A milestone in telecom’s evolution

It is unthinkable that the powers that be who broke up AT&T 20 years ago could have envisioned that the changes they set in motion ultimately would force the company to exit the consumer phone business. After all, AT&T was the phone business.

But the announcement 10 days ago that AT&T would turn its back on consumers is the loudest signal yet that the telecom world is forever changed.

Twenty years ago the goal of the divestiture of AT&T was to give pipsqueaks like MCI a fighting chance at survival and equipment vendors other than AT&T’s Western Electric a fair chance to sell gear into the Bell System.

AT&T agreed to spin off its 22 local operating companies Jan. 1, 1984, into seven Bell holding companies to end a long, contentious anti-trust suit brought by the U.S. Justice Department.

At the time the company had more than 1 million employees, $150 billion in assets (more than the top three U.S. industrial companies combined) and some $70 billion in revenue.

It looked like a good deal. AT&T was transferring to the Bell operating companies assets that were the hardest to install and service – local loops – while keeping the lucrative Long Lines division, Western Electric (by itself the 22nd-largest industrial company at the time), the preeminent Bell Labs and the newly created American Bell, the equipment arm through which the company was preparing to march into non-regulated markets.

Post-divestiture, AT&T had about 400,000 employees, $40 billion in assets and 1984 year-end revenue of $33 billion.

Now after 20 years of colossal gambles and failures in everything from computing to CATV, the company has 60,000 employees, $30 billion in revenue (estimated ’04) and still is trying to find its way.

Unlike the spasmodic thrashing of the past, however, this time AT&T simply appears to be making a sensible move to deal with an untenable situation. The prices of unbundled network elements are bound to climb and the Bell companies are winning the consumer long-distance war: Although AT&T is said to command 25% to 30% of that market, the Bells together now have 35% to 40% and their share is growing fast.

Short term this can only be a good thing for you, the business customer. Removing the distraction of fighting for share in a market with diminishing margins means AT&T can focus all its efforts on your needs. But one can’t hope but wonder if long term AT&T will be acquired.