Ma Bell & Her Friends

When it comes to confrontations with Big Business, Washington is scarcely shy. Yet last week, marshaling a full-time staff of 20 to do battle against the U.S.'s biggest utility, the Federal Communications Commission sounded downright diffident--and with good reason.

The FCC's target, the American Telephone & Telegraph Co., is not merely the world's largest corporation but traditionally the bluest of blue-chip investments. The Bell System has the most stockholders (2.8 million), the most shares of stock outstanding (530 million), and the highest total stock value ($31 billion) of any firm listed on any exchange. So many of those shares are owned by widows and elderly couples that the FCC attack on "Ma Bell" has stirred up the same sort of popular resentment as an assault on motherhood itself. "I have stacks and stacks of letters from people asking, 'Why are you trying to get A.T. & T.?'" said a top FCC official last week. Congressional mail was running the same way.

Slumping Shares. Since the FCC announced Oct. 27 that it would investigate not only A.T. &T.'s interstate and foreign rates, costs and earnings but the entire basis on which they are set, A.T. &T. stock has slumped to a two-year low in a market that overall has soared to alltime highs. A.T. &T. shares were-already below their peak of 75 (after a 2-for-l stock split in 1964) when the commission sprang its surprise. Between Oct. 28 and Feb. 2, they dropped from 661 to 581, inflicting $4.36 billion in paper losses on A.T. &T. investors. Showman Billy Rose, the company's largest individual shareholder, lost $700,000 of his $10.7 million fortune in A.T. &T. between Oct. 28 and his death last week.

Plainly upset by the price slide, the FCC two weeks ago went out of its way to insist that investors had "misinterpreted" the aims of its inquiry. With that, A.T. &T. stock rallied for a 21-point gain to 611. The FCC insists its aim is merely to learn whether the yardstick it has long used to regulate A.T. & T. rates-the company's profit on its investment-is outdated. "We don't know if our rate-making philosophy is going to change or not," said FCC Chairman E. William Henry last week. "Up to now, the company and the agency have been in complete accord."

Rising Tempers. If so, the accord is hardly apparent. A.T. &T. Chairman Frederick Kappel has denounced the inquiry as "totally unwarranted and unnecessary," predicted that it will be "painfully slow and costly," with the "telephone-using public the loser." The

FCC concedes that the investigation will require at least two years, after the Bell System submits its first written briefs in April. One reason: 66 public bodies and private corporations, from Aeronautical Radio Inc. to Xerox, have asked to be heard. In the end, the outcome could well be resolved as much by stamina as strategy-and Ma Bell has proved quite resilient over the years. The last time the FCC took her on for a big fight was in 1934. Those hearings stretched on so interminably that most of the issues were either settled by negotiation or simply forgotten.

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