Is AT&T still a monopoly?
In the communications sector particularly in the usage of telephone in the United States, AT&T was historically known to be a monopoly. For much of the twentieth century, AT&T controlled the country's phone services and equipment using its Bell System. Early in the 1980s, however, AT&T Internet was engaged in a significant antitrust lawsuit that resulted in company splits and loss of monopolistic power.
Well, is AT&T still a monopoly today? The short answer is no, however, AT&T has become a much larger and more influential company again after re-consolidating some of the Baby Bell companies it did split up, but it still has a great deal of competition in every facet of its business.
The AT&T Breakup and the Emergence of the Local Exchange Carriers
Before getting to AT&T’s current organization and the nature of its business, it is essential to take a brief look back at the events of 1984. During that period, AT&T was a giant holding company that controlled local telephone systems, long-distance communications, telephone hardware production, and research – virtually everything related to telecommunications. This made it impossible for AT&T to open its networks and equipment to its competitors to access since it had no reason to do so.
In 1974, the United States Department of Justice sued AT&T Corporation for anti-competitive practices, accusing it of using its dominance to suppress innovation and competition. Only after several years of trials in the courts, AT&T finally agreed to divest in 1984 by splitting into small companies. Long-distance services and some equipment manufacturing were retained by ATT, and the seven regional ‘Baby Bell’ holding companies were formed to operate local telephone networks and services.
The breakup made it possible for other competitors to venture into the telephony market and provide the consumer with a variety of options. MCI and Sprint could now offer similar services as AT&T for long-distance calling and telephone equipment and business communications were now available through new start-ups. Increased competition led to price reductions and improved service for many consumers, as firms sought to gain market share.
The Re-emergence of AT&T
However, in the 1990s and 2000s, AT&T began the process of reconstituting many of the parts of its former monopoly through mergers and acquisitions. In 2005 it bought one of the original Baby Bells, SBC Communications, which had evolved into one of the largest telecommunications companies in the United States. This once again made AT&T the biggest telephone company in America. AT&T also obtained other large suppliers such as BellSouth and DIRECTV later on.
However, due to these mergers, AT&T does not dominate the telecommunications market as it used to in the past. This is because the market has changed significantly with new wireless Internet services, cable companies offering bundled phone and Internet services, and the development of VOIP calling technologies that enable new forms of competition to enter the market.
Wireless Market No Monopoly
A circumstance that is not widely known is that in wireless services, AT&T has a relatively small market share among the national players. Currently, Verizon and T-Mobile have more subscribers in its wireless market in the U.S. than AT&T has, also many regional telecom companies and mobile virtual network operators (MVNOs) have captured a huge market of the wireless business. In the present highly competitive wireless market environment there are hardly many monopolistic forces such as network stickiness or lock-in created by proprietary networks as networks have become more integrated and number portability allows easy migration from one carrier to another.
Disconnection of Local Landline Hegemony
Local telephone markets also no longer have the AT&T stranglehold on them like they used to. The number of customers acquiring new landline service has been declining in the past two decades and this has in effect reduced the domination of AT&T over local networks. Most consumers have even completely abandoned the use of landline telephones as mobile phones are now commonplace.
Also, telecommunication services such as local telephone and broadband services have experienced AT&T’s market share being threatened by cable companies like Comcast and Charter through service bundling where they offer these services in conjunction with television services. As consumers demanded more convergence in home networking and communications as well as entertainment, cable providers have emerged as strong rivals to the local telephone companies.
Additional Features in Long Distance and Business Communications
While earlier, AT&T had almost a monopoly over long-distance services, many choices are available for today’s consumers and corporate buyers. Other carriers such as Level 3 Communications, CenturyLink, XO Communications, and others have developed large national fiber optic networks that enable them to bid for enterprise and government contracts. Skype also provides cheap VOIP calling tariffs which can effectively replace normal long-distance.
The AT&T case explicitly addresses the question of whether this monopolist could or would reform, and offers a clear answer: yes, it could.
Although AT&T currently controls significant size and power as the largest telecommunications firm in the US, the current antitrust laws and technology changes do not support the company in attaining the full vertical monopoly it had previously enjoyed. However, critics have opined that the further merger of media, internet, and content providers may put AT&T and other communications colossi in a position of control in the future.
The proposed merger between telecommunications giant AT&T and media company Time Warner in 2016 raised discussions regarding market power imbalances in new technologies without net neutrality provisions. The company’s arrangements with cellular tower firms have also created concern about self-serving for the company’s wireless division.
So in conclusion – no, AT&T is not currently a monopoly and it is not a market that is controlled by one particular company. However, its aggressive merger strategy and customer base still make it highly influential in every segment of the telecommunications industry. Regulators are still monitoring AT&T to avoid anticompetitive conduct, yet so far it appears that AT&T is only dominant in a highly competitive and rapidly evolving set of technology markets. Ma BellThread was successfully dismantling AT&T’s monopolistic structure, and the experience of that success may continue to dissuade it from rebuilding one.