merely from providing transmissions from a point in one exchange area to a point in a different exchange area but also from engaging in activities that comprise the business of providing interexchange services.
If the decree had been intended to restrict the local companies only from the interexchange transmissions themselves, a prohibition on the provision of "interexchange telecommunications" would have been entirely adequate. But the decree goes further to prohibit these companies in section II(D)(1) from providing "interexchange telecommunications services." The term "services" obviously has, and it must be accorded, meaning and, as will now be seen, that meaning is far broader than is implied by the construction of the statute advocated by the Regional Companies.
We begin with the obvious. The Operating Companies are excluded from the provision of interexchange services in order to prevent them from becoming competitors of the interexchange carriers. See Part I, supra. On this basis, many of the arguments advanced by the Regional Companies -- designed to demonstrate that there is little likelihood of their steering the shared tenant customers to one interexchange carrier rather than another
-- are largely beside the point,
for they fail to address the principal problem to which section II(D)(1) of the decree is addressed: the threat of competition by the Regional Companies themselves in the interexchange business.
Interexchange transmission capacity is transformed into an interexchange service that can be offered for hire,
i.e., an interexchange business, by the performance of functions that are normally and necessarily performed by those who are engaged in that business (and who would therefore be competing with the Regional Companies with respect to these functions if the motion were granted). The issue of what constitutes an interexchange service or business is most usefully considered in the context of what the Regional Companies would be doing with respect to shared tenant services in the event the motion were granted and to compare these activities with the activities of interexchange enterprises.
First. The Regional Companies would, at a minimum, be aggregating demand within a building and purchasing bulk interexchange services based on that demand for resale to the end users, i.e., the tenants.
The purchase of interexchange capacity on a wholesale basis (i.e., at prices that reflect total demand in a particular context) and its sale at retail clearly constitutes the provision of interexchange services under the decree.
Those engaged in such an activity are referred to as resellers, that is, interexchange providers.
If the Regional Companies performed such an activity, that is, if they purchased interexchange services at a bulk price based on the demand in a particular building and then sold such services at retail at higher prices to the building's tenants -- they, too, would be resellers in the interexchange business, and they would be in direct competition with other resellers and with facilities-based interexchange carriers.
Second. The Regional Companies expect to perform these functions by making selections of interexchange capacity on what they deem the lowest-cost basis
and by marketing the services thus assembled.
Given the existing technology and the economics of the interexchange business, the selection process is exceedingly complex, involving many variables.
Both facilities-based carriers and resellers market their services based on comparisons of their particular rates, or mix of rates, with the rates of their competitors in the interexchange business, in efforts thereby to persuade the ultimate users to purchase their services rather than those of other interexchange providers.
These marketing features are also integral to the shared tenant services plan of the Regional Companies, and these companies would thus be directly competing with the legitimate interexchange providers through their own rate comparisons. One example of such a rate comparison already in being is a promotional brochure published by the provider of shared telecommunications services to the World Trade Center building in New York City soliciting potential subscribers among the building tenants by comparing its offerings against the offerings of other providers and by comparing its rates directly with those of AT&T, MCI, and Sprint.
Third. The Regional Companies would not only be purchasing and marketing interexchange services, they would also be selecting carriers for their customers and procuring additional interexchange services for them.
In connection with the phase-in of equal access,
the interexchange carriers are undertaking elaborate and expensive campaigns, through the media and otherwise, to induce individual customers to presubscribe to their particular services. The cooperation of the Operating Companies is an essential element in that effort
to bring about free and fair competition among the various interexchange carriers,
and the Operating Companies are even "expected to assist the interexchange carriers by means of such measures as making lists of non-presubscribed customers available to them."
An analysis of the shared tenant services proposal of the Regional Companies indicates that they expect to stand this presubscription process on its head. Instead of assisting the interexchange providers in their efforts to "sign up" interexchange customers, the Regional Companies are seeking to offer a presubscription option of their own. If the Ameritech motion were granted, the tenant-customers would be expected to subscribe not to a legitimate interexchange carrier but to the Regional Companies, and those companies, in turn, would make the arrangements for choosing the interexchange services and options to serve those customers.
Here again it is clear that the functions involved -- the selection of carriers and the procurement of interexchange services -- constitute integral parts of the interexchange business, and that, by performing these functions, the Regional Companies would be directly competing with the interexchange carriers for that business.
Fourth. The Regional Companies would be performing the interexchange switching and routing function, which takes calls from customers and directs them to their destination. That function would be performed by these companies in lieu of its performance by an interexchange carrier, particularly where the calls would not simply be routed to a particular carrier but to a particular service of a carrier, such as a private line.
However, the switching and routing functions quite obviously constitute key parts of the interexchange business, and the Regional Company activities in that regard would be performed in direct competition with the interexchange carriers in the interexchange business.
In addition to the general threat arising from the Regional Companies' monopoly there is a special threat to fair competition by these kinds of activities, for at least two reasons. In the first place, a Regional Company, unlike any other competitor, could use its market power in the provision of exchange access
to maximize the interexchange carriers' costs with respect to such access while minimizing the rates paid for interexchange services by its own shared services enterprise. Furthermore, a Regional Company, again unlike any other interexchange competitor, could use its control over exchange access to become the dominant purchaser of interexchange services in its region, thereby further to establish its dominance with respect to interexchange rates and hence with respect to the interexchange market.
C. Potential for Expansion
All these problems are further exacerbated by the virtually unlimited potential in the event of a grant of the Regional Company request and the absence of a logical stopping point.
As presently framed, the Ameritech motion is restricted to shared services involving only tenants in a particular building. However, neither principle nor technology require such a limitation.
Just as it is aggregating the demands of the tenants in a particular building, a Regional Company could as easily aggregate demand with respect to a group of buildings, a section of a city, certain types of businesses, or even among all subscribers to its central office switch.
Having done so, it could offer interexchange services to all such subscribers on the same basis as those services would initially be offered to tenants in one building.
What would thus be likely to happen is that, in relatively short order, the Regional Companies would become the purchasers of interexchange services for all the telephone subscribers in their exchange areas, leaving to the interexchange carriers only the role of providers of leased facilities for integrated interexchange services marketed and offered by the Regional Companies.
That this scenario is not an implausible one is demonstrated by Ameritech's own submission to the Court. In one of its memoranda,
Shared-services arrangements can also be provided for building complexes, such as a university campus or an office park. In addition, large individual businesses and institutions may have some of the same economies of scale and centralized management advantages as shared systems because of their heavy usage of telecommunications and related products and services. If desired by these individual customers, Ameritech would provide equivalent packages of products and services.