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At & T
The formation of the Bell Telephone Company superseded an agreement between
Alexander Graham Bell and his financiers, principal among them Gardiner G.
Hubbard and Thomas Sanders. Renamed the National Bell Telephone Company in March
1877, it became the American Bell Telephone Company in March 1880. By 1881, it
had bought a controlling interest in the Western Electric Company from Western
Union. Only three years earlier, Western Union had turned down Gardiner
Hubbard's offer to sell it all rights to the telephone for $100,000.
In 1880, the management of American Bell, created what would become AT&T Long
Lines. The project was the first of its kind to create nationwide long-distance
network with a commercially viable cost-structure. This project was formally
incorporated into a separate company christened American Telephone and Telegraph
Company on March 3, 1885. Starting from New York the network reached Chicago,
Illinois in 1892.
Bell's patent on the telephone expired in 1894, but the company's much larger
customer base made its service much more valuable than alternatives and
substantial growth continued.
On December 30, 1899, the American Telephone and Telegraph Company bought the
assets of American Bell--this was because Massachusetts corporate laws were very
restrictive and limited capitalization to ten million dollars, forestalling the
growth of American Bell itself.
National long distance service reached San Francisco in 1915. Transatlantic
services started in 1927 using two-way radio, but the first trans-Atlantic
telephone cable did not arrive until 1956, with TAT-1.
In 1907, AT&T president Theodore Vail proposed that a formal monopoly would be
more efficient. The federal government accepted this principle, initially in the
Kingsbury Commitment of 1913.
For most of the 20th century, AT&T subsidiary AT&T Long Lines thus enjoyed a
near-total monopoly on long distance telephone service in the United States.
AT&T also controlled 22 Bell Operating Companies which provided local telephone
service to most of the United States. While there were many "independent
telephone companies", General Telephone being the most significant, the Bell
System was far larger than all the others, and widely considered a monopoly
itself.
During the early 1920s, AT&T bought Lee De Forest's patents on the "audion", the
first triode vacuum tube, which let them enter the radio business. Thanks to the
pressures of World War I, AT&T and RCA owned all useful patents on vacuum tubes.
RCA staked a position in wireless communication; AT&T pursued the use of tubes
in telephone amplifiers. Some patent allies and partners in RCA were angered
when the two companies' research on tubes began to overlap; there were many
patent disputes.
AT&T, RCA, and their patent allies and partners finally settled their disputes
in 1926 by compromise. AT&T decided to focus on the telephone business as a
communications common carrier, and sold its broadcasting subsidiary Broadcasting
Corporation of America to RCA. The assets included station WEAF, which for some
time had broadcast from AT&T headquarters in New York City. In return, RCA
signed a service agreement with AT&T, ensuring any radio network RCA started
would have transmission connections provided by AT&T. Both companies agreed to
cross-license patents, ending that aspect of the dispute. RCA, GE, and
Westinghouse were now free to combine their assets to form the National
Broadcasting Company, or NBC network.
In 1925, AT&T created a new unit called Bell Telephone Laboratories, commonly
known as Bell Labs. This research and development unit proved highly successful,
pioneering, among other things, radio astronomy, the transistor, the
photovoltaic cell, the Unix operating system, and the C programming language.
However, its parent company did not always capitalize on these achievements. In
1949 the Justice Department filed an antitrust suit aimed at forcing the
divestiture of Western Electric, which was settled seven years later by AT&T's
agreement to confine its products and services to common carrier
telecommunications and license its patents to "all interested parties". A key
effect of this was to ban AT&T from selling computers despite its key role in
electronics research and development.
The rest of the telephone monopoly lasted until final settlement of a 1974
United States Department of Justice antitrust suit against AT&T on January 8,
1982, under which AT&T ("Ma Bell") agreed to divest its local exchange service
operating companies, in return for a chance to go into the computer business
(see AT&T Computer Systems). Although the Department of Defense did not want
AT&T to be broken, effective January 1, 1984, AT&T's local operations were split
into seven independent Regional Bell Operating Companies known as "Baby Bells".
AT&T, reduced in value by about 70%, continued to run all its long distance
services, although it lost some market share in the ensuing years to competitors
MCI and Sprint Corporation.
After its own attempt to penetrate the computer marketplace failed, in 1991,
AT&T absorbed NCR Corporation (National Cash Register), hoping to capitalize on
the burgeoning personal computer and UNIX networked server markets, but was
unable to extract lasting financial or technological gains from the merger.
After deregulation of the U.S. telecom industry via the Telecommunications Act
of 1996, NCR was divested again. At the same time, AT&T's equipment
manufacturing operations and the renowned Bell Laboratories were spun off into
Lucent Technologies. The industry as a whole had many other reorganizations
since the 1990s, both due to deregulation and because of technological advances
reducing demand and pricing power in telecommunications.
In 1997, AT&T hired former IBM executive Michael Armstrong as its chief
executive officer. Armstrong's vision was to change AT&T from a long-distance
carrier into a global "telecommunications supermarket", eyeing Internet services
for the booming dot-com industry.
Armstrong's most prominent strategy was buying significant cable television
assets. After acquiring John Malone's TCI and Media One (gaining through the
latter a 25% share of Time Warner Cable), AT&T was the largest provider of cable
television in the United States. It intended to use these assets to bridge the
so-called "last mile" and break the Regional Bell Companies' access-monopoly of
the consumer household for data and telephony services, but the wager was
costly, substantially increasing the company's debt.
In 1998, AT&T announced a US$1 billion alliance with BT to offer global voice
over IP (VoIP) services, sparking rumors of a potential merger [1]. But the
parties fought for control of the project and could not even agree on the
alliance's name. By mid-2001, customers were being directed to sign contracts
with the parent companies, and Concert, as the venture was eventually known, was
scrapped in October that year.
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