Telecommunications law[]
The Modification of Final Judgment (MFJ) went into effect at the beginning of 1984, clarifying and expanding the terms of the 1982 consent decree that settled United States v. AT&T — a landmark U.S. antitrust case, originally filed on January, 14, 1949, and modifying the previous Final Judgment of January 24, 1956.[1]
Under the consent decree, AT&T retained most long-distance operations and terminal equipment. The Bell operating companies were spun off and reorganized into seven regional holding companies. They were permitted to offer local monopoly services, as well as toll services within their restricted operating territories. They could provide new terminal equipment, but could not engage in manufacturing.
The basic premise of this divestiture settlement was that the Bell system's competitive markets should be separated from their noncompetitive monopoly markets in order to prevent unfair monopoly abuses, such as AT&T forcing captive local ratepayers to bear the burden of subsidizing equipment and long-distance service against emerging rivals. The competitive markets had begun with MCI's challenge to AT&T's monopoly on long-distance service, starting in 1968, and the entrance of competing manufacturers of customer premises equipment.
The Bell System's 22 local telephone operating companies (BOCs) were separated from the parent company (AT&T) and grouped into seven regional Bell holding companies (RBHCs), which were entrusted with providing local services. The seven regional Bell holding companies (Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell, and U.S. West) were specifically prohibited under the MFJ from entering the three lines of business deemed competitive and therefore assigned to AT&T: (1) designing and manufacturing telecommunications network and customer premises equipment, (2) providing information services (such as electronic yellow pages), and (3) providing long-distance services.
The information-services ban was to prevent RBHCs from using their control over the local loop "bottleneck" to engage in anticompetitive conduct toward other information services providers. The prohibition was subsequently amended at the triennial review in 1987, and later reversed and remanded by the U.S. Court of Appeals for the District of Columbia. The other two provisions of the MFJ were the subject of intense congressional activity.