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Breakup of the Bell System.

The biggest communications story of the past decade . . . and perhaps of the entire twentieth century . . . has to be the break-up of the Bell System. And the jury is still out as to the justification of the governments' antitrust action, the fairness of Judge Harold Greene's divestiture decision, and the wisdom of AT&T's willingness to settle.

Only time will tell whether the divestiture of AT&T turns out to be "good" or "bad" for the people of the Unwted States, for the more than three million shareholders of AT&T, for the new AT&T as a company, and for the total communwcations wndustry.

Now, just half a year into the new AT&T's future, all that can be said is that the divestiture has dramatically changed AT&T from a regulated, somewhat staid monopolistic utility into an aggressive, marketing-oriented company . . . and had created a near-chaos of opportunity which has made the total communications marketplace one of the most exciting ever to exist in this nation of opportunity.

AT&T had, of course, been under Justice Department attack before. Early in this century AT&T President Theodore Vail (the father of the Bell system) acquired a 30 percent interest in Western Union and also became president of that company, attracting the attention of the attorney general. And then, like now, AT&T settled, agreeing in 1913 in what came to be known as the "Kingsbury Commitment" to these four conditions: first, to dispose promptly of all Western Union Stock; second, to refrain from any further acquisition or control, either directly or indirectly, of any other telephone company; third, to connect its toll lines with any company desiring such connection; and fourth, to provide long lines service to the customers of all independent companies so connected.

"In the recent settlment," observes Bruce Netschert, vice president of National Economic Reasech Associates, "AT&T has made the same decision. It gives up the less profitable part of the business while retaining the core of the network (long distance transmission) plus gaining the right to compete in new profitable areas from which it was previously prohibited. Again, the net result is advantageous . . . although to realize that advantage AT&T must become a market-oriented company. One wonders, did the ghost of Theodore Vail have a few words with Charlie Brown in December 1981?"

The long and costly government action which led to divestiture began on November 20, 1974 when the Justice Department filed its antitrust suit seeking break-up of the Bell System. Four years later Judge Harold Greene came on the scene, replacing ailing Judge Waddy. In August of that year (1981), the Justice Department agreed to drop the suit if Congress (then on a "Communications Act" kick) enacted legislation that would accomplish the desired break-up of AT&T. But by the end of that year, all parties agreed to resume discussions and just a few days later, on January 8, 1982, AT&T and the Justice Department announced that they had come to an agreement.

On August 11, 1982 Judge Greene issued his now-famous 178-page opinion saying that the settlement was "in the public interest" . . . with ten modifications. A week later both AT&T and Justice agreed to the ten changes and on August 24, 1982 Judge Greene entered his decree. On December 16, 1982 AT&T filed its reorganization plan. On July 8, 1983 Judge Greene asked for six final changes (including the passing of the Bell name to the operating companies) and both AT&T and Justice accepted these six changes on August 3, 1983.

On August 5, 1983 Judge Greene gave his final full approval to divestiture which AT&T implemented by transferring assets and reassigning personnel on December 31, 1983 . . . and by divesting by distribution of the stock of the seven regional companies on January 31, 1984.

AT&T Chairman Charles Brown faced divestiture with a characteristic smile, saying: "Today signals the end of an institution . . . the 107 year-old Bell System . . . and the start of a new era in telecommunications in this nation.

"The telephone companies are launched in fine shape. Financially sound. Well managed. Dedicated to good service. They are equipped with all of the necessary human and technical resources to build toward their separate futures . . . and flourish.

"The new AT&T is a new enterprise. A new state of mind. A new outlook. We no longer own the Bell name but we own the AT&T name, the legacy: the commitment to excellence, quality, reliability, integrity. Qualities that were the marks of this business during its century of service to the nation. We do not intend to lose them. Moreover, we carry with us into our new future a large measure of the resources and skills that characterized us in the past.

"We have sought to capture this sence of purpose this sense of mission, this spirit, in a new corporate signature. We will, after divestiture, continue to be AT&T. That will be our name, and also our brand name. And the globe . . . symbolically girdled by electronic communications . . . suggests the new dimensions . . . not just geographic . . . of our business and our future.

"AT&T people will be running a new business."

The divested part of the Bell System involves these seven new holding companies which came into existence on January 1, 1984 (with the Bell operating companies each oversees shown in parenthesis): Nynex (Nex England Tel and New York Tel), Bell Atlantic (Bell of Pennsylvania, Diamond State Tel, New Jersey Bell and the Chesapeake and Potomac Companies), Bell South (South Central Bell and Southern Bell), Ameritech (Illinois Bell, Indiana Bell, Michigan Bell, Ohio Bell and Wisconsin Tel), Southwestern Bell (Southwestern Bell), US West (Mountain Bell, Northwestern Bell and Pacific Northwest Bell), and Pacific Telesis (Pacific Bell and Nevada Bell). Each of the seven companies anticipates 1984 revenues in the seven-to-ten-billion dollar range and net incomes near the billion dollar mark.

AT&T is a high growth, high technology company which is in the business of meeting customer needs, domestically and worldwide, for the electronic movement and management of information.

Now free from many of the restrictions that bound the company in the past, AT&T is reaching out in new directions and applying its technology, experience and expertise in new ways and in new markets.

With assets of more than $34 billion, an employee body of 373,000 experienced people and acknowledge proficiency in science and technology, AT&T has ample resources to realize its goals and attain leadership in the universal information marketplace.

AT&T's corporate organization is headquartered in New York City and is made up of about 2,000 people who are responsible for financing and for setting overall corporate strategy, policy and direction. The headquarters organization ensures that AT&T is managed as one business. The company's 1,500-member shareowner services group, American Transtech, is located in Jacksonville, Florida. This group serves AT&T shareowners as well as those of the seven regional holding companies, into which are grouped the divested 22 local Bell operating companies.

The rest of the company's employees work for one two distinct sectors (see chart) now in place at AT&T . . . AT&T Communications and AT&T Technologies. AT&T Communications is the new company's long distance service arm and AT&T Technologies is where all the "new AT&T" action is. The Computer Systems group, for example, has already jumped into the computer marketplace with its UNIX offerings.

All of the lines of business in the AT&T Technologies sector are part of a new enterprise created in December . . . AT&T Technologies, Incorporated . . . except for AT&T Information Systems (formerly American Bell) which has to maintain the degree of separation required by the FCC under its Computer Inquiry II order.

AT&T has been reorganized to draw on the company's strengths, to focus on customer needs and to get its products to market as quickly as possible. This "new" AT&T intends to be a worldwide leader in the Information Age. And its creation is certainly a highlight of our "Two Dynamic Decades".
COPYRIGHT 1984 Nelson Publishing
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Copyright 1984 Gale, Cengage Learning. All rights reserved.

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Publication:Communications News
Date:Sep 1, 1984
Previous Article:Coax Opens Wideband Market.
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