- American Telephone & Telegraph
:"For other companies with similar names, see
AT&T (disambiguation)."Infobox Company
company_name = AT&T Corporation
type = Private (
Subsidiaryof AT&T Inc.)
foundation = 1885
location = Bedminster,
New Jersey, United States
parent = American Bell (1885-1899)
AT&T Inc. (2005-present)
AT&T Corporation, originally the American Telephone & Telegraph Company, is an American
telecommunications company that provided voice, video, data, and Internettelecommunications and professional services to businesses, consumers, and government agencies. During its long history, AT&T was at times the world's largest telephonecompany, the world's largest cable televisionoperator, and a regulated monopoly. Today, the company is a subsidiary of AT&T Inc. and its subsidiary AT&T Communicationsstill provides long distance service across the country.
In 2005, AT&T was purchased by
Baby BellSBC Communications for more than $16 billion, who then changed its name from SBC to AT&T, Inc. At its peak, it employed one million people and its revenue was roughly $300 billion annually in today's dollars (for comparison, ExxonMobil's 2006 annual revenue was $377.6 billion).
AT&T Corporation continues to exist as a
subsidiaryof AT&T Inc. and its name occasionally shows up in AT&T press releases. [ [http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=24633 AT&T Corp restructured its Asia Pacific Operations - AT&T Press Release, Oct 31, 2007] ]
Company formation and expansion
The formation of the
Bell Telephone Companysuperseded an agreement between Alexander Graham Belland his financiers, principal among them Gardiner Greene Hubbardand Thomas Sanders. Renamed the National Bell Telephone Company in March 1879, it became the American Bell Telephone Company in March 1880. By 1881, it had bought a controlling interest in the Western ElectricCompany from Western Union. Only three years earlier, Western Union had turned down Gardiner Hubbard's offer to sell it all rights to the telephone for $100,000.
In 1880, the management of American Bell created what would become AT&T Long Lines. The project was the first of its kind to create a nationwide long-distance network with a commercially viable cost-structure. This project was formally incorporated into a separate company christened American Telephone and Telegraph Company on
March 3, 1885. Starting from New York, the network reached Chicago, Illinoisin 1892.
patenton the telephone expired in 1894, but the company's much larger customer base made its service much more valuable than alternatives and substantial growth continued.
December 30, 1899, the American Telephone and Telegraph Company bought the assets of American Bell; this was because Massachusetts corporate laws were very restrictive, and limited capitalization to ten million dollars, forestalling the growth of American Bell itself.
National long distance service reached San Francisco in 1915. Transatlantic services started in 1927 using two-way
radio, but the first trans-Atlantic telephone cable did not arrive until 1956, with TAT-1.
A national monopoly
As a result of a combination of regulatory actions by government and actions by AT&T, the firm eventually gained what most regard as
monopolystatus. In 1907, AT&T president Theodore Vailmade it known that he was pursuing a goal of "One Policy, One System, Universal Service." AT&T began purchasing competitors, which attracted the attention of antitrustregulators. To avoid antitrust action, in a deal with the government, Vail agreed to the Kingsbury Commitmentof 1913. The terms of the agreement allowed AT&T to purchase independent phone companies as long as it sold an equal amount of telephone devices. G.W. Brock says in "Telephone:The First Hundred Years", "This provision allowed Bell and the independents to exchange telephones in order to give each other geographical monopolies. So long as only one company served a given geographical area there was little reason to expect price competition to take place." AT&T focused on purchasing companies within specific geographic areas that increased its effective control of the telephone system market, while selling its less-desirable and previously acquired companies to independent buyers. Also included in the Kingsbury Commitment was the requirement that AT&T allow competitors to connect through its phone lines. Economists point out that this reduced the incentive of these companies to build competing long-distance lines.
