Could The Old AT&T Break-Up Offer Lessons For Big Tech Today?

Jun 26, 2019
Copyright 2019 NPR. To see more, visit https://www.npr.org.

AUDIE CORNISH, HOST:

Federal regulators and the Justice Department are taking a close look at whether the big tech companies have become too powerful, whether they're monopolies and whether they should be broken up. One model they might consider is what happened some 35 years ago to another tech giant, the phone company. NPR's Brian Naylor reports.

BRIAN NAYLOR, BYLINE: Before Sprint, before Verizon, before T-Mobile, it was a simpler time. There was the phone company - just one - American Telephone and Telegraph, known by all as AT&T Ma Bell. If you're old enough, you might remember their ads.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON: (Singing) Reach out. Reach out and touch someone. Reach out. Call up and just say, hi.

NAYLOR: AT&T controlled it all. You leased your phone from them. Your local and long-distance calls traveled over their lines. They ran their own research laboratory. AT&T was, in every sense of the word, a monopoly. And this began to bother some folks.

STEVE COLL: As the computer age blossomed and computers increasingly interacted with the phone system to create new opportunities for consumers, the monopoly seemed like an obstacle to innovation, an obstacle to the future.

NAYLOR: Steve Coll wrote a book about the AT&T monopoly called "The Deal Of The Century: The Breakup Of AT&T."

COLL: And so some of the new startup companies, the equivalent of Silicon Valley companies in the '70s, started to bring private antitrust actions against AT&T, complaining that the phone system was so inflexible and so pervasive that it stifled competition.

NAYLOR: It wasn't just competitors who felt that way. The Department of Justice started looking at the Bell System and whether it was in violation of antitrust law. It was a daunting task to take on such a corporate behemoth. Philip Verveer was a young staff attorney at the DOJ's antitrust division at the time.

PHILIP VERVEER: It's hard, probably, for most people to appreciate how powerful AT&T was in those days, but it provided phone service for 90% of the country and long-distance service for essentially 100% of the country.

NAYLOR: But despite the phone company's power, the Justice Department took it on, filing suit to break up AT&T in 1974. In 1982, the company decided to settle the case. And two years later, AT&T chief financial officer Robert Allen mournfully announced the breakup had taken place.

(SOUNDBITE OF ARCHIVED RECORDING)

ROBERT ALLEN: Gone is the old Bell System franchise. And with it, gone the old organization structure, designed as it was to conform to regulatory jurisdictions and to serve fairly predictable consumer demand.

NAYLOR: Local phone service was taken over by a number of regional companies, which over the years have merged together, forming many of the carriers we know today, including Verizon and, ironically, a company called AT&T, a descendant of the original Ma Bell.

There were some hiccups, complaints that the quality of local phone service was diminished, but Steve Coll, now a staff writer at The New Yorker and dean of the Columbia School of Journalism, says, for the most part, the breakup of the Bell System worked as planned.

COLL: It was necessary to get AT&T out of the way to create the space for the great renaissance in technology that has driven a lot of the U.S. economy since the 1980s.

NAYLOR: Now the Department of Justice, along with the Federal Trade Commission, is exploring whether to charge some of the big tech platforms with antitrust violations, possibly leading to their breakup. In a way, it sounds far-fetched to think that government would take such dramatic action against these rich and powerful corporations, but it's been done before.

Brian Naylor, NPR News, Washington.

(SOUNDBITE OF LADY GAGA SONG, "TELEPHONE") Transcript provided by NPR, Copyright NPR.