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The most pressing issue for consumers is the future of phone rates. The breakup of AT&T into separate corporate entities, one for local calls and one for long-distance ones, will effectively undermine AT&T's traditional practice of charging premium prices for long-distance service in order to hold down the cost of local calls. This internal subsidy system has worked remarkably well over the years. Though inflation has pushed up overall consumer prices in the U.S. by nearly 130% in the past ten years, the cost of local telephone service has risen by only 51.7%. In fact, the price of a local call from a phone booth in many parts of the country is still the same as it has been for years: 100.
Bell officials last week were trying to ease public concerns about price hikes. Executives passed out memos urging employees to tell outsiders that there "is nothing in the consent decree that changes local rates." But despite those soothing words, some telephone charges will be going up. Warns Ulric Weil of Morgan Stanley & Co.: "Don't be surprised if, in some parts of the country in the future, it will cost you $100 to have the telephone repairman come to your home." Most likely to suffer are people in rural areas, where telephone equipment is often aging and the number of subscribers is low. To prevent a runaway surge in local costs and fees, Congressman Wirth proposes establishing a national telecommunications fund. The fund would use surcharges on long-distance calls to help offset the cost of maintaining local service.
Another basic question that remains up in the air is the corporate shape of the divested telephone companies. Theoretically, AT&T could spin these off as 22 separate companies or even as one new and enormous operating company. Though 22 operating companies might produce administrative overlap and waste, simply creating a single megacom-pany could perpetuate the firm's current dominance over supplying telecommunications equipment in the U.S.
One possible compromise might be to create five or ten regional operating companies, each big enough to benefit from economies of scale. At the same time, the existence of several large potential equipment buyers would make it difficult for any one supplier to corner the entire market.
No matter how those complex issues are finally resolved, the coming battle in telecommunications will be a multi-billion-dollar struggle of giants. AT&T is already one of the world's leading producers of an array of highly sophisticated electronics equipment and computer-driven data and information-processing equipment. Yet the outside world rarely learns of its prodigious high-tech output, since virtually all of it is consumed internally by subsidiaries and affiliates throughout the Bell System. Now the company can begin offering its products to anyone who wants to buy them.