New Baby Bell

The phone company shake-up

Ma Bell is expecting. The announcement came last week as A T & T, the world's largest corporation, shuffled its management and company organization to prepare for the birth of an independent subsidiary. The new offspring, nicknamed Baby Bell, will battle IBM, Xerox and GTE's Telenet for supremacy in the burgeoning computer communications market. It will begin life as a giant with about 15% of Bell's $122 billion in assets, and by 1985 Baby Bell may be doing $10 billion worth of business.

The reorganization of AT&T is part of the Federal Communications Commission's plan to loosen Government control over the communications industry. Last April the FCC ruled that the phone company could enter the field of computer communications, from which it has been previously barred. But at the same time, Washington required that AT&T separate its new computer operations from its traditional telephone services. The new corporate structure will result in two almost separate companies, one to handle the regulated phone business and Baby Bell to sell the rapidly expanding array of equipment, from picture phones to computers, that tie in with the telephone lines. The FCC contended that without the separation, Bell could have used profits from its regulated phone service to subsidize new computer products and thus unfairly undercut its competitors.

In order to simplify splitting itself in two, Bell is planning to gain more central control over its empire. It will spend $1 billion to buy out minority shareholders in four Bell System companies not already entirely controlled, including New England Telephone and Pacific Northwest Bell. The company will also set up a new wholly owned subsidiary, AT&T International, which will control all foreign operations.

The upheavals at AT&T, though, are hardly over. The FCC has ordered the company broken down into two parts by March 1982, but the giant firm claimed that such a deadline was virtually impossible. Said the company in a petition to the commission: "This will be one of the largest corporate reorganizations ever carried out." AT&T's restructuring plan will not be totally carried out for about eight years. The FCC did not say last week whether it would give the company more time. Meanwhile, a computer industry trade group representing more than 50 companies that are fearful of the market power AT&T could have in their business has sued the FCC in an effort to block the birth of a bouncing Baby Bell.

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