WRFH/Radio Free Hillsdale 101.7 FM - In Media Res: You Can Ring "Ma Bell"

Episode Date: October 21, 2024

Join Hershey and Stephanie as they discuss the breakup of AT&T in 1982, one of the largest antitrust lawsuits in American history, on this episode of In Media Res.

Hello, beautiful people, and welcome to our show on Radio Free Hillsdale 101.7 FM. My name is Hershey. And my name is Stephanie. And we're your host for MediaRes, a show where we examine a landmark court case, starting from the middle of the action. In this episode, we will be investigating one of the biggest antitrust cases in U.S. history, the breakup of American Telephone and Telegraph Company, or what we know as AT&T in 1982. Are you ready for this, Hershey? Yeah, let's dive right in.

AT&T was considered a monopoly, mostly because it was one, and a pretty big one at that. In the early 1910s, AT&T became the leading and pretty much the only provider of telephone communication services in the United States. By the 1970s, it was one of the largest companies in the world, and it was a conglomerant of several other communications companies, such as Western Electric that made the telephone equipment, long lines, which provided long-distance service, and about 24 local operating companies that would provide local service. It was referred to colloquially as Ma Bell, and it always had what we call a natural monopoly in the telephone industry. And for our listeners, a natural monopoly is just when a monopoly forms in an industry because it's easier and cheaper for a company to supply the good or service than to have multiple companies doing it. AT&T was actually permitted to have a natural monopoly by the Federal Communications Commission in exchange for providing universal service and basic connection to consumers. And that is the huge irony of many antitrust cases, that most of these monopolies were granted by government in the first place. Something that was especially contested in this case was the fact that AT&T was deliberately charging higher than cost rates for their more profitable services, like long-distance calling,

to subsidize their less profitable services like local calling. This made local calls, which were pretty much the majority of calls, much cheaper. And AT&T claimed that these low prices would only remain possible if AT&T could remain the next. natural monopoly it had over the communications market. But this self-subsidizing is a direct violation of antitrust law. AT&T was around as early as 1885, but allegations of AT&T's anti-competitive practices didn't start until 1949. Many of these were settled with small compromises, but lawyers in the antitrust division of the Department of Justice were still itching to dismantle AT&T's hold on the telecommunications market.

Though the market was beginning to be more competitive in the 1960s and 70s, the Attorney General of the United States, William Saxby, filed a suit against AT&T in 1974 for a variety of anti-competitive practices. And this is the lawsuit that ended it in 1982. It lasted for eight years. Many cases can actually take much longer than that, but just think of how large a company AT&T was at the time. That is not only a lot of evidence to pour over, but the Department of Justice was also trying to think of the best plan to properly divest AT&T of their market power and break up its monopoly. The judge overseeing this case in the United States District Court for D.C. was judge. The judge overseeing this case in the United States District Court for D.C. was Judge Harold Green. And by 1982, he ruled that AT&T had indeed violated antitrust law by restricting other telecommunications companies from, providing services and devices, unfairly favoring the equipment manufactured by one of their

subsidiaries, and the overcharging for long-distance calls, among other reasons. The Mondell Company was ordered to divest into seven smaller regional holding companies that became known as the Baby Bells. In the years to come, many of these companies would merge with each other and create some of the leading phone service companies we know today, such as Verizon, Sprint, and, yes, AT&T. At the time, AT&T versus United States was the largest antitrust case in American history. Since then, we have had many similar antitrust cases with technology companies such as Microsoft, and now we are seeing cases rise up against Google, Apple, and other big tech companies.

Yes, and it will certainly be interesting to see how those play out in the years to come. And I'm afraid that's all we have time for on this episode of InMediares. We're your host, Hershey and Stephanie, and thank you for joining us. We'll catch you next time on Radio Free Hillsdale 101.7 FM. Thank you.