The Toil & Turmoil of Ma Bell

From an unpretentious Manhattan headquarters, the American Telephone & Telegraph Co. runs a prodigious organization. The Bell System operates more than half of the world's 208 million phones, reaps more revenue ($13 billion last year) than the Canadian government, is the biggest private customer in the U.S. capital market. A.T. & T. chiefs preside over a 22-man top-management group traditionally--and aptly --known as "the cabinet.''

Lately, A.T. & T.'s cabinet has been about as troubled as the one in Washington. For more than two years, the regulatory Federal Communications Commission has been digging into Bell rates and procedures in the first thoroughgoing investigation of A.T. & T. since the 1930s. Only last month the company ended a nationwide strike--its first since 1947--by agreeing to an inflationary 6 1/2% average wage and benefit increase. Three weeks ago, in a speech just before his retirement from the Justice Department, Trustbuster Donald F. Turner evoked an old ghost by saying that new action aimed at divesting A.T. & T. of its manufacturing subsidiary, Western Electric, might be "in order." And this week, with the publication by Putnam of an angry A.T. & T. "history" called Monopoly, the world's largest corporation (assets: $38 billion) is called a "supergovernment," beyond the control of anyone.

Hung Up. Partly reflecting such alarums and largely ignoring the fact that A.T. & T. profits ($2 billion last year) are at record levels. Bell stock has sagged to its lowest price since 1960. Between mid-1964, when the stock reached a peak of $75 a share, and last week, when it closed at $49.75, Bell's total market value declined $11 billion.

Bell stock is hung up partly on the uncertainties surrounding the complex and seemingly endless FCC probe even though A.T. & T. Chairman H. I. Romnes points out, "the commission has clearly recognized" that A.T. & T. earnings should provide "ample incentives to progress."

Last year, after taking 10,000 pages of testimony, the FCC determined that a fair return on Bell's interstate capital investment would be 7% to 7.5% v. the 7.5% to 8.5% that Bell had asked for. The FCC thereupon ordered interstate phone rates cut by $120 million, or about 3%. After a vigorous appeal, Bell got the FCC to temporarily suspend $20 million of the cut. Two weeks ago, A.T. & T. petitioned to have the $20 million thrown out altogether to compensate for the recent wage settlement and other rising costs.

The FCC has still to tackle a host of other issues, most importantly A.T. & T.'s relations with Western Electric, the nation's eleventh biggest manufacturing company. Though Bell avoided divestiture of Western Electric on antitrust grounds through a 1956 consent decree with the Justice Department, other questions are being raised about the subsidiary, which manufactures almost all Bell System equipment. Critics charge that Bell deliberately pays inflated Western prices in order to increase the Bell System rate base by raising the value of its plant. A.T. & T. denies this, pointing to Western's slim (4.1% last year) margin of profit.

"Mischief." In the view of Monopoly Author Joseph C. Goulden, Washington correspondent for the Philadelphia Inquirer, "Ma Bell's" troubles couldn't happen to a more deserving mother. Goulden, 34, admits that his is "not an objective history" of A.T. & T. One day, after Bell made him "swelter in an airless booth for ten minutes" to place a long-distance call, he began his two-year study of Government records and material supplied by such longtime A.T. & T. foes as Louisiana's Democratic Senator Russell Long.

Goulden contends that A.T. & T.'s "economic weight is sufficient to disturb the checks and balances scales both of government and of the marketplace." As a result, he says, Bell is free to indulge in all sorts of "mischief." He cites the company's switch to all-digit dialing as an example of "mendacity and bullheadedness in customer relations." Wiretapping of all sorts, he charges, has become so widespread that "conversing on a Bell System phone is about as private as skywriting."

Because of lucrative quirks in local and toll-call zones, Goulden complains, suburbanites often find that they can make free calls over vast but useless areas, yet pay toll rates to phone frequently used downtown numbers only a few miles away.

Easy Ack-Ack. Often, Goulden is in error. Anxious to "fend off potential competition" in space, he writes, A.T. & T. in 1962 launched its Telstar satellite, "a gaudy but commercially worthless trinket" designed to dazzle Congress while legislative creation of the Communications Satellite Corp. was in progress. After Comsat's creation, says Goulden, Bell snapped up 29% of the shares supposedly reserved for the public. Bell does indeed own 29% of Comsat--but only those shares originally allotted to the company by Congress.

Such ack-ack keeps the phone lines humming, and that is A.T. & T.'s main commodity. Throughout it all, there is one thing about which both Bell and its critics agree: U.S. phone service is far and away the best in the world.

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