorium on the telephone companies' ability to enter the information-processing business, as well as a variety of other endeavors.

Greene recently lifted the moratorium. Since then, the newspaper industry has appealed the matter to the Supreme Court without success.

The campaign against the Baby Bells has moved to Congress, with the newspaper industry arguing that the unrestrained entry of the phone companies into electronic publishing could kill competition and diversity. Robert M. Johnson, Newsday's publisher, told a House subcommittee the Bell companies' control of the phone lines gives them "the unique ability to skew the results their way...Fair competition cannot exist where you are forced to rely on a competitor for delivery of your product."

Of more importance than the conflict of interest inherent in owning the phone lines that competitors must use is the Baby Bells' propensity for stretching the rules. Southwestern Bell is among the Baby Bell companies admitting to passing on lobbying expenses to customers rather than shareholders, in violation of telecommunications regulations. It is no wonder that the newspaper industry is worried about how fair the telephone companies will be as keepers of the gate, especially in view of the guaranteed profits the companies already make on revenues that dwarf those of the newspaper industry.

If Congress does pass new legislation, it probably will focus on closer regulation of the telephone companies in the belief that such scrutiny can force the Baby Bells to deal fairly with competitors. Unfortunately, regulating agencies in the past have not been efficient watchdogs, tending to give forth a mild yip, rather than a loud bark, at misdeeds.

Whatever the fears about how the Baby Bells will behave, one way or another they probably will become competitors of newspapers, cable companies and others entering the electronic-information business. To serve a mass market, the telephone companies will need to persuade millions of customers to invest in the equipment necessary for interactive information processing, and a truly effective system may require a huge investment in fiber optics.

These obstacles will give newspapers and others time to continue developing their own electronic-publishing systems. In the long run, newspapers will have to fight this new competitive threat in the same way they have all others: by offering a better product. l