U.S. v. AT&T (1982) | |
---|---|
![]() | |
Court | United States District Court for the District of Columbia |
Full case name | United States of America v. American Telephone & Telegraph Co., et al. |
Decided | August 24, 1982 |
Citation | 552 F.Supp. 131 |
Holding | |
The Sherman Antitrust Act enabled the United States government to break up the AT&T telephone monopoly into seven smaller companies. | |
Court membership | |
Judge sitting | Harold H. Greene |
Laws applied | |
Sherman Antitrust Act |
United States v. AT&T, 552 F.Supp. 131 (1982), was a ruling of the United States District Court for the District of Columbia, [1] that led to the 1984 Bell System divestiture, and the breakup of the old AT&T natural monopoly into seven regional Bell operating companies and a much smaller new version of AT&T.
Since the Kingsbury Commitment in 1913, AT&T was permitted by the United States government, first via the Interstate Commerce Commission and then via the Federal Communications Commission (FCC), to become the natural monopoly telephone service provider in the country (known as the Bell System) in return for commitments to universal service and basic connectivity for all consumers. [2] As early as 1949, the American government had sued the company for conspiring to restrict the manufacture of handsets and other landline telephone equipment via its control of patents, and discussions about breaking up the AT&T monopoly due to abuses of its market power began during this period. [1]
By the 1950s the FCC began to allow devices manufactured by other firms to be connected to the AT&T landline telephone network, starting with the Hush-A-Phone in 1957. [3] In 1968, the FCC permitted consumer use of the Carterfone, a device that connected the landline network to CB radio networks, thus allowing consumers to receive basic service from AT&T but with wider choices of device manufacturers and auxiliary network service options. [4] The FCC also found evidence during this period that AT&T was overcharging consumers for physical products that had been manufactured by its equipment subsidiary Western Electric, which was itself a monopoly, and using the resulting monopoly profits to subsidize its landline network operations, which was a violation of antitrust law. [5]
These developments, along with an appreciation of new technologies and business models for telephone service that were becoming available, convinced American regulators that AT&T should no longer be tolerated as the natural monopoly in that marketplace. [6] A plan to break up the company into smaller components was proposed by the United States Department of Justice starting in 1974, citing authority under the Sherman Antitrust Act to reduce the power of a monopoly firm. [1] AT&T itself recommended a divestiture structure in which it would be broken up into regional subsidiaries. [7] The Department of Justice action was filed as United States v. AT&T with United States District Court for the District of Columbia in 1974. [1]
The United States District Court for the District of Columbia oversaw the proceedings for nearly a decade as AT&T and the Department of Justice formulated a plan to break up the company. [8] In 1978, Judge Harold H. Greene, on his first day on the bench at the District Court, took over management of the case. [9]
The Department of Justice announced in early 1982 that it had completed the development of its plan to break up AT&T. [10] Judge Greene investigated this plan and issued a ruling to wrap up the U.S. v. AT&T proceedings. Greene cited evidence that the company had restricted connection of service offerings and devices from other companies to its landline network, had unfairly prioritized equipment manufactured by its Western Electric subsidiary, and had overcharged for long distance telephone calls. [11] Greene then ruled that the plan to break up the company was consistent with various provisions of antitrust law, including the Sherman Act which allows government action against companies that abuse their market power, and the Tunney Act which enables government investigations of the effects of mergers and acquisitions. [1]
The final plan for breaking up AT&T, which was originally in the form of a consent decree between the company and the Department of Justice, was called the Modification of Final Judgment and was signed off by AT&T Chief Executive Officer Charles L. Brown and Assistant Attorney General William F. Baxter. [12] [13] Judge Greene accepted the terms of this agreement in an addendum to his ruling in August 1982. [1]
After Greene's ruling in August 1982, the AT&T corporate structure was divested into seven regional holding companies that became known as Regional Bell Operating Companies, or colloquially as "Baby Bells", which went into operation on January 1, 1984. Those companies inherited local landline telephone services for each region, while AT&T continued to exist as a long distance service provider at about 30% of its previous size. [10] That version of AT&T was later acquired by one of the Baby Bells. Southwestern Bell; the new entity retained the AT&T name and the company evolved into the present multinational telecommunications firm known as AT&T. [14]
