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Weekly UpdatesIt is important, therefore, to think about this entire episode from a more structural perspective. If the 1982 decree had never undertaken divestiture, but had made facilitation of new entry from any and all directions its sole objective, mobile phone technology could have skipped over extensive obstacles to its widespread deployment. All the applicant need do is show up for an interconnection hearing in order to be added to the network. What it puts on its side of that interconnection is strictly its own business. The phone company has no more control over that end use than the electrical company has over the appliances that are attached to its outlets. At a guess, earlier arrival of cellular could have hastened the demise of the local exchange monopoly by perhaps a generation by providing on a secure and rapid basis an alternative entry path into the home. The entire episode shows that, notwithstanding the commendable desire to break the old Bell monopoly, the 1982 decree contained many structural limitations on innovation that could only warm the hearts of the die-hard supporters of corporatism.
In a similar vein, the adoption of the interconnection approach would have let the existing Bell System and any of its competitors provide "information services," (41) including data processing, electronic publishing, voice answering services, and electronic mail to their customers. (42) Yet the 1982 decree gave the government and Judge Greene the opportunity to put restrictions on the RBOCs, which they did based on the inchoate belief that the RBOCs were capable of using their monopoly power to distort the operation of this emerging market. How was never stated. In retrospect, the entire episode starts from exactly the wrong premise. New and emerging markets benefit from new entry, not from institutional prohibitions. The most costly restrictions on entry come from those companies with the greatest potential expertise on the relevant issue. The restriction here thus hearkens back to the unwise provisions in the Packers case that kept the various meatpacking companies out of key segments of the grocery business. In 1991, this restriction was removed, but not until it had generated endless rounds of pointless litigation. (43) Once again, the corporatist approach to new entry found a welcome home in the 1982 breakup decree.
V. A SUMMING UP
Any complete discussion of the Bell consent decree could take volumes to complete. But it takes far less time to summarize the lesson. The principle that should inform all exercises of government regulation is that regulation is an evil until it can be shown to be a good. In this particular instance, the rather hefty costs of implementing the 1982 decree should count as a substantial thumb on the scale. Robert Crandall estimates that these direct costs ran to a tidy sum, but that the overall decline in telephone costs per minute occurred more rapidly in the United States than in Canada and the EU. This decline now hovers at about the same rate of five to seven cents per minute, at least as of 2006. (44) This one number suggests that it would be hard to identify any systematic savings that came out of a process that has been rich in litigation, but little else. More to the point, none of these numbers deal with the interim delays in innovation that are fairly attributable to the decree. The broad lesson here is that the choice of remedial instruments really matters, often times more than the perception that some degree of regulation is in fact needed. The 1982 decree introduced an unwieldy alliance between Judge Greene and the FCC which helped set the course of regulation under the 1996 Telecommunications Act. None of these movements were wise, and all of them could have been anticipated by regulators who started with the right frame of mind, which favors modest steps over grand coups. A simple interconnection approach is not the hallmark of a competitive market. But it would surely have functioned far better than the complex schemes of regulation that have controlled telecommunications in the United States since the adoption of the 1982 Bell consent decree, now some twenty-six long years ago.
(1.) RICHARD A. EPSTEIN, ANTITRUST CONSENT DECREES IN THEORY AND PRACTICE: WHY LESS IS MORE (2007).
(2.) United States v. AT&T, 552 F. Supp. 131 (D.D.C.1982).
(3.) See Michael Wachter, Labor Unions: A Corporatist Institution in a Competitive World, 155 U. PA. L. REV. 581 (2007).
(4.) Federal Anti-Injunction Act, Pub. L. No. 72-65, 47 Stat. 70 (1932) (codified as amended at 29 U.S.C. [section][section] 101-115 (2000)).
(5.) Pub. L. No. 74-198, 49 Stat. 449 (1935) (codified as amended at 29 U.S.C. [section][section] 151-169 (2000)).
(6.) The stabilization theme is highly evident in the National Labor Relations Act, which reads:
29 U.S.C. [section] 151. For an attack on the coherence of these propositions, see RICHARD A. EPSTEIN, HOW PROGRESSIVES REWROTE THE CONSTITUTION 95-99 (2006).
(7.) For an early statement of the point, see FRIEDRICH HAYEK, THE ROAD TO SERFDOM (50th Anniversary ed. 1994). There, the author observes,
Id. at 137-41. In effect, the preferred recipients enjoy the priority of debt in downtimes and participate equally as holders of equity in good times. By definition, someone else has to get a smaller share of what turns out, given the inefficiencies involved, a smaller pie.
(8.) For discussion, see MICHAEL K. KELLOGG, JOHN THORNE & PETER W. HUBER, FEDERAL COMMUNICATIONS LAW 24-28 (1992).
