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AT&T


This note considers AT&T, supplementing the more detailed profile on Liberty Media.


It covers -

  • introduction
  • telegraph and telephony
  • radio
  • dismantling Ma Bell
  • TCI and beyond
  • chronology
  • studies

Introduction

American Telephone & Telegraph Corporation (AT&T), at one time the world's largest telephone company, was instrumental in the development of the US broadcasting and film industries before acquiring and disposing of Liberty Media in the closing years of last century.

Telegraph and telephony

AT&T traces its history from establishment of Bell Telephone Company in 1877 by Alexander Graham Bell and a group of Boston financiers.

The company expanded rapidly, despite disputes over management and intellectual property, being renamed the National Bell Telephone Company in 1879 and American Bell Telephone Company in 1880. It acquired manufacturer Western Electric in 1881, a year after establishment of Bell Canada (later BCE), and in 1885 established AT&T to operate its long-distance telephone network. Bell established local operating companies across the US (with the long distance network first reaching San Francisco in 1915) and acquired independent operators that had proliferated amid expiry of key Bell patents in 1894.

In 1899 Bell's local operating companies were consolidated under AT&T. Control passed to Wall Street interests led by financier JP Morgan in the aftermath of the 1907 Crash. At that time its president Theodore Vail argued that telephony was a natural monopoly, with AT&T deserving special treatment from the federal and state governments in return for 'universal' service to business, government and domestic consumers. Washington's acceptance of that argument was embodied in the so-called Kingsbury Commitment of 1913.

Radio and film

In 1919 AT&T joined with General Electric, United Fruit and Westinghouse to form Radio Corporation of America (RCA), at that time oriented towards business and military communications rather than domestic broadcasting. RCA provided a mechanism for sharing the patents of the parent organisations (and for acquisition of British Marconi's interest in American Marconi) amid growing disputes about control of the new technology

In 1922 AT&T established Broadcasting Corporation of America (BCA) as its broadcasting subsidiary, centred on a New York radio station subsequently identified as WEAF, and by 1924 had linked 16 owned or affiliated stations as part of its National Brioadcasting System.

AT&T, Westinghouse and General Electric resolved the disputes in 1926. RCA acquired BCA for US$1 million, with AT&T's radio activities essentially being restricted to long-distance radiotelephony. RCA agreed that AT&T would provide the landlines needed for its new NBC network. RCA and AT&T cross-licensed their radio patents. During the preceding year AT&T had sold most of Western Electric's non-US manufacturing operations to ITT, under the control of Sosthenes Behn, for US$30 million.

AT&T research into communications technology was reflected in partnership between Western Electric and Warner Bros subsidiary Vitaphone about sound recording and speakers for motion films. That was used for the landmark 1926 Don Juan and 1927 Jazz Singer, with AT&T's Electrical Research Products Inc (ERPI) being established in 1927 to service and distribute Western Electric sound equipment.

By the end of the following year over 1,000 cinemas used that gear and most Hollywood studios were leaning to Western Electric as a supplier in the transition to sound production. That drove RCA's acquisition of a stake in FBO during 1927 and creation with Joseph Kennedy of the Radio Keith Orpheum (RKO) film production, distribution and exhibition group. AT&T in turn financed studios and cinema chain purchases of its equipment through loans from ERPI or taking a stake in the film companies. Western Electric's dominance in film sound patents, manufacturing and service agreements attracted government attention. Western Electric signed a consent decree in 1938, with ERPI being sold through an MBO (later becoming Altec Lansing) and competitors having access to the patents.

During the rest of the decade and following years AT&T reinforced its position as the dominant telecommunications operator. It had amalgamated its research operations as Bell Laboratories in 1925 (with staff gathering a slew of Nobel Prizes and other awards) and gained international recognition for excellence in manufacturing at its Western Electric arm. It launched commercial radio-telephony services across the Atlantic (with what is now British Telecom) in 1927. AT&T commissioned the first commercial communications satellite, Telstar I, in 1962 and was active in development of the internet.