Around 1917, the idea that everyone in the country should have phone service and that the government should promote that began being discussed in government. AT&T agreed, saying in a 1917 annual report: "A combination of like activities under proper control and regulation, the service to the public would be better, more progressive, efficient, and economical than competitive systems." In 1918 the federal government nationalized the entire telecommunications industry, with national security as the stated intent. Rates were regulated so that customers in large cities would pay higher rates to subsidize those in more remote areas. Vail was appointed to manage the telephone system with AT&T being paid a percentage of the telephone revenues. AT&T profited well from the nationalization arrangement which ended a year later. States then began regulating rates so that those in rural areas would not have to pay high prices, and competition was highly regulated or prohibited in local markets. Also, potential competitors were forbidden from installing new lines to compete, with state governments wishing to avoid "duplication." The claim was that telephone service was a "
natural monopoly," meaning that one firm could better serve the public than two or more. Eventually, AT&T's market share amounted to what most would regard as a monopolistic share.
In 1913, after vacuum-tube inventor
Lee De Forestbegan to suffer financial difficulties, AT&T bought De Forest's vacuum-tube patents for the bargain price of $50,000. In particular, AT&T acquired ownership of the ' _en. Audion', the first triode (three-element) vacuum tube, which greatly amplified telephone signals. The patent increased AT&T's control over the manufacture and distribution of long-distance telephone services, and allowed the Bell System to build the United States's first coast-to coast telephone line. Thanks to the pressures of World War I, AT&T and RCAowned all useful patents on vacuum tubes. RCA staked a position in wireless communication; AT&T pursued the use of tubes in telephone amplifiers. Some patentallies and partners in RCA were angered when the two companies' research on tubes began to overlap, and there were many patent disputes.
AT&T, RCA, and their patent allies and partners finally settled their disputes in 1926 by compromise. AT&T decided to focus on the telephone business as a communications common carrier, and sold its broadcasting subsidiary
Broadcasting Corporation of Americato RCA. The assets included station WEAF, which for some time had broadcast from AT&T headquarters in New York City. In return, RCA signed a service agreement with AT&T, ensuring any radio network RCA started would have transmission connections provided by AT&T. Both companies agreed to cross-license patents, ending that aspect of the dispute. RCA, GE, and Westinghouse were now free to combine their assets to form the National Broadcasting Company, or NBC network.
In 1925, AT&T created a new unit called Bell Telephone Laboratories, commonly known as
Bell Labs. This research and developmentunit proved highly successful, pioneering, among other things, radio astronomy, the transistor, the photovoltaic cell, the Unix operating system, and the C programming language. However, its parent company did not always capitalize on these achievements. In 1949, the Justice Department filed an antitrust suit aimed at forcing the divestiture of Western Electric, which was settled seven years later by AT&T's agreement to confine its products and services to common carrier telecommunications and license its patents to "all interested parties". A key effect of this was to ban AT&T from selling computers despite its key role in electronics research and development. Public utilitycommissions in all state and local jurisdictions regulated the Bell Systemand all the other telephone companies. The Federal Communications Commission(FCC) regulated all service across state lines. These commissions controlled the rates that companies could charge, and the specific services and equipment they could offer. Nonetheless, technological innovation continued. For example, AT&T commissioned the first experimental communications satellite, TelstarI in 1962.
AT&T increased its control of the telephone system through its leasing arrangements for telephones and telephone equipment made by its subsidiary,
Western Electric. Like most telephones of the time in the United States, Western Electric-made phones were owned not by individual customers, but by local Bell System telephone companies — all of which were in turn owned by AT&T, which also owned Western Electric itself. Each phone was leased from AT&T on a monthly basis by customers, who generally paid for their phone and its connection many times over in cumulative lease fees. This monopoly made millions of extra dollars for AT&T, which had the secondary effect of greatly limiting phone choices and styles. AT&T strictly enforced policies against buying and using phones by other manufacturers that had not first been transferred to and re-rented from the local Bell monopoly. Many phones made by Western Electric thus carried the following disclaimer permanently molded into their housings: "BELL SYSTEM PROPERTY — NOT FOR SALE." Telephones were also labeled with a sticker marking the Bell Operating Company that owned the telephone.