(9.) See discussion supra note 6.
(10.) Pub. L. No. 63-212, [section] 6, 38 Stat. 730, 731 (1914) (codified as amended at 15 U.S.C. [section] 17 (2000)). The Act states "[t]hat the labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help...." Id.
(11.) See NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937) (upholding the constitutionality of the National Labor Relations Act); see also Wickard v. Fillburn, 317 U.S. 111 (1942) (upholding nationwide restrictions on agricultural production).
(12.) Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 (1978).
(13.) Surface Transportation Assistance Act of 1982 (Highway Improvement Act), Pub. L. No. 97-424, 96 Stat. 2097 (1983).
(14.) 317 U.S. 341 (1943).
(15.) Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947) ("So we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress."). For a defense of that preemption in the name of federalism, see Ernest A. Young, Federal Preemption and State Autonomy, in FEDERAL PREEMPTION: STATES' POWERS, NATIONAL INTERESTS 249 (Richard A. Epstein & Michael S. Greve eds., 2007). For the author's critique of these dual systems of regulation, see Richard A. Epstein & Michael S. Greve, Introduction: Preemption in Context, in FEDERAL PREEMPTION, supra, at 1; Richard A. Epstein & Michael S. Greve, Conclusion: Preemption Doctrine and Its Limits, in FEDERAL PREEMPTION, supra, at 309.
(16.) United States v. AT&T, 552 F. Supp. 131, 170 (D.D.C. 1982).
(17.) Pub. L. No. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C.).
(18.) The court noted:
AT&T, 552 F. Supp. at 161 n.123.
(19.) See id. at 164 n.139, 165 n.141.
(20.) For example, by 2007, households with only cell phones outnumbered those with only landlines. See Press Release, Mediamark Research Inc., Telecom Milestone: More Cellphone-Only Than Landline-Only Households (Sept. 12, 2007), available at http://www.mediamark.com (follow "Newsroom" hyperlink; then follow "2007 Press Releases" hyperlink).
(21.) 26 Stat. 209, ch. 647 (1890) (current version at 15 U.S.C. [section][section] 1-7 (2000)).
(22.) United States v. Aluminum Co. of America (Alcoa), 148 F.2d 416 (2d Cir. 1945).
(23.) For an account of the case, see EPSTEIN, ANTITRUST CONSENT DECREES IN THEORY AND PRACTICE: WHY LESS IS MORE, 40-53 (2007). Some of the landmark cases were United States v. Winslow, 227 U.S. 202 (1913); United States v. United Shoe Mach. Co., 247 U.S. 32 (1918); United Shoe Mach. Corp. v. United States, 258 U.S. 451 (1922); United States v United Shoe Mach. Corp., 110 F. Supp. 295 (D. Mass. 1953); United States v. United Shoe Mach. Corp., 391 U.S. 244 (1968).
(24.) See Alcoa, 148 F.2d at 429-30. Unfortunately, the Alcoa decision found ample exception to this basic rule.
(25.) For a catalogue of forbidden clauses struck down, see, United Shoe Mach. Corp., 258 U.S. at 456-57. For the earlier defense of this case see, United Shoe Mach. Co., 247 U.S. at 45; Winslow, 227 U.S. at 215-17.
(26.) EPSTEIN, ANTITRUST CONSENT DECREES, supra note 23, at 113 (noting the problem for both United Shoe Machinery Company and Microsoft Corp.).
(27.) For the ultimate in per se violations see Topco Assoc., Inc. v. United States, 405 U.S. 596 (1972) (finding a per se violation from efficient buying cooperatives).
(28.) See Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006) (rejecting automatic inference from valid patent to monopoly position in tie-in cases).
(29.) For the classic exposition of the permutation, see Town of Concord v. Boston Edison Co., 915 F.2d 17 (1st Cir. 1990). In that case, Chief Judge Breyer, as he then was, refused to accept the possibility of a price squeeze by a monopolist in a regulated industry, given its inability to raise prices at will. Id.
(30.) Even that point was not always clear. In the famous consent decree in the Packers Case, United States v. Swift & Co., 286 U.S. 106 (1932), the original settlement not only broke up the cartel within the meatpacking industry, but also prevented each of the companies from competing separately in other markets, including agricultural processes. The last restrictions were profoundly anticompetitive. In the 1932 litigation, Swift sought to break the decree, but on that point was stoutly opposed by the grocery industry, which profited from the consent decree bar. The modification was denied and, once again, the antitrust law was pressed into service for anticompetitive ends. Id. For discussion, see EPSTEIN, ANTITRUST CONSENT DECREES, supra note 23, at 22-29.
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