What happened to the old AT&T?
The original AT&T was the business that before 1984 when it was unbundled into smaller entities under US Department of Justice antitrust action. Operating over a century, the old AT&T Internet was a massive vertically integrated monopoly providing local and long-distance phone services along with telecommunications equipment in much of the United States.
AT&T originated in 1877 when Alexander Graham Bell invented the phone. Under the name American Telephone and Telegraph firm, Bell's telephone firm grew and acquired other smaller telephone companies to concentrate its authority over the whole telephone infrastructure throughout the United States over the following several decades. By 1913, AT&T was controlling about ninety-one percent of the nation's phone lines and had already dominated the telephone services in the United States.
Operating as a legal monopoly under regulatory control, AT&T was a legal monopoly for much of the 20th Century. The government let its monopoly position as network externalities and economies of scale naturally create monopolistic traits in phone networks. But by 1974 the U.S. Department of Justice began compiling an antitrust lawsuit against AT&T. After ten years of legal conflict, AT&T agreed to a divestment plan whereby it would split AT&T into seven independent "Baby Bell" operating companies with local telephone service and access to the exchange and AT&T would retain long distance services, research and development facilities, and equipment manufacture divisions.
The primary justification for the creation of the old AT&T breakup was to promote competition in long-distance telephone services and telecommunications hardware manufacturing. From a political perspective, the breakup was also aimed at reducing the influence of large business entities. However, over the years, the “Baby Bells” regrouped into even larger companies such as SBC Communications and Ameritech Corporation, and then re-formed again as part of the newly revived AT&T Corporation which was acquired by one of the “Baby Bell” spin-offs, SBC, in 2005.
The timely disintegration of the old monopolistic telephone system also brought in fresh competitive forces in the form of mobile phones and the Internet. The abolition of the old state-controlled telephone monopoly has been identified as having facilitated constant and remarkable development in communication technology since then. Nonetheless, it has its setbacks; for example, economies of scale have taken a hit and there has not been much planning concerning the communication structures hence sometimes interoperability and integration prove problematic.
While it is obvious that the old telephone monopoly of AT&T was not good for telecommunications, the dynamics of telecommunications also present many challenges to regulators who wish to liberalize the marketplace yet at the same time foster access to infrastructure for everyone. Telecom has been revolutionized once again in the 21st century through the advancement of digital communications technology and this poses new issues for policy making including market power, privacy, and access. Google and Facebook dominate their respective areas like never before, and Internet and mobile communications providers are also increasingly concentrated in the hands of a few giants just like AT&T. It can also be seen that many of the lessons from the old AT&T breakup remain relevant today about these issues in the new digital environment.
Thus, the old AT&T telephone monopoly was split in 1984 in the interest of promoting competition, although telecommunications networks have structural conditions of natural monopoly where large-scale integrated firms are most suitable. However, consolidation and concentration of market power have re-emerged in the vastly more complex digital telecommunications ecosystem but not in the same manner. New dynamics in mobile broadband technology and the Internet have emerged, which have raised new competition and policy issues. As the technologies and markets are moving forward at a great pace, the regulators are still struggling with many of the same basic questions related to the concentration of power and the provision of access to all.
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