Dismantling Ma Bell

The defining US antitrust actions during the second half of last century were arguably those against AT&T, IBM and Microsoft. In 1956 AT&T settled antitrust action initiated in 1949 with a consent decree (sometimes called the final judgement) that restricted Western Electric to telecommunication-related manufacturing, constrained AT&T to only engage in telecommunications and - perhaps most critically - committed AT&T to granting non-exclusive licenses to those wishing to access the network. That drove moves for greater competition as entities such as MCI established long distance networks linking AT&T local operations.

That decree formed the basis of the landmark 1974 suit against AT&T, settled in 1982 when Ma Bell agreed through the 'modification of final judgement' to divest its local operations.

That agreement came into effect at the beginning of 1984, with establishment of seven Regional Bell Operating Companies (RBOCs), aka the 'Baby Bells'. AT&T retained its long distance operations (with freedom to expand overseas in competition with ITT), along with its research and manufacturing operations. Its overall assets shrank by around 70%.

Moves to provide international connectivity - particularly for major corporations through a partnership with IBM - proved disappointing. During 1991 AT&T paid US$7.4 billion for computer hardware and software group NCR, only to dispose of that operation in 1996. It acquired McCaw Cellular (delivering control of LIN Broadcasting, spun off as LIN TV) in 1994 for US$11.5 billion. It hived off most of the AT&T equipment manufacturing operations and Bell Laboratories as Lucent Technologies.

TCI and beyond

AT&T then focused again on telecommunications operations, buying cable group MediaOne (which had absorbed the Providence Journal Co's cable operations) for US$62 billion and TCI for US$54 billion in 1999. The intention was that AT&T, with the largest cable television network, would breach the RBOC's monopoly on 'last mile' access to households and thereby prosper in local markets amid ongoing erosion of its dominance in the long distance market. Acquisition of TCI made John Malone AT&T's largest individual. It provided AT&T with a substantial stake in Murdoch-controlled News Corporation, a 25% share of Time Warner Cable and 39% of cable ISP @Home.

Management and investor expectations were affected by the 2000 telecom and dot-com crash, lower than expected revenue growth and uncertainty about AT&T's strategic direction.

AT&T spun off AT&T Wireless in 2001 (in what was then the world's largest IPO) and sold AT&T Broadband - its cable television operations - to Comcast for US$47.5 billion during the following year. Liberty had been spun off in 2001.

Comcast subsequently sold its interests in QVC to Liberty for US$7.9 billion. AT&T Wireless was acquired by Cingular in 2004 for US$41 billion.

In July 2004 AT&T announced that it was no longer seeking residential customers. In 2005 it agreed to a US$16bn takeover by SBC Communications

Chronology

A detailed chronology of AT&T and Liberty Media is here.

Studies

John Brooks' Telephone, The First Hundred Years (New York: Harper & Row 1976) is an elegant corporate history of AT&T. Sonny Kleinfeld's The Biggest Company on Earth: A profile of AT&T (New York: Holt Rinehart 1981) is a thinner study immediately before the break-up.

Other works include George David Smith's The Anatomy of a Business Strategy: Bell, Western Electric & the Origins of the American Telephone Industry (Baltimore: Johns Hopkins Uni Press 1985), Robert Garnet's The Telephone Enterprise: The Evolution of the Bell System’s Horizontal Structure 1876-1909 (Baltimore: Johns Hopkins Uni Press 1985) and Kenneth Lipartito's The Bell System and Regional Business: The Telephone in the South, 1877-1920 (Baltimore: Johns Hopkins Uni Press 1989). The standard history of ITT - the very model of the bad telco - remains Anthony Sampson's Sovereign State: The Secret History of ITT (London: Coronet 1974).

Peter Temin's The Fall of the Bell System (Cambridge: Cambridge Uni Press 1988) remains the major study of deconstructing Ma Bell. Issues are explored in Gerald Brock's Telecommunication Policy for the Information Age: From Monopoly to Competition (Cambridge: Harvard Uni Press 1994), Reed Hundt's You Say You Want A Revolution: A Story of Information Age Politics (New Haven: Yale Uni Press 2000), and Larry Kahaner's On the Line: The Men of MCI - Who Took on AT&T, Risked Everything, and Won! (New York: Warner 1986).

