7. What prompted the breakup of AT&T?

Intent on remaining a government-sanctioned monopoly, AT&T had little interest in selling network access to alternative service providers. (In recent years, ironically, AT&T has been the principal advocate of forcing local telephone companies to provide network access to rivals, itself included, at below-cost rates.)

Challenges to AT&T’s protected standing intensified in the 1970s, prompting the FCC to allow limited competition in long-distance services. Local service, however, remained off-limits to competition. This regulatory disconnect between local and long-distance calling continues today, despite technological advances that have rendered obsolete any meaningful distinction between the two.

In 1974, the U.S. Justice Department filed an antitrust lawsuit against AT&T based on complaints by MCI and other long-distance service providers. The lawsuit went unresolved for eight years. But in 1982, the company settled with the government under conditions ordained by Judge Harold H. Greene of the Federal District Court for the District of Columbia.

The landmark settlement required AT&T to divest its local operating companies and limit its services to the long-distance market. Hence, in 1984, Michigan Bell became part of Ameritech, one of seven regional “Baby Bells” that assumed control of local calling services.

AT&T was allowed to continue manufacturing telephone equipment. (These operations were later spun off as Lucent Technologies.) Judge Greene retained jurisdiction over the case for more than a decade, effectively elevating himself to the role of national telecom czar. Virtually every major business decision required approval by both the judge and the FCC.

Thus, the creature of government was dismembered by government, demonstrating yet again that “government has nothing to give anybody except what it first takes from somebody, and a government that’s big enough to give you everything you want is big enough to take away everything you’ve got.”[14]

A subsequent series of mergers and acquisitions reduced the number of regional operating companies from seven to four: SBC, Verizon, BellSouth and Qwest — now commonly referred to as “incumbents.” In Michigan, Ameritech was acquired by SBC in 1999, while Verizon acquired GTE, another Michigan carrier, in 2000.

Competition in long-distance service has yielded dramatic consumer benefits in the form of lower prices and improved service quality. Average revenues per minute for interstate and international calls originating in the United States dropped from 62 cents per minute in 1983 to 10 cents per minute in 2001.[15] In many instances, calling across state lines and even international borders costs less than local toll calls within a single state.