Busy Signals

Confusion for A T& T

As the New Year's Day deadline for the breakup of the giant Bell System draws closer, both the company and the Government are maneuvering like wide receivers before the ball is snapped, in most cases causing great confusion. Last week three pre-breakup decisions were announced. One will delay until April a scheduled rise in local phone bills.

Another will remove all vestiges of Government regulation from long-distance rates charged by competitors of A T & T. The third will reduce the worth of A T & T by billions of dollars.

The last decision befits the galactic proportions of the breakup, involving as it does the world's largest company.

A T&T Chairman Charles Brown said at a press conference that the company planned to shrink its worth by $5.2 billion at year's end. That means that the largest divestiture in history will be preceded by the largest financial write-down in history.

About $1.4 billion of the reduction will come from technical accounting changes required by the divestiture The remaining $3.8 billion will reflect write-offs of old telephone equipment.

Brown said that the company could no longer afford to carry on its books at inflated values the portion of its physical plant that advancing technology has made obsolete.

For example, despite its increasing use of fiber-optic-cable systems that carry far more conversations at lower cost, AT&T is stuck with millions of miles of old-fashioned copper wire and coaxial cable. Also on its books are millions of old dial telephones, built to work for 40 years but less versatile than newer high-tech models like its Touch-matic, which automatically dials up to 15 numbers.

The write-off will be made against 1983 profits, meaning that the company's earnings will be reduced by the $5.2 billion amount. Explaining the decision to apply the full write-down in a single stroke, Brown said: "It is generally considered more comfortable to take a dog's tail off all at once, rather than an inch at a time." Profits have been lackluster anyway. In the year's third quarter, AT&T profits fell 28%, to $1.46 billion, continuing a long decline. One reason was the anticipated costs of divestiture. Another, said Brown was the "lingering effect of recession" on revenues from telecommunications.

Wall Street analysts have been expecting the write-down for some time. They were stunned, however, by its size More surprising, and potentially more significant, was a decision by the Federal Communications Commission. Earlier, the FCC agreed to impose special long-distance access charges on phone bills starting Jan. 1. The reason: when the seven regional operating companies are broken away from Ma Bell, local service will no longer be subsidized by long-distance rates. About 150 for each minute of long-distance tolls has gone to support local telephone service. After divestiture phone users, instead of paying for their local lines in the form of higher prices for long-distance calls, will pay for them in the form of the flat access charge.

Savings to AT&T from the access charges will be $3 billion to $3.5 billion. It is proposing reductions in long-distance rates, though, of only $1.75 billion. But last week the FCC, after looking into A T & T's figures, delayed until April 3 the imposition of the access charges, which range from $2 for private residential lines up to $6 for businesses. Brown described the FCC's switch as "astounding." Said he: It "throws existing plans awry." The access charges have been under attack since they were first proposed by the FCC. They have become a target of Washington politicians who see them as burdensome to their poorer constituents and are pressing for two bills to block them.

The FCC also decided to lift all rate regulation from MCI, Sprint and the other emerging long-distance carriers that compete with AT&T's long-distance service, and that in most cases already undercut its prices. The move was largely symbolic. The new long-distance carriers have been regulated scarcely at all since their inception. Nevertheless, AT&T was hardly happy about the decision The FCC left AT&T fully regulated, as the dominant carrier by far of long-distance calls. The company still must submit rate changes to the Government and justify them with elaborate data. Said an AT&T official: "It's unfair to unleash our competition while forcing us to play by the old rules." This file is automatically generated by a robot program, so viewer discretion is required.