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.
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.
Day in history
On this day 34 years ago, blundering oilmen turned a ten-foot deep freshwater lake in Louisiana into a saltwater lake over a thousand feet deep. Read more here.