In 1968, the
Federal Communications Commissionallowed the Carterfoneand other devices to be connected directly to the AT&Tnetwork, as long as they did not cause damage to the system. This ruling (13 F.C.C.2d 420) created the possibility of selling devices that could connect to the phone system and opened up the market to numerous products, including answering machines, fax machines, cordless phones, computer modems and the early, dialup Internet.
In the 1980s, after some consumers began buying phones from other manufacturers anyway, AT&T changed its policy by selling customers the phone's housing, retaining ownership of the mechanical components — which still required paying AT&T a monthly leasing fee.
For most of the 20th century, AT&T subsidiary AT&T Long Lines thus enjoyed a near-total monopoly on
long distancetelephone service in the United States. AT&T also controlled 22 Bell Operating Companieswhich provided local telephone serviceto most of the United States. While there were many "independent telephone companies", General Telephone being the most significant, the Bell Systemwas far larger than all the others, and widely considered a monopoly itself.
Erosion of "a natural monopoly"
For many years, AT&T had been permitted to retain its monopoly status under the assumption that it was a
natural monopoly. The first erosion to this monopoly occurred in 1956 where the Hush-a-Phone v. FCCruling allowed a third-party device to be attached to rented telephones owned by AT&T. This was followed by the 1968 Carterphone decisionthat allowed third-party equipment to be connected to the AT&T telephone network. The rise of cheap microwave communications equipment in the 1960s and 1970s opened a window of opportunity for competitors — no longer was the acquisition of expensive rights-of-way necessary for the construction of a long-distance telephone network. In light of this, the FCC permitted MCI (Microwave Communications, Inc) to sell communication services to large businesses. This technical-economic argument against the necessity of AT&T's monopoly position would hold for a mere fifteen years until the beginning of the fiber-optics revolution sounded the end of microwave-based long distance.
Break up, spinoffs and restructuring
The rest of the telephone monopoly lasted until final settlement of a 1974
United States Department of Justice antitrustsuit against AT&T on January 8, 1982, under which AT&T ("Ma Bell") agreed to divest its local exchange service operating companies, in return for a chance to go into the computer business (see AT&T Computer Systems). AT&T's local operations were split into seven independent Regional Bell Operating Companies known as "Baby Bells".
With the American consumer's new ability to purchase phones outright, AT&T and the Bell System lost the considerable revenues earned from phone leasing by local Bell companies. Forced to compete with other manufacturers for new phone sales, the aging Western Electric phone designs still marketed through AT&T failed to sell, and Western Electric eventually closed all of its U.S. phone manufacturing plants. AT&T, reduced in value by about 70%, continued to run all its long distance services through
AT&T Communications(the new name of AT&T Long Lines), although it lost some market share in the ensuing years to competitors MCI and Sprint Corporation.
A sign that hung in many Bell facilities in 1983 read:
Western Electricwas fully absorbed into AT&T as AT&T Technologies, and was divided into several units focused on specific customer groups, such as AT&T Network Systemsand AT&T Consumer Products.
After its own attempt to penetrate the computer marketplace failed, in 1991, AT&T absorbed
NCR Corporation(National Cash Register), hoping to capitalize on the burgeoning personal computerand UNIX networked server markets, but was unable to extract lasting financial or technological gains from the merger. After deregulationof the U.S. telecom industry via the Telecommunications Act of 1996, NCR was divested again. At the same time, the majority of AT&T Technologies and the renowned Bell Laboratories was spun off as Lucent Technologies. The industry as a whole had many other reorganizations since the 1990s, both due to deregulationand because of technological advances reducing demand and pricing power in telecommunications.
