For decades, the nation had a heavily regulated, highly profitable national phone company run by AT&T and known as Ma Bell. Anti-trust action and deregulation broke that monopoly into pieces, but the market is knitting the pieces back together with the AT&T purchase of BellSouth/Cingular – for better or worse.
When Ma Bell was “the one and only phone company”, telecommunications was pretty much about one thing: a black phone, tethered to the wall by a black cord. But new technology produced new abilities and new equipment — your kitchen phone is cordless, you carry a cell phone wherever you go and the Internet has become crucial.
A decade of legal challenges forced the phone system to break itself into seven Baby Bells and a long-distance company named AT&T. In the early 1980s, a long, costly Justice Department lawsuit for anti-trust violations had shoved AT&T into a corner. Rather than keep fighting, the company agreed to break up into seven regional Bell operating companies, known as the Baby Bells. The massive deregulation of the telecom industry in 1996 seemed to fuel a frenzy of competition.
At first, the breakup was decried: Why “fix” something that had been working so well? But in a few years, the breakup started to look brilliant. Employment at the mostly unionized Baby Bells soared. For investors, the split was seen as a virtual engine of wealth creation and innovation. Shares of the seven Baby Bells rose, while profits outpaced that of the original company. And the AT&T name merrily lived on in long-distance and wireless.
Then came the massive rewrite of telecommunications law in 1996 — the much-ballyhooed change touted as opening the gates to full-tilt competition and a frenetic boom in spending and speculation. The buzz word became “convergence” — the Baby Bells and cable companies would charge onto each others’ turf, competition would bloom and the consumer would buy sensational new services at ever-lower prices.
Change would come from below as well. Hundreds of new companies appeared, as potential rivals. And, for a time, there seemed to be blank checks for any company with plans to sell local phones or data service.
Known for decades as Southern Bell and South Central Bell, BellSouth was the largest of the Baby Bells. Company executives spoke of becoming an international player one day, a global giant offering long-distance, wireless, data and Internet access. The future looked bright for BellSouth.
BellSouth invested billions in Latin America, built up BellSouth Mobility as a cellular provider, invested in a long-distance provider, struggled state by state to win long-distance rights and began offering television service via satellite.
Meanwhile, AT&T was dying. Profit was evaporating in the long-distance business, so the company poured tens of billions of dollars into the purchase of cable companies — only to be drowned in the debt.
Then something strange happened. SBC moved in to buy the once-famous-but-now-sinking company called AT&T. But the name AT&T was far better known than SBC, so after the purchase SBC kept the AT&T name. Now AT&T became powerful and a real player in telecommunications.
In the north and east is Verizon, created in the merger of Bell Atlantic and Nynex. In the mountain west is Qwest, once the Baby Bell known as U.S. West. In nine states in the southeast was BellSouth.
Some thought BellSouth might even buy AT&T. But the roles have now reversed. AT&T, pending stockholder and regulatory approval, is ready to swallow BellSouth in a colossal deal valued at $89 billion in stock and debt. The agreement follows months of speculation by Wall Street analysts and investors of a possible deal between AT&T and BellSouth. BellSouth was seen as a logical target to become part of the revamped AT&T, as the nation’s telecommunications industry continues on an epic reordering of itself.
BellSouth Chairman and CEO Duane Ackerman said he expects Cingular cellular service to eventually be known by the AT&T brand, bringing an end to the use of a short-lived name born in 2000.
One of the most important features of the deal would be to put Cingular Wireless, the nation’s largest wireless provider, under a single owner. Currently, AT&T and BellSouth are partners in Atlanta-based Cingular, which faces stiff competition that is about to get tougher as a group of cable companies – including Comcast – team up to provide jointly branded cellphone service with Sprint Nextel.
There are challengers in cable, huge companies that offer phone service along with television and Internet. And there are some survivors from the late-1990s telecom rush, still snipping away at niches in the market. But the newly reconstituted AT&T will be in its strongest position since the 1984 breakup.
And once again, tens of millions of checks each month for phone bills will be made out to Ma Bell.
AT&T, Ma Bell, BellSouth, Cingular, phone, telecommunication
