1968 – The Carterphone Decision (aka FCC Part 68)
1970s – The Infamous US Government Lawsuit
In late 1960s, a new market was on the rise called Long Distance. This enabled customers to make calls outside their home central office without needing operator assistance. Companies tried to do this but often got in the way (allegedly) by AT&T’s regional providers. MCI was one of the more successful companies to do this. The once Microwave Communications Inc, used microwave/UHF radio signals to transmit the call almost identical to a commercial two way radio. AT&T had already done this, and in fact some of the US Television networks used AT&T’s Long Lines to transmit audio to local affiliates.
However, it was OK for AT&T to do this, and not for everyone else. And as a result AT&T had allegedly disconnected lines from MCI in some markets. These practices including markets such as third party telephones one could buy off the shelf in a store or even another vendor’s PBX telephones were also shunned by local Bell officials. In 1974, AT&T was sued by the Justice Department in the case for monopoly of the Long Lines department. The company also went to an administrative court from the FCC just four years prior in the Carterphone case. The case by the Justice Department started around 1980, lead by Judge Harold Greene and in January 1982, Charles Brown the chairman of AT&T came before the public announcing a settlement with the Government.
1982 – Announcement of the Consent Decree
The 1982 Consent Decree, later to be known as just “The Divesture” would mark a significant change to the corporate history of AT&T. The man’s delivery was as if he killed his own company he built, beginning like many AT&T execs for the time, as a lineman. The moving video of his bittersweet pride is probably rare for executives to ever feel.
AT&T’s Bell Labs invented the transistor (basically an app-sized equivalent to the infamous vacuum tubes) that started a large computer market. In a 1956 Consent Decree, AT&T was banned from being in the computer market. The motive was for AT&T to be in more lucrative business, but also having to deal with the challenges of a competitive market. AT&T was a more of a regulative utility where double digit growth was not possible, but was required in a competitive marketplace.
The settlement was allegedly in favor of the consumer. A lot of this was due to the technicalities, and even the day to day business, ranging on who should own the Yellow Pages, to who should be the collector of the bills of what would become eight different companies; to who owns what lines in a large sheath of wires. And where do people follow their jobs? And would there be layoffs?
So as a result, for over a year, with Judge Greene’s assistance in the letter of the Consent Decree, AT&T was preparing for both themselves and their employees where they stood before December 31st, 1983. By this time; the company decided to break into seven companies known commonly as the “Baby Bells”, mostly the Bell companies that served each of their regions in this case – just a stronger brand name than before. The Regional Bell Operating Companies were allowed to use the infamous Bell logo designed by Paul Rand, but not the AT&T logo.
What resulted for the “new AT&T” was four divisions, the Long Lines, the equipment repair service for consumers, and enterprise computer and telephony services, and a long haul multimedia service.
The Baby Bells or RBOCS were not allowed to sell equipment (or even consulting services) at all per to Judge Greene’s orders. This lobbying on the smaller bells continued for a couple years after 1984, and as a result, some Bell companies created their own companies sharing the Baby Bell’s name as a financial engineering loophole called “subsidiaries”.
1984 – 2004 – New World Order (AT&T’s Failed Transition from a Utilitarian to Competitive Business Model)
In 1984, telephones suddenly started to change. The infamous “Bell System Property – Not For Sale” was replaced by the AT&T logo. And any stickers on the bottom that stated property of the RBOCs was replaced by a 1-800 number to AT&T (see above – even for consumers they were banned for support.)
The once heavy duty sets were replaced by electronics, making such lovely sets friendly to the dumpster if something failed. AT&T started to offshore consumer telephone manufacturing early on and focused on domestic productions of say their Merlin small business phones and their System 75 PBX boards, etc.
Since 1984, AT&T struggled in the computer business. While they invented and owned UNIX, they tried to sell UNIX workstations, and around 1987, AT&T was touting a workstation that could run UNIX and MSDOS and the ability to multitask. This didn’t help AT&T’s issue at all.
AT&T’s transition was cutoff suddenly when James Olson, the Chairman and CEO had died of cancer in early 1988 just before their annual shareholders meeting. He was only 64 years old at the time. Olson, a ballsy, gutsy, “We’ll-Get-IBM-In-Their-bleepy-bleep” attitude was the fire that AT&T needed in their belly. A very strong leader who knew what AT&T needed to do get into the competitive space. A son of parents working for the Bell System, he worked his ranks up through the company to become chairman then CEO in 1986, succeeding Charlie Brown, who was their CEO at the time of the Divesture.
With that, the man who took the company’s keys was Bob Allen, a soft spoken dude while he had the right intentions, he lacked the fire in the belly, which propelled AT&T into a slow, but steady downfall.
AT&T started to sell off entities that could’ve helped them. Their flagship operating system that was in most computer related systems was sold to Novell in the late 1980s. While IBM disposed the once #1 enterprise phone system company, ROLM from a 1984 acquisition in 1991, that same year AT&T decided to buy the National Cash Register company that was evolving from selling electronic cash registers to point of sale terminals well known as P.O.S. with an IT business model. AT&T was believed to preemptively held NCR back, and between the corporate politics, NCR was spun off a few years later.
During this time AT&T tried to woo consumers with some video conferencing solutions that the same company dissed in the 1960s, using the standard analog phone lines. Another innovation that never left the labs, was a technology called the Hobbit, that was featured in a 1993 ad campaign of “You Will. and the company that will bring it to you – AT&T”
In the summer of 1995, AT&T announced 3 spinoffs, the failed acquisition of National Cash Register (that would become 3 lettered initials), the equipment business that was once Western Electric, Lucent Technologies, and AT&T would be reformed financially to look as if they made profits. AT&T had also acquired McCaw Wireless then sold it off, then bought the cable giant TCI in the late 1990s, failed and sold to Comcast a few years later. AT&T was in post menopausal state, bored and nothing better to do.
Nearly twenty one years after the Divestiture, AT&T was sold to – by the Baby Bell known as Southwest Bell Corporation (since combined Pacific Bell, BellSouth and SNET from Connecticut as one) and acquired late that year. AT&T’s century plus existence quickly became someone who was of a young adult age.
Conversations and speculation of Judge Greene’s intervention and it’s merit can still be argued.