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AT&T Consent Decree

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Definition Edit

The AT&T Consent Decree is

the order entered August 24, 1982, in the antitrust action styled United States v. Western Electric, Civil Action No. 82–0192, in the United States District Court for the District of Columbia, and includes any judgment or order with respect to such action entered on or after August 24, 1982.[1]

Line-of-Business restrictions on BOCs Edit

The Consent Decree divided the Bell System into two major service components — AT&T's long distance business and the seven BOC local telephone operations. The Decree allowed the BOCs to market a wide range of telecommunications services within designated "local access transport areas" (LATAs).

However, the Consent Decree initially prohibited the BOCs from (1) providing long-distance services, (2) manufacturing or providing telecommunication equipment, (3) manufacturing customer premises equipment, (4) providing information services, and (5) providing non-telecommunications products or services, such as operating a cafeteria on company premise.[2] These restrictions are referred to as "line-of-business restrictions."

The court recognized that after divestiture, the BOCs would possess a monopoly over local telephone service in their geographic areas but concluded that this condition alone would not require the BOCs to be barred from all competitive markets. Rather, the court concluded that a line-of-business restriction on the BOCs would be permissible only if there was a substantial possibility that the BOCs would use their monopoly power to impede competition in a particular market.

Two relevant factors were considered: (1) whether the BOCs would actually have the incentive and opportunity to act anticompetitively and (2) whether the participation of the BOCs would contribute to the creation of a competitive market. In addition, the court also considered important public policies, such as the effects of the restrictions on the rates for local telephone services. Applying this analysis, the court found the five previously noted restrictions to be warranted.

The court recognized, however, that over time it was probable that the BOCs would lose the ability to leverage their monopoly power in competitive markets. Accordingly, the court required that the decree explicitly provide a mechanism for removing line-of-business restrictions. The competitive entry test imposed by the modified consent decree provides for the removal of a line-of-business restriction upon a showing "that there is no substantial possibility that [a BOC] could use its monopoly power to impede competition in the market it seeks to enter."

References Edit

  1. 47 U.S.C. §153(3).
  2. The restriction on non-telecommunication products or services was lifted in 1987, and the prohibition on providing information services was lifted in 1991.

Source Edit

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