by Peter W. Huber, Michael K. Kellogg, and John Thorne.
In 1987, the first edition of this Report was published under the auspices of the Department of Justice, as part of its obligation to conduct a formal, triennial review of the continued necessity for the line-of-business restrictions imposed upon the Bell Operating companies at the time of divestiture. 1993 should be the occasion of the third such Triennial Review. It will not be. Litigation from the first Review is still pending, and the Department of Justice has indicated that it may never again attempt to assess competition in the industry as a whole. The Department now prefers to focus its attention on individual markets or submarkets implicated by discrete waiver requests.
The legal basis for the Department's decision to abandon the Triennial Review process is unclear. Prior to approval of the decree, the Department stated unequivocally: "in order to ensure that the Court is fully apprised of developments in this area, the Department will undertake to make a formal report to the Court on the continuing need for the restrictions on the third anniversary of the date of divestiture, and every third year thereafter so long as the restrictions remain in force."(1) Judge Greene subsequently reiterated this commitment in terms of a decree requirement: "the Department of Justice was required to report to the Court every three years concerning the continuing need for the retention of the restrictions."(2) That requirement, however, apparently disappeared as soon as the Department began concluding that certain restrictions should be relaxed.(3)
Lawful or not, the Department's decision to abandon the Triennial Review process is unfortunate. Divestiture accomplished many positive things, but the architects of divestiture plainly failed to anticipate fundamental changes that would sweep across the industry in the decade after the decree was drafted. The industry has changed greatly since 1987, and even greater changes are impending. A preoccupation with narrow segments of the industry distracts policy makers from assessing these larger trends. This second Report on Competition in the Telephone Industry represents our attempt to describe the competitive state and direction of the industry at the beginning of the second decade since Judge Greene approved the divestiture decree.
Endnotes
1. Response of the United States to Public Comments on Proposed Modification of Final Judgment, United States v. Western Elec. Co., 47 Fed. Reg. 23,320, 23,337 (D.D.C. May 27, 1982).
2. United States v. Western Elec. Co., 592 F. Supp. 846, 852-53 (D.D.C. 1984).
3. Following the first Triennial Review, Judge Greene declared that "the Department has complete discretion on the question whether and when to file another report." Memorandum at 5, United States v. Western Elec. Co., No. 82-0192 (D.D.C. July 17, 1989). Judge Greene explained that the "intended value" of triennial reviews had been significantly diminished by the Department's change of heart concerning the line of business restrictions. Id. at 3.