On November 20, 1974, the United States Department of Justice filed an anti-trust lawsuit against AT&T that would result in the breakup of a century’s old monopoly. The fact that AT&T was a monopoly was no surprise to anyone, and in fact, the company had openly built their business on being a unified system with no competition. But by the 1970’s, AT&T had grown too large in too many directions for the government to continue to ignore.
AT&T was born out of the original Bell Telephone Company, which had been founded to house the patents of telephone inventor Alexander Graham Bell. In the era before the original patents expired the company had an entirely legal monopoly over the telephone network, but with their expiration came heavy competition. AT&T brought in a new president, Theodore Vail, who took the company in a new direction. They would heavily invest in building a coast-to-coast network of telephone lines, and would brazenly attempt to become the only long distance provider in the country. The plan worked, and AT&T began buying up competition until it was the only player in the long-distance game.
Vail’s motto, and the company’s long-time slogan, became “One Policy, One System, Universal Service.” While having a monopoly is antagonistic to the forces of capitalism and creates higher prices, in certain situations including telephone networks, it can make sense. It was better for the people of America to have one system with universal service, as they could be guaranteed there was no friction between the different technology types or varying telephonic standards of different companies. One system meant that the same telephone would work whether it was plugged into a socket in California or New York. The Justice Department regularly investigated AT&T, but repeatedly allowed them to keep operating. By permitting AT&T to continue in this monopolistic fashion, the government ensured a functioning phone system for its citizens.
By the 1970’s things had changed for AT&T. They had become so powerful that they not only owned the local and long distance telephone services, but also the companies that manufactured telephones and equipment, and even the phone book. Their most troublesome asset became Western Electric, an equipment manufacturing company in which the government ordered them to completely divest in 1974. AT&T countered with another proposition: allow AT&T to continue to operate the long distance network and maintain its positions in the related business, in exchange for giving up ownership of the local telephone companies. By doing this, AT&T local business was effectively split into numerous companies including NYNEX, SBC, WorldCom, and more, while AT&T survived as the nation’s long distance carrier. It was the end of America’s largest company, but it would seem the division was only temporary. Since 1982 when the breakup finally occurred, the vast majority of the broken-up AT&T companies have coalesced, through mergers and acquisitions, into to just two carriers: AT&T and Verizon. Perhaps the day when we see these two companies trying to merge back into one is not so far off.