This paper traces AT&T's entanglement with United States antitrust law from its decades of telecommunications dominance through the court-negotiated breakup of 1982 and the gradual re-consolidation of the Baby Bells. It then examines AT&T's attempt to acquire T-Mobile in 2011 and the subsequent opposition mounted by the U.S. Department of Justice and the Federal Communications Commission. The paper argues that AT&T's comparatively restrained response to the 2011 antitrust challenge — in contrast to its combative posture during earlier disputes — reflects both a diminishment of the company's market power and a strengthening of government antitrust enforcement over the preceding three decades.
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The history of antitrust law in the United States has been heavily shaped by the AT&T Corporation. AT&T has been seemingly involved in one form of dispute or another with the U.S. Justice Department and other government agencies regarding its business activities. Subsequent to the storied breakup of AT&T in the early 1980s, there was little discussion regarding antitrust activity involving AT&T, but with the company's announcement that it intended to take over T-Mobile, AT&T found itself once again at the center of antitrust controversy. How AT&T responded to these antitrust challenges is examined in this paper.
AT&T was, for many years, the dominant company in the United States telecommunications industry. Through its various subsidiaries — Western Electric, Bell Operating Companies, Bell Laboratories, and AT&T Long Lines — AT&T enjoyed many years in which it faced few, if any, challenges to its dominance. Throughout those years, AT&T was forced to confront antitrust challenges in the courts, at regulatory agencies, and in the halls of the U.S. Congress, and for the most part successfully withstood all challenges to its market position (United States v. American Tel. & Tel. Co., 1983). After many years of such battles, AT&T, recognizing that it might be forced to split into separate corporations by court order, voluntarily divided into independently owned and operated corporations commonly known as the "Baby Bells."
The AT&T split was the result of many years of negotiations. There had been considerable pressure on AT&T stemming from complaints that the business operated as a monopoly and from repeated concerns by the U.S. Government that the continued promotion of the AT&T monopoly was causing artificially high telephone charges and placing a strain on the marketplace. The breakup of the massive AT&T corporation into the Baby Bells seemed to satisfy the consumer advocates and government lawyers who had argued for it for many years, and developments in the telecommunications industry — such as the Internet and cellular phones — caused a reshuffling of power (King, 2002). New companies were able to compete with AT&T for long-distance customers, and competitors such as MCI and Sprint effectively drove down long-distance rates to levels far below what consumers and businesses had paid prior to the breakup (Madden, 2003).
Offsetting the benefits of cheaper long-distance rates, however, was the fact that the Baby Bells still controlled the local telephone service market and began charging local access fees that raised the overall cost of telephone service. To make matters worse, the seven Baby Bells created after the breakup gradually began to merge until only four large telecommunications companies remained: Verizon, SBC Communications, Qwest, and BellSouth. The practical effect of this consolidation was that the state of the local telephone business became essentially the same as it had been prior to the AT&T breakup in 1982.
On the outside looking in on the local phone business was the old AT&T Corporation. Barred from competing in the local telephone market, AT&T began to enter the broadband cable industry. By offering telephone service over coaxial cable, AT&T was able to circumvent the legislation that had prohibited it from competing with the Baby Bells. In building its coaxial cable business, AT&T aggressively acquired cable television companies such as TCI and MediaOne, along with large interests in companies such as Time Warner. These moves allowed AT&T to again begin competing in the local telephone business, which it urgently needed as the long-distance business had shrunk considerably due to the proliferation of the Internet and cellular phones.
AT&T's success in the coaxial cable business was so significant that within twenty years of the breakup, the company was once again in a position where critics were calling for another division of the corporation.
"2011 merger attempt and DOJ opposition"
"Sprint, FCC, and Justice Department challenges"
"AT&T's restrained response signals weakened market power"
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