Recently it was announced that AT&T has begun the process of purchasing BellSouth. This comes 22 years after a court order split AT&T into 7 regional companies. If and when this transaction is completed, AT&T will have recombined four of the seven regional companies that it was divided into.
Back when I was taking US History, our teacher brought up an issue that had him rather agitated, Exxon and Mobil were merging to form Exxon/Mobil. This announcement came right on the heels of BP buying Amoco. The result would yield five (IIRC) distinct companies left over from the breakup of Standard Oil. This, along with the talks of AOL buying Time Warner, had Mr. V pretty upset about the government’s apparent disregard of antitrust laws. My biggest confusion lies in the coordinated timing of these mergers. Since I was born in the year that AT&T was split up I do not remember the quality of phone service prior to the birth of “baby bells”.
Did the court orders that were originally given expire? Does the government no longer see AT&T as a potential monopoly? How different was phone service before the AT&T breakup? Why have the Standard-Oil infants been allowed to merge?
As always, thanks for your time and consideration.
AT&T was a regulated monopoly, a different legal creature than a number of individual competing companies or even an oligopoly, which is a condition in which a very few large companies dominate a market.
However, these few telecoms today do compete and compete ferociously for customers and also have to compete with large numbers of other service providers - cable, VOIP, satellite, etc. It’s not at all the same world as it was when everybody had, no choice, to go through AT&T for long distance.
Same with the much older breakup of Standard Oil. There are many corporations today in the oil business and no one has control over the entire market, as Standard Oil did.
Antitrust is still an issue, but the business cycle in most industries is for progressive mergers and splits, with new, smaller companies finding places to enter the cracks when the larger companies get too large. The Internet and its services is a prime example of that. Today’s conditions in telecom and oil are just so different from the monopoly days as to belie any talk of antitrust action.
The other reason is the Telecommunications Act of 1996, which deregulated the long-distance and local monopolies. It allowed the Baby Bells to get into the long distance market (which they were previously forbidden from) and it also required them to open their infrastructure to new telecom startups, thus fostering competition in the local markets. With much of the enforced monopoly structure out of the way, the phone companies are now free to act in a more businesslike manner.
The deregulation of the phone companies is often overlooked as one of the most important events in US history of the 1990s. Without it, much of the internet and telecommunications business as we know it today would not have been possible.
Yes. Between 1982 and 1996, AT&T and its successor Baby Bells were governed by the consent decree known as the “Modification of Final Judgment” which settled the government antitrust suit against AT&T. That decree was superseded when President Clinton signed the Telecommunications Act of 1996 into law on February 8 of that year:
There was no cellular service.
There was no telephony via cable TV lines or the Internet.
There were no resellers of telecom service.
There was no competition whatsoever for local telephony–depending on where you lived, your local provider was either a Bell subsidiary of AT&T or a monopolistic local provider such as GTE or a rural co-op. Competition for long distance service was just beginning, with MCI and Sprint winning tiny market shares away from AT&T. MCI and Sprint were cheaper, but to use them, you had to use cumbersome “dial around codes”.
In addition to providing local and long distance service to most of the country, AT&T manufactured most of its own network via its Western Electric subsidiary, which has long since been spun off (voluntarily) into Lucent.
You might also note that the present AT&T is really SBC, the descendent of one of the baby bells (Southwestern Bell). Last November, SBC bought out AT&T, and renamed itself AT&T. The child is father to the mother, or something. Among other things, it had the amusing effect of reintroducing T to the Dow Jones Average. AT&T had been removed long ago, and one of the newer components was SBC.
I worked for Bell Labs at the time of divestiture. Strange times.
Note that the current mood in Washington is quite favorable to monopolies. Anti-trust legislation mostly dates from the early 1900s. Thanks to the immense power of modern campaign donations, any large corporation can have laws put into place to favor them. (In some cases, the companies literally write the law.)
The Telec. Act of 1996 is a classic example.
Pre-1980, a company with as little as 40% market share would have to worry a lot about running into trouble with the Feds concerning anti-trust laws. Now the limit is “anything less than 100%”. Cf. Microsoft.
Such a merger would have been unthinkable legally 25 years ago. Now, they know that there is no chance that anyone in Washington DC will even object.
Cellular was being developed independently by Motorola and AT&T long before the AT&T breakup. The original commercial service was through Ameritech, one of the divested AT&T companies. The newsletters circulated to Bell Labs employees were full of stuff about developing cellular networks when I was there. If there was a stumbling block, it was the FCC. Some history: