Innovation & Wealth › The information age › Deregulation, privatization and 'shareholder value'
Breakup of AT&T
January 1, 1984· Event· Laws, labor & antitrust
Well documentedSolid records, texts or physical evidence.
An antitrust settlement split the Bell telephone monopoly into a long-distance AT&T and seven regional 'Baby Bells' on January 1, 1984.
See it on the Innovation & Wealth map →What happened
AT&T owned most US local phone lines, nearly all long-distance service and, through Western Electric, the phones themselves; it had about a million employees. The Justice Department sued in 1974. In a 1982 settlement overseen by Judge Harold Greene, AT&T kept long distance, Western Electric and Bell Labs but spun off its local companies into seven regional firms. Long-distance prices fell as MCI and Sprint competed. Many Baby Bells later merged back into today's AT&T and Verizon.
Impact on society and the economy
It opened telecom to competition, cheaper calls and new equipment makers, and remains the largest US corporate breakup since Standard Oil in 1911.
How we know
The court record of United States v. AT&T, the 1982 consent decree (the 'Modification of Final Judgment'), and FCC data on falling long-distance rates.
Still debated
Whether the breakup or new technology (microwave links, fiber, mobile) did more to cut prices is debated; some blame it for Bell Labs' later decline.
Connections (2)
▸Sherman Antitrust Act was the basis of Breakup of AT&TWell documented
The connection
The Justice Department's 1974 suit charged AT&T with illegally monopolizing telephone service and equipment under Section 2 of the Sherman Act. After Judge Greene refused in 1981 to dismiss the case, AT&T agreed in 1982 to spin off its local phone companies, making the 1890 law the tool for the largest corporate breakup in US history.
When and how
Washington, D.C.: suit filed November 1974, trial 1981, settlement January 1982 before Judge Harold Greene; the breakup took effect January 1, 1984.
How we know
The court filings and the 1982 consent decree rest directly on the Sherman Act.
Debates
Whether the government would have won at trial is uncertain; AT&T may have settled partly to escape old limits and enter the computer business.
▸Alexander Graham Bell and the telephone became the Bell monopoly ended by Breakup of AT&TWell documented
The connection
Bell's 1876 patents gave his company a legal monopoly until they expired in 1893–94. AT&T then bought rivals and refused to connect independents to its long-distance lines. A 1913 deal with the government and later regulation made it a protected monopoly. By the 1970s the Bell System ran most US phones, until the 1984 breakup.
When and how
Boston, 1876–77; AT&T in New York from 1885; the 1913 Kingsbury Commitment with the Justice Department; dissolved January 1, 1984.
How we know
Patent records, the Kingsbury Commitment, FCC records and court filings trace an unbroken corporate line from the Bell Telephone Company to the Bell System.
Debates
Whether a regulated monopoly was needed to build universal phone service, as AT&T chief Theodore Vail argued with 'One Policy, One System, Universal Service,' is still debated.