AT&T: The Break-Up of a Monolith
THE DEAL OF THE CENTURY
The Breakup of AT&T
By Steve Coll
Atheneum. 400 pp. $18.95
THROUGHOUT MOST OF THIS CENTURY, it was the behemoth of American business: the largest corporation in the world, the purveyor of goods and services virtually no one could do without, and, for better or worse, a monopoly of mammoth dimensions. In its early years, the American Telephone & Telegraph Company grew big by swallowing up its competitors; in its later years, it stayed big by squashing them. When the federal government tried to loosen AT&T’s mortal lock on the telephone business, as it did in the 1910s, in the 1940s, in the 1950s, and again in the 1970s, Uncle Sam turned out to be no match for Ma Bell. Little wonder, then, that those who saw something sinister in big business saw, in AT&T, an evil and invincible empire.
This is the story of how the bad guys finally lost.
In The Deal of the Century, a superbly reported and smoothly written narrative, Steve Coll reconstructs the labyrinthine some would say Byzantine story behind the breakup of the Bell System. The drama unfolds on many fronts, but Coll’s account of what happened and why is graced by a certain seamlessness. The context, of course, is the bewildering and decidedly unpleasant force AT&T found itself facing, for the first time, in the late 1960s: competition.
As it happened, AT&T’s draconian response to competition may have been its undoing. When the Federal Communications Commission ruled in 1968 that AT&T customers could hook up non-AT&T equipment in their homes and businesses, AT&T direly warned that such “foreign attachments” could disrupt telephone service to an entire city, an assertion that proved to be just short of ridiculous. When the FCC embraced the notion of limited competition in the long-distance business, AT&T launched a full-scale attack on its own regulators. When an ambitious but cash-starved enterprise called Microwave Communications Inc. moved into the long-distance market, AT&T tried to choke off its access to local telephone exchanges, and at one point even pulled the plug on MCI’s customers. And when the Justice Department filed a sweeping antitrust suit against it in 1975, AT&T got a federal judge to put the litigation on hold and then tried, unsuccessfully, to strong-arm Congress into fully restoring its monopoly status.
By 1977, however, as the Justice Department prepared to reactivate its antitrust action, AT&T sent one of its staff attorneys on a peace mission to Washington. “Maybe it’s time to talk about a solution to this thing,” he told Ken Anderson, who would serve for three years as the government’s lead trial attorney against AT&T. “I’ll tell you one thing,” Anderson replied. “This case is going to be a severed limbs case. We’re going to have severed limbs, AT&T limbs, on the table dripping blood. That’s the way this case is going to be settled.”
In the face of such intransigence, AT&T’s executives and lawyers came to hope that the election of Ronald Reagan might end their troubles once and for all. Reagan liked, on the 1980 campaign trail, to tell the story about how he could mail a letter from Hollywood to New York in the 1940s for just a few cents, while a long-distance telephone call was many times that, and how, 30-odd years later, postage had gone up tenfold while long-distance rates actually had gone down. “And, of course,” Reagan’s punch line invariably went, “the government is suing the phone company.”
But William F. Baxter, the Reagan administration’s antitrust chief at the time, loved the idea of suing the phone company. When asked at a press conference what he intended to do about the AT&T case, Baxter’s reply was swift and sharply worded: “I intend,” he said, “to litigate it to the eyeballs.”
IT EVENTUALLY WAS LEFT TO Charlie Brown, AT&T’s chairman, to pose the questions everyone else in the company theretofore had been afraid to ask: “Why are we fighting this case?” And “Why are we fighting so hard to keep this local exchange bottleneck?” The more Brown and other AT&T executives thought about it, in fact, the more appealing some form of corporate hara-kiri became. The cleanest break, they figured, was to jettison the 22 local operating companies, AT&T’s most costly and least profitable subsidiaries, while keeping the big moneymakers: Long Lines (its long-distance subsidiary), Western Electric, and Bell Laboratories. It took AT&T’s board of directors, which gathered in December 1981 to consider the proposal, less than two hours to agree.
It took U.S. District Court Judge Harold H. Greene much longer. For years, he managed to keep the biggest case that ever walked into his courtroom from walking out, even though AT&T’s lead trial attorney had aptly sized up the situation by saying, “This case is history, your honor.”
History, however, is filled with irony, and Coll suggests that while AT&T lost the battle it may yet win the war. “The fact is that unless Congress intervenes and decides for political reasons to prolong the other common carriers’ artificial deep discount,” he writes, “AT&T will find itself alone in the basic long-distance market by the end of the century.”
Maybe so. Breaking up AT&T, after all, wasn’t necessarily the best choice. Just the right choice.
This review originally appeared in the November 9, 1986, edition of The Washington Post Book World.
Bill Hogan