The most obvious impact for consumers was the proliferation of new types of telephone equipment produced by myriad companies, including answering machines and designer handsets, [15] while companies like Sprint and MCI offered competitive new options for long distance service. [16] The Baby Bells were mostly successful and some of them merged with each other, resulting in the modern telecommunications companies Verizon [17] and Lumen Technologies. [18]
The divestiture of AT&T, and the actions by courts and regulatory agencies to achieve it, was the largest government action to reduce a corporation's market power in American history, [19] [20] and it is a dominant instance of the enforcement of American antitrust law. [21] [22] However, the results for the American telecommunications marketplace have been mixed. Some researchers praised the divestiture as an act of deregulation (of a natural monopoly) that enabled more competition, [23] [24] which in turn enabled the development of firms that could serve multiple sectors of the marketplace such as phones, computer networks, and cable television. [25] On the other hand, further technological and financial developments in the telecommunications industry, such as the convergence of networks and services, have made the lessons of the divestiture unclear, as the marketplace is again dominated by an oligopoly of large firms. [26] [27] [28]
The judicial process that enabled the AT&T divestiture is often cited as an instructive historical example in modern discussions about possibly breaking up the big tech firms that have gained market dominance in the 21st century. [29] [30]
Communications in the United States include extensive industries and distribution networks in print and telecommunication. The primary telecom regulator of communications in the United States is the Federal Communications Commission.
The Kingsbury Commitment is a 1913 out-of-court settlement of the United States government's antitrust challenge against the American Telephone and Telegraph Company (AT&T) for the company's then-growing vertical monopoly in the telecommunication industry. In return for the government's agreement not to pursue legal action against the company as a monopolist, AT&T agreed to divest the controlling interest it had acquired in the Western Union Telegraph Company, and to allow non-competing independent telephone companies to interconnect with the AT&T long-distance network.
In telecommunications, a customer-premises equipment or customer-provided equipment (CPE) is any terminal and associated equipment located at a subscriber's premises and connected with a carrier's telecommunication circuit at the demarcation point ("demarc"). The demarc is a point established in a building or complex to separate customer equipment from the equipment located in either the distribution infrastructure or central office of the communications service provider.
The Telecommunications Act of 1996 is a United States federal law enacted by the 104th United States Congress on January 3, 1996, and signed into law on February 8, 1996 by President Bill Clinton. It primarily amended Chapter 5 of Title 47 of the United States Code. The act was the first significant overhaul of United States telecommunications law in more than sixty years, amending the Communications Act of 1934, and represented a major change in that law, because it was the first time that the Internet was added to American regulation of broadcasting and telephony.
The telecommunications policy of the United States is a framework of law directed by government and the regulatory commissions, most notably the Federal Communications Commission (FCC). Two landmark acts prevail today, the Communications Act of 1934 and the Telecommunications Act of 1996. The latter was intended to revise the first act and specifically to foster competition in the telecommunications industry.
In telephony, the demarcation point is the point at which the public switched telephone network ends and connects with the customer's on-premises wiring. It is the dividing line which determines who is responsible for installation and maintenance of wiring and equipment—customer/subscriber, or telephone company/provider. The demarcation point varies between countries and has changed over time.
Universal service is an economic, legal and business term used mostly in regulated industries, referring to the practice of providing a baseline level of services to every resident of a country. An example of this concept is found in the US Telecommunications Act of 1996, whose goals are:
An incumbent local exchange carrier (ILEC) is a local telephone company which held the regional monopoly on landline service before the market was opened to competitive local exchange carriers, or the corporate successor of such a firm.
Mercury Communications was a national telephone company in the United Kingdom, formed in 1981 as a subsidiary of Cable & Wireless, to challenge the then-monopoly of British Telecom (BT). Although it proved only moderately successful at challenging BT's dominance, it led the way for new communication companies to attempt the same.
The Carterfone is a device invented by Thomas Carter. It connects a two-way radio system to the telephone system, allowing someone on the radio to talk to someone on the phone. This makes it a direct predecessor to today's autopatch. The connection is acoustic -- sound travels through the air between the Carterfone and a conventional telephone that is part of the telephone system.