In 1994, AT&T purchased the largest cellular carrier, McCaw Communications, for $11.5 billion and kick-started its cellular division with 2 million subscribers. [cite web |url= http://www.usdoj.gov/atr/public/press_releases/1994/211893.htm|title=JUSTICE DEPARTMENT FILES ANTITRUST SUIT AND CONSENT DECREE IN AT&T-MCCAW MERGER |accessdate=|last= |first= |date=
1994-07-15|publisher= United States Department of Justice] [cite web |url= http://seattlepi.nwsource.com/business/191742_attw21.html|title= The fall of AT&T Wireless|accessdate=|last= RICHMAN|first= DAN|date= 2004-09-21|publisher= Seattle Post-Intelligencer]
In 1995, AT&T purchased long-distance provider
Alaska Communications System(Alascom). FCC approval required the company be run as an AT&T subsidiary rather than a more likely absorption into AT&T Communications, giving the company the AT&T Alascomname. The buyout marked the first time that any company with Bell roots would hold operations in the non-contiguous United States.Fact|date=July 2007
In 1997, AT&T hired former
IBMexecutive C Michael Armstrongas its chief executive officer. Armstrong's vision was to change AT&T from a long-distance carrier into a global "telecommunications supermarket", eyeing Internet services for the booming dot-com industry.
Armstrong's most prominent strategy was buying significant
cable televisionassets. After acquiring John Malone's TCI and Media One(gaining through the latter a 25% share of Time Warner Cable), AT&T was the largest provider of cable televisionin the United States. It intended to use these assets to bridge the so-called " last mile" and break the Regional Bell Companies' access-monopoly of the consumer household for data and telephony services, but the wager was costly, substantially increasing the company's debt. AT&T acquired TCI in a $48 billion all-stock transaction including the assumption of $16 billion of debt. [http://news.com.com/AT&T+wins+the+bidding+war+for+MediaOne/2100-1033_3-225427.html AT&T acquired MediaOne] for $54 billion in cash and stock, after a bidding war with Comcast.
In 1998, AT&T announced a US$1 billion alliance with BT to offer global
voice over IP(VoIP) services, called Concert, sparking rumors of a potential merger. [cite web |url= http://www.cnn.com/WORLD/europe/9807/26/bt.att/|title= AT&T, British Telecom announce joint venture|accessdate=|date= |year= 1998-07-26|publisher= CNN.com] But the parties fought for control of the project and could not even agree on the alliance's name. By mid-2001, customers were being directed to sign contracts with the parent companies, and Concert Communications Services, as the venture was eventually known, was scrapped in October that year.
In 1999, AT&T acquired the Olivetti & Oracle Research Lab, from
Olivettiand Oracle Corporation. In 2002, it closed down the research part of the lab.
Also in 1999, AT&T paid US$5 billion to purchase IBM's Global Network business, which became AT&T Global Network Services, LLC. As part of the purchase agreement, IBM granted AT&T a five-year, US$5-billion contract to handle much of IBM's networking needs, and AT&T outsourced some of its applications processing and data management work to IBM. IBM also committed to billing and installation for AT&T's long-distance customers in a 10-year deal valued at US$4 billion; and assumed management of AT&T's data processing centers.
With long-distance rates falling and the market for telecommunications services overall weakening, AT&T could not sustain the debt it had incurred in these ventures. Moreover, the cost of upgrading TCI's equipment to handle two-way communications proved far higher than pre-merger estimates. AT&T undertook a major reorganization in October 2000, moving its mobile phone and broadband units into separate companies, to allow each unit to raise capital independently.
July 9, 2001it spun off AT&T Wireless Corp. in what was then the world's largest initial public offering(IPO). Later that year it spun off AT&T Broadbandand Liberty Media, which comprised its cable TV assets. AT&T Broadband was subsequently acquired by Comcastin 2002, and AT&T Wireless merged with Cingular WirelessLLC in 2004.
