20 November 1974: the US government launches an antitrust suit against AT&T

On this day in 1974, the US government launch an antitrust suit against AT&T to break its stranglehold on the American telephone network.

AT&T logo
AT&T now has a market cap of around $200bn
(Image credit: © AaronP/Bauer-Griffin/GC Images)

The American Telephone and Telegraph Company (AT&T) was set up in 1885 to create a private national telephone service in the US. Rapid growth, plus its acquisition of all major rivals, gave AT&T a monopoly over long-distance telephone calls. It also controlled many local phone companies.

As a result, in 1913, regulators launched an antitrust (competition) suit. To avoid breakup or intervention, AT&T settled out of court. The Kingsbury Commitment saw AT&T continue in return for allowing local firms to connect to the national network.

While the deal slowed AT&T's expansion, it did not stop it. By the 1920s, AT&T had bought out all but three of the independent firms. By 1934, the government gave up trying to introduce competition, and imposed direct price regulation via the Federal Communications Commission.

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However, the agreement started to break down in the late 1960s. A number of rival firms, who tried to take advantage of the agreement allowing them to connect to the national network, were either refused service or quoted artificially high prices.

So in 1974, the government launched another antitrust suit, seeking to break up AT&T. AT&T argued that its monopoly allowed consumers to take advantage of economies of scale. The long-running dispute wasn't settled until 1984. AT&T sold all its local services, which split into seven companies ("Baby Bells") and retained its national service and various subsidiaries.

AT&T was bought by South Western Bell Corp (one of its "Baby Bells") for $16bn in 2005. The merged firm, still known as AT&T, today has a market cap of $200bn.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

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