Hush-A-Phone v. United States, 238 F.2d 266 was a seminal ruling in United States telecommunications decided by the D.C. Circuit Court of Appeals. Hush-A-Phone Corporation marketed a small, cup-like device which mounted on the speaking party's microphone, reducing the risk of conversations being overheard and increasing sound fidelity for the listening party. At the time, AT&T had a near-monopoly on America's phone system, even controlling the equipment attached to its network. In this era, Americans had to lease equipment from "Ma Bell" or use approved devices. At this time Hush-A-Phone had been around for 20 years without any issues. However, when an AT&T lawyer saw one in a store window, the company decided to sue on the grounds that anything attached to a phone could damage their network.
The monopoly position of the Bell System in the U.S. was ended on January 8, 1982, by a consent decree providing that AT&T Corporation would, as had been initially proposed by AT&T, relinquish control of the Bell Operating Companies, which had provided local telephone service in the United States. AT&T would continue to be a provider of long-distance service, while the now-independent Regional Bell Operating Companies (RBOCs), nicknamed the "Baby Bells", would provide local service, and would no longer be directly supplied with equipment from AT&T subsidiary Western Electric.
Baxter's law is a law of economics that describes how a monopoly in a regulated industry can extend into, and dominate, a non-regulated industry. It is named after law professor William Francis Baxter Jr., who was an antitrust law professor at Stanford University. As Assistant Attorney General, he settled a seven-year-old case against AT&T with by far the largest breakup in the history of the Sherman Antitrust Act, splitting AT&T up into seven regional phone companies in 1982.
AT&T Inc. is an American multinational telecommunications holding company headquartered at Whitacre Tower in Downtown Dallas, Texas. It is the world's third-largest telecommunications company by revenue and the second-largest wireless carrier in the United States behind Verizon but ahead of T-Mobile. As of 2023, AT&T was ranked 13th on the Fortune 500 rankings of the largest United States corporations, with revenues of $122.4 billion.
After President Nixon took office in 1969, Clay T. Whitehead, Special Assistant to the President, pushed to establish an executive office dedicated to telecommunications policy. The White House Office of Telecommunications Policy (OTP) was established in 1970. In 1978, it was merged, along with the Commerce Department's Office of Telecommunications, into the newly created National Telecommunications and Information Administration (NTIA).
The Bell System was a system of telecommunication companies, led by the Bell Telephone Company and later by the American Telephone and Telegraph Company (AT&T), that dominated the telephone services industry in North America for over 100 years from its creation in 1877 until its antitrust breakup in 1983. The system of companies was often colloquially called Ma Bell, as it held a vertical monopoly over telecommunication products and services in most areas of the United States and Canada. At the time of the breakup of the Bell System in the early 1980s, it had assets of $150 billion and employed over one million people.
AT&T Corporation, commonly referred to as AT&T, an abbreviation for its former name, the American Telephone and Telegraph Company, was an American telecommunications company that provided voice, video, data, and Internet telecommunications and professional services to businesses, consumers, and government agencies.
The history of AT&T dates back to the invention of the telephone. The Bell Telephone Company was established in 1877 by Alexander Graham Bell, who obtained the first US patent for the telephone, and his father-in-law, Gardiner Greene Hubbard. Bell and Hubbard also established American Telephone and Telegraph Company in 1885, which acquired the Bell Telephone Company and became the primary telephone company in the United States. This company maintained an effective monopoly on local telephone service in the United States until anti-trust regulators agreed to allow AT&T to retain Western Electric and enter general trades computer manufacture and sales in return for its offer to split the Bell System by divesting itself of ownership of the Bell Operating Companies in 1982.
AT&T Corp. v. City of Portland, 216 F.3d 871, was a court ruling at the United States Court of Appeals for the Ninth Circuit. The ruling was an important early precedent on the regulation of local cable broadband networks, with the court finding that Federal Communications Commission regulations supersede those of local authorities.The ruling has also been cited as a precedent in network neutrality disputes.
United States v. AT&T, 916 F.3d 1029 (2019), was a ruling of the United States Court of Appeals for the District of Columbia Circuit, which prevented the U.S. government from blocking a merger between AT&T and Time Warner, thus creating the WarnerMedia conglomerate. The court found that regulators were unable to prove harm to consumers per the requirements of United States antitrust law.