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The trustbusters argue that increased competition could eventually bring down communication costs. That contention is hotly disputed by Bell's de-Butts, who protests that the Justice suit "could lead to fragmentation of responsibility for the nation's telephone network. If that happens, telephone service would deteriorate and cost much, much more." That, essentially, is the "single system" argument. It holds that "vertical integration," with everything from manufacture of phones to collection of bills in the hands of a central management, is the most efficient way to operate a complex telephone system. Many outside observers agree. Says Wall Street
Communications Analyst Carl Glick: "AT&T provides the very cheapest service possible. Justice gets so wrapped up in its rhetoric about the advantages of competition that it loses sight of the economic implications of its moves."
Curiously, the trustbusters have doubts about whether or not a Bell breakup would improve the economics or quality of communications service. They do not seriously quarrel with Bell's argument that the industry as presently structured has produced the world's best telephone service, and at fairly reasonable costs. They also concede that Bell profits have not been inordinate, in fact have remained relatively static in terms of return on invested capital. Bell's return has remained in the 7% to 7.6% range for more than ten years.
Friendly Tip. Legally, Justice has a strong case for its claim that Bell over the years has unfairly obstructed the interconnection with the AT&T system of non-Western Electric terminal equipment, telephones, satellites, mobile telephones, microwave facilities and data-transmission gear. But the trustbusters' chances of forcing Bell to give up Western Electric are uncertain. They did not succeed in doing so the last time they took on A T & T, in a suit filed during the Truman Administration in 1949 That suit was finally resolved by the Eisenhower Administration. During an informal meeting with A T & T's general counsel at the Greenbrier in White Sulphur Springs, W. Va., Ike's Attorney General, Herbert Brownell, offered what the AT&T man described as a "friendly tip" on how to negotiate a settlement. Soon after, the Government approved a consent decree that allowed Bell to keep Western Electric in return for a wrist-slap promise not to let it compete for business outside of A T & T.
The 1956 consent decree, which suggests Government approval of Bell's ownership of Western Electric, casts a long shadow. In any case, antitrust officials concede privately that they are so uncertain about the possible economic impact if they succeed in their suit that they are undecided as to how hard they should press for their maximum demands. Says one Antitrust Division spokesman: "We're leaving enough room to avoid any possibility of financial destruction of the company or destruction of the national telephone system."