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Restrictions Hurt Public--AT&T Chief

September 25, 1985|BRUCE KEPPEL and DONALD WOUTAT | Times Staff Writers

The government treats AT&T as if it were still a monopoly, restraining the flow of better products at lower prices that would result from unfettered competition in the telecommunications and information fields, AT&T Chairman Charles L. Brown said Tuesday in Los Angeles.

"Domestic telecommunications policies--at the federal and the state level, including California--still lag the reality of the marketplace," Brown told a Town Hall audience. "Regulatory policies and rules still persist--particularly, handicaps on AT&T--that continue to regard us as we once were, a monopoly, and not as we are today: a company faced with intense competition."

Keeping American Telephone & Telegraph under regulatory wraps deprives the public of "the full benefits" of competition and "the free interplay of marketplace forces," he said.

In response to reporters' questions, Brown conceded that AT&T had encountered tough going since the old Bell System was dismantled Jan. 1, 1984, regrouping the local operating systems into independent regional companies while leaving AT&T with the long-distance network and the opportunity to enter the burgeoning information market.

Unhappy With Progress

Nobody, "least of all me," is satisfied with AT&T's progress in that new market, Brown said. AT&T entered the computer business about 18 months ago and has fallen short of its own sales forecasts, partly because of the industrywide computer slump and what critics have called AT&T's lack of marketing experience.

To slash costs to be more competitive in the computer market, the company's Information Systems division is eliminating 24,000 jobs--at least 1,300 of them in California, where AT&T is the state's fifth-largest private employer with 25,000 employees.

Brown said the announced layoffs will likely be enough to cut overhead and improve the division's competitiveness. "We do not have another shoe that we intend to drop," he said.

"I don't think anybody--least of all me--is entirely satisfied with the degree to which we are able to sell and market," he said of AT&T's venture into the computer market. But he added, "I am satisfied that we are on the right track."

AT&T is studying computer-related firms that it might want to buy, he said, but he added that, at this point, Apple Computer--often mentioned as a likely takeover candidate--is an unlikely candidate. "Everybody's on the list," he said. "Hardly a day goes by that somebody doesn't come in and say, 'Boy, have I got a deal for you!' ."

Wants Streamlining

In the regulatory arena, Brown welcomed the Federal Communications Commission decision last week to eliminate its requirement that AT&T operate its long-distance telephone service separately from its telephone equipment and computer businesses--a separation he called confusing to customers.

He also blamed that separation for unusually high overhead costs that affected first-year earnings.

Brown said regulatory restraints are more severe for AT&T than for its telecommunications competitors. He called for "streamlined regulation" to avoid what he called the "agonizing lawyering" that the company must go through each time it seeks to impose a new rate or offer a new service. "Our competitors don't have that problem," he said.

Regulators also should realize that AT&T isn't "fighting against a bunch of midgets," he said, but against such corporate giants as IBM, ITT and GTE.

Both federal and state regulators have imposed unduly high "access charges" that AT&T must pay local phone companies for originating and completing long-distance calls, he said.

"These charges now represent well over 60% of our costs," he told reporters.

High access charges and an overly low rate of earnings for AT&T's long-distance arm in California caused it to lose money in 1984, and that situation has not improved, he said. "We're not doing very well in California."

As for corporate earnings, Brown was cautious: "We don't predict earnings. The only time I did it, I was wrong."

Brown alluded to an overly optimistic earnings forecast for AT&T's first fiscal year after divestiture, when the company was outshone by robust profits at its former subsidiaries.

For the first six months of 1985, AT&T earnings of $815 million are up about 14% from year-earlier results. For the year, analysts project earnings of about $1.7 billion, or a 23% gain from 1984's $1.38 billion.

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