Lessons from the AT&T break up, 30 years later

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Thirty years ago, on the first day of 1984, the old U.S. telephone system broke apart. Based on Judge Harold Green’s Modified Final Judgement of 1982, AT&T on January 1 1984 became a long-distance company, while seven regional Bell Operating Companies (RBOCs) took control of the nation’s local phone networks.

The break up of the telephone monopoly was a big event. In retrospect, however, three parallel developments in communications loom larger. The Internet, mobile, and cable all disrupted and drove the communications world more than Washington policy.

The AT&T break up probably helped upstart fiber-optic long-distance firms Sprint and MCI, who did not own local lines and had to compete with the integrated AT&T network. Severing AT&T’s local networks put all three on the same footing. But in other ways, the break up was more ceremony than substance. Each of the seven RBOCs still controlled the local communications network in its region. All that changed for most consumers of local phone services was the name at the top of the bill.

Meanwhile, rival networks from outside the traditional telecom world were just beginning to bubble, and they would not only moot the local-long-distance distinctions at the heart of the AT&T split and but also transform communications in more fundamental ways.

One year before the AT&T break up, on January 1, 1983, Arpanet, the Internet’s precursor, had adopted TCP/IP as its operating protocol. Several experimental protocols existed at the time, but TCP/IP flourished and became the foundation for general purpose data networks, which would eventually envelope most every network — voice, local, long-distance, and otherwise.

In October 1983, just months before the AT&T split, Ameritech launched its cellular wireless network and introduced the Motorola DynaTAC phone, selling for $3,995. Just 12,000 subscribers signed up the first year. With nationwide sign-ups under 100,000, few discerned the impact mobile phones (save mobile devices writ large) would have on the economy, or on telecom policy. Yet again, we see that the revolutionary stage was being set by technologies and networks that were not as ubiquitous, not as reliable, often not as cheap as — and not directly competitive with — traditional telecom.

In 1984, Arpanet got its now-familiar domain naming system — .com, .net, .edu, etc. — and there were around 1,000 hosts on this network that we didn’t yet call the Internet.

Meanwhile, cable TV was a flourishing young industry, full of small-town entrepreneurs and a few visionaries who were just beginning to think about scaling the business. Still, cable was entirely a complement and competitor to broadcast TV. Cable firms didn’t compete with phones or mobile or the Internet. What possible effect would cable have on the business or policy of telecom? And yet, cable was building a powerful broadband platform that would later adapt to and adopt the digital Internet and challenge telecom in nearly every way.

So, 30 years on, let’s celebrate the anniversary of a monopoly’s end. Don’t forget, however, that the AT&T monopoly was a creation of government regulation that forbade and discouraged competition and innovation in numerous ways. And that the most important rivals to the telephone network at the time were not other telephone companies. The key wasn’t government-fostered managed competition, nor the creation of similar firms to compete with AT&T in its traditional business. The real sources of innovation and the end of monopoly communications came from new technologies, new firms, new platforms, and new business models from outside and inside the telecom world.

 

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