For manufacturing see in particular Optical Illusions: Lucent and the Crash of Telecom (New York: Simon & Schuster 2004) by Lisa Endlich and Manufacturing the Future: A History of Western Electric (Cambridge: Cambridge Uni Press 1999) by Stephen Adams & Orville Butler.

For expansion into cable see Stephen Keating's Cutthroat: High Stakes and Killer Moves on the Electronic Frontier (Boulder: Johnson 1999), Mark Robichaux's Cable Cowboy: John Malone and the Rise of the Modern Cable Business (New York: Wiley 2002), L J Davis' The Billionaire Shell Game: How Cable Baron John Malone and Assorted Corporate Titans Invented A Future Nobody Wanted (New York: Doubleday 1998) and Vertical Integration in Cable Television (Cambridge: MIT Press 1997) by David Waterman & Andrew Weiss.

Context is provided by Brian Winston's Media Technology & Society: A History from the Telegraph to the Internet (London: Routledge 1999), The Creation of the Media: The Political Origins of Mass Communications (New York: Basic 2004) by Paul Starr, America Calling: A Social History of the Telephone to 1940 (Berkeley: Uni of California Press 1992) by Claude Fischer, Connections: Social & Cultural Studies of the Telephone in American Life (New Brunswick: Transaction 2000) by James Katz and the 1998 An Overview of Telecommunications Market Evolution: Telegraphy & Telephony 1837-1934 (txt) by Gary Madden & Scott Savage.

Bell and Vail feature in HM Boettinger's The Telephone Book: Bell, Watson, Vail and American Life, 1876-1983 (New York: Stearn 1984) and RV Bruce's Alexander Graham Bell & the Conquest of Solitude (Boston: Little Brown 1973).

Michelle Martin's "Hello Central?" Gender, Technology, & Culture in the Formation of Telephone Systems (Montreal: McGill-Queen's Uni Press 1991) should be read in conjunction with Lois Kathryn Herr's Women, Power, and AT&T: Winning Rights in the Workplace (Boston: Northeastern Uni Press 2003), My Sisters Telegraphic: Women in the Telegraph Office 1846-1950 (Athens: Ohio Uni Press 2000) by Thomas Jepsen, Race on the Line: Gender, Labor and Technology in the Bell System, 1880-1980 (Durham: Duke Uni Press 2001) by Venus Green, Gregory Downey's Telegraph Messenger Boys: Labor Technology & Geography, 1850-1950 (New York: Routledge 2002) and Stephen Norwood's Labor's Flaming Youth: Telephone Operators & Worker Militancy, 1878-1923 (Urbana: Uni of Illinois Press 1990).

Neil Wasserman's From Invention to Innovation: Long-Distance Telephone Transmission at the Turn of the Century (Baltimore: Johns Hopkins Uni Press 1985) is a cogent study of innovation and economics, complemented by Leonard Reich's The Making of American Industrial Research: Science & Business at GE and Bell, 1876-1926 (Cambridge: Cambridge Uni Press 1985).

Ithiel de Sola Pool's Forecasting the Telephone: A Retrospective Technology Assessment (Norwood: Ablex 1983) and The Social Impact of the Telephone (Cambridge: MIT Press 1977) are useful point of reference.

For regulation see in particular Alan Stone's How America Got On-Line: Politics, Markets & the Revolution in Telecommunications (Armonk: Sharpe 1997), Electronic Media & Government: The Regulation of Wireless & Wired Mass Communication in the United States (White Plains: Longman 1995) by Leslie Smith & Milan Meeske, Breaking Up Bell: Essays on Industrial Organisation & Regulation (New York: North Holland 1983) edited by Donald Evans, Telecommunication Policy for the Information Age: From Monopoly to Competition (Cambridge: Harvard Uni Press 1994) by Gerald Brock and the 1997 thesis by Robert Ward on The Chaos of Covergence: A Study of the Process of Decay, Change, and Transformation within the Telephone Policy Subsystem of the United States offer insights into regulatory and market changes in the US.