• United States

U.S. Department of Justice vs. AT&T

Oct 26, 20072 mins

AT&T breakup comes nearly full circle 20-plus years later

The Department of Justice’s antitrust filing against AT&T did break up the carrier – at least for a good 25 years.

In the Ali-Frazier of last century’s heavyweight telecom fights, the U.S. Department of Justice went toe-to-toe with AT&T after filing an antitrust action against the carrier in 1974.

Specifically, the Department of Justice accused AT&T of engaging in anti-competitive behavior and sought to break up the company. Invoking the Sherman Antitrust Act in its case, the government said that AT&T had monopoly power over America’s telecommunications, and argued that the company should sell off some of its subsidiaries, such as manufacturer Western Electric and research arm Bell Laboratories, which would then be carved into even smaller companies.

The government’s actions set off a fierce public debate. Proponents of the Justice Department’s trust-busting suit argued that breaking up AT&T would allow more companies to enter the market place, thus spurring greater innovation and competition. Opponents countered that AT&T should be exempt from antitrust rules in order to maintain uniform standards in telecommunications services. Breaking up Ma Bell, they said, could lead to a fragmented, disorganized telecom industry.

“AT&T provides the very cheapest service possible,” Carl Glick, a telecom analyst, told Time Magazine. “Justice gets so wrapped up in its rhetoric about the advantages of competition that it loses sight of the economic implications of its moves.”

After years of legal wrangling, AT&T eventually agreed to a settlement on the government’s terms in 1982. Under the agreement, AT&T would be allowed to keep its long-distance operations, Western Electric and Bell Laboratories in exchange for divesting from its 22 local phone monopolies. Since then, AT&T has had incremental success at gaining back some of its previous clout, as the company was allowed to merge with BellSouth, one of the RBOCs that formed after AT&T had been forced to divest from its local phone services.

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