There is the possiblity that there are economies of scope between the core business of an RBOC and alarm services since an essential part of the latter business is alarm transmission.
The bill would prohibit RBOC entry into the alarm industry for 3-7 years, and then only subject to Justice Department review.
Public policy issues and RBOC entry into information services
Moreover, the court was concerned about the possible use of cross-subsidy to disadvantage competitors in information services and was not convinced that RBOC entry would provide positive benefits to consumers.
The district court believed that allowing only transmission of information like alarm signals by an RBOC would not provide the RBOCs with an incentive to discriminate against providers of electronic monitoring.
It noted the district court's concern that the RBOC entry would harm small and innovative firms:
36) If the market to be entered were concentrated and not acting competitively, the court stated that entry might be justified even though the RBOC could more easily acquire market power.
The appeals court decision also mandated that the district court rely heavily on the Justice Department's opinion that RBOC entry into the information services industry would increase competition.
41) The court reported that affidavits concerning the voice message market claimed that the RBOCs designed features to increase incompatibility with competitors' standard equipment, priced features to increase rivals' costs, provided certain features only to their affiliates, and delayed offering features desired by competitors until the particular RBOC was prepared to offer the features.
The transfer of RBOC profits to an unregulated alarm subsidiary is also unlikely.
Given an already competitive industry, the possible static gains to consumers from RBOC entry are probably small.
There is also the equally persuasive argument that precluding RBOC entry at the present time will result in judicial and administrative costs.
RBOCs have so far failed in every one of their gateway ventures, they remain locked in a regulatory and technically oriented corporate culture, and they are even beginning to generate complaints that their basic phone service is deteriorating, Blethen said.
Any cooperation with the RBOCs must keep the phone company out of the creative end, Blethen said.