In 2004, the U.S. government eliminated equal access regulations that allowed long-distance phone companies to access the networks owned by the regional Bell carriers at fixed rates. This ultimately caused AT&T to move away from the residential telephone business — declaring in the process that it would no longer market residential telephone service. Instead, its residential focus shifted to offering a voice service over a broadband Internet connection called
Acquisition by SBC
January 31, 2005, Baby Bell SBC Communicationsannounced its plans to acquire "Ma Bell" AT&T Corp. for $16 billion. SBC announced in October 2005 that it would shed the "SBC" brand and take the AT&T brand along with the "T" NYSE ticker symbol.
Merger approval concluded on
November 18, 2005; SBC Communications began rebranding the following Monday, November 21as "AT&T Inc." and began trading as AT&Ton December 1under the "T" symbol.
The AT&T headquarters buildings
From 1885 to 1910, AT&T was headquartered at 125 Milk St in Boston. With its expansion it moved to New York City, to a headquarters on 195 Broadway (close to what is now the
World Trade Centersite). The property originally belonged to Western Union, of which AT&T held a controlling interest until 1913 when AT&T divested its interest as part of the Kingsbury Commitment. [ [http://www.att.com/history/milestones.html AT&T: History: Milestones in AT&T History ] ] Construction of the current building began in 1912. Designed by William Welles Bosworth, who played a significant role in designing Kykuit, the Rockefeller mansion north of Tarrytown, New York, it was a modern steel structure clad top to bottom in a Greek-styled exterior, the three-story-high Ionic columns of Vermont granite forming eight registers over a Doric base. [Mark Jarzombek, Designing MIT: Bosworth's New Tech", Northeastern University Press, 2004, pp. 65-68.] The lobby of the AT&T Building was one of the most unusual ones of the era. Instead of a large double-high space, similar to the nearby Woolworth Building, Bosworth designed what is called a "hypostyle hall," with full-bodied Doric columns modeled on the Parthenon, marking out a grid. Bosworth was seeking to coordinate the classical tradition with the requirements of a modern building. Columns were not merely the decorative elements they had become in the hands of other architects but created all the illusion of being real supports. Bosworth also designed the campus of MITas well as Theodore N. Vail's mansion in Morristown, New Jersey.
In 1978, AT&T commissioned a new building at 550 Madison Ave. This new
AT&T Buildingwas designed by Philip Johnsonand quickly became an icon of the new Postmodernarchitectural style. The building was completed in 1984, the very year of the divestiture of the Bell System. The building proved to be too large for the post-divestiture corporation and in 1993, AT&T leased the building to Sony, who now owns it. [ [http://www.barrypopik.com/index.php/new_york_city/entry/chippendale_building_sony_building/ 550 Madison Ave.] ] [ [http://www.firstamny.com/stoler_9_8_05.aspx "Fortune 100 Companies Capitalize on Record Prices"] September 8, 2005]
AT&T, prior to its merger with
SBC Communications, had three core companies:
AT&T Laboratories AT&T Alascomcontinues to sell service in Alaska, while AT&T Communicationscontinues to sell long distance telephone service and operate as a CLECoutside of the borders of the Bell Operating Companiesthat AT&Towns. AT&T Laboratorieshas been integrated into AT&T Labs, formerly named SBC Laboratories.
AT&T was also known as "Ma Bell" and affectionately called "Mother" by phone
phreaks. During some strikes by its employees, picketers would wear t-shirts reading, "Ma Bell is a real mother." It is worth noting too that, before the break-up, there was greater consumer recognition of the "Bell System" name, in comparison to the name AT&T. This prompted the company to launch an advertising campaign after the break-up to increase its name recognition. Spinoffs like the Regional Bell Operating Companies or "RBOC"s were often called "Baby Bells". Ironically, "Ma Bell" was acquired by one of its "Baby Bells", SBC Communications, in 2005.
The AT&T Globe Symbol, the corporate
logodesigned by Saul Bassin 1983, has been nicknamed the Death Starin reference to " Star Wars". This name was also given to the titanic Bell Labs facility in Holmdel, New Jersey, now owned by Alcatel-Lucent.
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