AT & T Case

After the invention of the telephone by Alexander Graham Bell in 1876, the American Telephone and Telegraph Company, also known as AT&T, was incorporated in 1885 as a subsidiary of the Bell Telephone Company. AT&T’s goal was to build and operate the first long-distance telephone network, creating its first line between New York and Philadelphia (Granville). This line only had the capacity of one call at a time and cost $9 for the first five minutes. After the original telephone patents expired, the telephone industry no longer had entry barriers and was open to competition, permitting over 6,000 phone company to operate around the United States. This pushed AT&T to continue doing research, and with the help of George Campbell and Michael Pupin,

This agreement made the American Telephone and Telegraph Company promise to sell its controlling interest in the Western Union, agree to not acquire other independent telephone companies, and to allow competitors to connect with the its Bell system (Lasar). Consequently, the telephone system was made up of a system of geographically dominant local carriers and one long-distance carrier. The two worked together to mutually benefit, eliminating the remaking of competition and encouraging the formation of the largest monopoly in the United States. By 1932, the Bell Company controlled over 79% of the national telecommunication market and was still the only firm controlling the long-distance network (“The Bell System”). “One Policy, One System, Universal Service” was AT&T’s motto at the time, and for most of the society, it justified the firm’s expansion to offer “universal service” to the country. This caused the government to regulate the firm as a “natural monopoly” rather than breaking up the system. The “Kingsbury Commitment” made by the government was an attempt to regulate the monopoly and protect the remaining competitors. AT&T continued to avoid being broken up for the next fifty years by innovating and then strategically retreating in order to keep its monopoly. The firm was finally broken up by an antitrust suit in 1982, forcing AT&T to rid itself of the Bell operating companies that had provided local exchange service (“The Bell System”). The government believed this would separate the local exchange parts of AT&T where the natural monopoly was seen as valid from the other parts (long distance, manufacturing, research and development), which competition was appropriate. The United States Government lifted the constraints that blocked entry to the long-distance industry, ending AT&T’s