The AT&T breakup became effective January 1, 1984. Prior to then, ATT was a regulated monopoly. The breakup allowed others to enter their territory and allowed them to enter other territories. AT&T agreed to divest its local exchange service operating companies (the Baby Bells) in return for a chance to go into the computer business (AT&T Computer Systems – which was involved with Unix System 5 and AT&T PCs).
So what’s happened in the past 25 years? Technology has changed in ways not imagined at that time, affecting the breakup in a multitude of ways.
The breakup led to multiple types of telephone handsets and new technologies.
Long distance became much cheaper – partially because AT&T’s higher long distance prices had previously subsidized local land service, and partly because of competition from companies such as MCI and Sprint. Today, the long distance market is shrinking dramatically due to cell phones and Voice over IP.
The billions of dollars AT&T hoped to make from the computer business didn’t happen.
Another part of the breakup of course was the creation of the seven Baby Bells. These were:
- Southwestern Bell
- Pacific Telesis
- AmeriTech
- Bell South
- NYNEX
- Bell Atlantic
- US West
None of which exist today! Local landline service never became competitive or terribly profitable. Instead, it became a good buyout target since it was never that strong financially. Hence the seven babies are now three:
- Southwestern Bell, Pacific Telesis, and AmeriTech became known as SBC. In 2005, SBC bought what was left of AT&T, including the name. AT&T acquired Bell South in 2006, along with the Cingular mobile serivce which previously was jointly owned by Bell South and SBC/AT&T.
- NYNEX was bought by Bell Atlantic in 1997. Bell Atlantic acquired GTE in 2000 and became known as Verizon.
- US West was acquired by Quest in 2000.
Today landline business is down due to cell phones and Voice over IP.
The question is then, was the breakup worth it? Yes, although just not in ways that were envisioned at the time.
During the Microsoft DOJ case, a suggested remedy was splitting it into “Baby Bills,” a comparison to the AT&T breakup. However, the two companies were not the same. AT&T was a regulated monopoly; Microsoft was not – it gained a large market share due to its market success (some may say for other reasons, but it definitely was never a regulated monopoly). If you want to read more about the Microsoft case, you may want to check out the paperback edition of Winners, Losers, and Microsoft by Stan Liebowitz and Steve Margolis (https://www.amazon.com/Winners-Losers-Microsoft-Stan-Liebowitz/dp/0945999844). Its appendix has a discussion of the DOJ case and suggested remedies.
Also check out this slideshow: Ma Bell’s 25-year odyssey
and this related article Does the AT&T breakup still matter 25 years on?
