On January 1st, 1984, AT&T was no longer the biggest company in market capitalization as it went through one of the largest corporate restructuring cases in American history that was mandated by government. Many people of a certain age that skews older than Generation Xers felt the government had no business in breaking up Ma Bell.

On the other hand, younger people, especially the entrepreneurial circles, felt there needed to be a change to pave a way for new technologies. Ironically hack-crazy-professor Scott Galloway (NYU Stern School of Business) was known going on  like the Fox Business Network and urge Facebook to divest in Instagram using false comparisons that breaking up AT&T created “innovation”.

Like The Blue App preying on underage children then targeting them with negative ads? Neoliberalism is not a technical topic, but late stage capitalism that followed the Divestiture is an interesting subject that won’t be covered here!

Your humble curator wasn’t alive during the drama. Also the “consumer” just cared about costs and years later and bitch about it when it doesn’t go their way.

The Backstory

The Breakup, or known formally as Divestiture dates back to 1974 by the U.S. Justice Department on claims that AT&T’s very lucrative, but highly pricy Long Lines service was kept from competition. Meanwhile a startup called the Microwave Communications Incorporated, built a network of microwave dishes in the Midwest to connect people to a cheaper service. The company grew like crazy from the beginning, after hitting some earlier hardships. The leader, John McGowan had tried to interconnect with the AT&T network, in which they denied his company access. If any customer wanted to get to this cheaper long distance service, they would have to call at least a 7 digit number, a personal identified number, like a passcode then the intended phone number.

However, the AT&T’s Long Lines was likely to help subsidize the large local telephone network. Prior to the case, AT&T’s own market share and market cap was being pinched by the competition. Once there was there-there for the Justice Department to put AT&T in the court, by 1980, lead by Judge Harold Greene, AT&T went through twice the lawyers and responses to the D.O.J. of which had very small, likely antidotal  case against their Long Lines. The reasoning why the initial investigation was benched was, since President Nixon was still President (before leaving after the Watergate scandal, the reason why the DOJ did not further investigate until the end of the Carter administration, was Nixon was pro growth, pro business, the early forms of neoliberalism/late-stage capitalism.)

Another key note to emphasize, in the the 1970s,  AT&T and the Bell System lost their edge in the walls and tables. Following the 1968 Carterphone Decision, (allowing third parties to tie to a publicly switched telephone network, a bunch of competitors came into the interconnect world, from Far East like the Japanese to other American companies. Also to note, the Snoopy and Woodstock and Mickey Mouse phones were actually made by a third party company, American Telecommunications Company or ATC, that was repackaged by the Bell System to customers to lease or own.

Regardless of government intervention, the market was indicating it was already correcting itself.

The Plea Deal (or the 1982 Consent Decree)

On January 6th, 1982, AT&T essentially had a plea bargain with the Justice Department, with an initial announcement to break the company up. Charles “Charlie” Brown, AT&T’s chairman at the time went up to the New York press almost with a morbid attitude as if he killed his own company that he worked up the ranks, as well as his parents. (Compare to MCI who had executives that could come and go, and secretaries making millions of dollars on stock options. While AT&T was considered to be anti-consumer, AT&T didn’t have a systemwide, or large amounts of “insiders” being rewarded for their own good. Some people may not want to admit this.)

The process to break up AT&T was not announced on that day, in fact it took over 18 months for it come into fruition and by mid to late 1983 the company would be set to be broken up into 7 “Baby Bells” known formally as Regional Bell Operating Company effective January 1st, although New Years fell on a Sunday, the first day of business operations would occur the following day.  Those would become:

• NYNEX (New York and New England Tel.)
• Bell Atlantic (New Jersey, and the Mid Atlantic States)
• Bell South (for areas well past the Mason-Dixon Line in the heart of the Bible Belt)
• Ameritech (the Midwest carrier)
• US West (From the Rockies down to Arizona and loop around the Pacific Northwest)
• Pacific Telesis (aka Pac Bell for Nevada and California.)

Companies that had minority ownership by AT&T directly (as opposed to the Bell System acting as a full subsidary) were sold off and stayed as separate entities those were:

• Cincinatti Bell
• Southern New England Telephone (For entire state of Connecticut… except for Greenwich (since it’s on the NYS border, that apparently switched under New York Tel)

AT&T preferred a more risker proposition as their Long Distance business was getting severely canablized by MCI and other companies. Since a 1956 Consent Decree forbid AT&T to sell computers, they wanted to be in this business so badly because their own people invented the transistor – the bedrock to personal computers which wasn’t a decade old at this point. At the same time, they also wanted to grow customer bases of their flagship PBX and ESS switches. In order to retain selling equipment and services related to Information Systems, they had to dissolve the regional and local dial tone companies.

The under discussed debate is that the DNA within AT&T was never to be a “competitive company” (or in today’s words with  neoliberalism world a “growth company”), as it was described. Competitive means bowing down to a consumer, who only wants cheap stuff and doesn’t care about quality. Giving customers “choices” with 2 companies with dozens of brands. Competitive means commercialism, and the only interest within a company is with their own employees who act as their own shareholders. Central office switches became slot machines in order for them to make “quarterly profits”.

As the 1980s went to a close MCI had been the perceived winner, as AT&T was the loser. In 1986, John Olson took over as the company’s CEO. Coming from a military background and started as lineman as well, he had the fire in his belly to make AT&T be the information systems leader in the 1990s selling UNIX and MS-DOS workstations and felt he could outdo IBM. Sadly, he died in 1988 of cancer, and a more soft-spoken and meek leader, Robert Allen would take over the company oversaw the buyout of National Cash Register. After interfering with NCR’s transition to cash registers to what we call today “Point of Sale” computers,  by 1995 AT&T announced another spinoff, by their own doing including NCR,  along with the infamous Western Electric division as Lucent and refocused AT&T for what became passé at that point with their Long Distance division, as well as playing around with mobility, and cable TV services by 1996. A couple years later they bought the cable TV giant of the time, TeleCommunications Incorporated (or TCI) to then sell it off to Comcast, which was more of a startup sized company by the change of the century.

A major change of how consumers used and consumed media caused a big large restructuring of the telecom (and also the media) industry came as Congress passed the infamous Telecommunications Act of 1996, another Democratic Party form of neoliberalism, allegedly with consumer interests in mind. At the same time central offices were slot machines, local TV and radio stations were seen as profit centers – and in the 1982 Consent Decree was slowly fading away…

By the turn of the Millennium between 2000 to 2004, AT&T really had no real assets that made money following the dot-com bubble. At the same time, business press was hyping up really lame pun headlines of  “SBC is Dialing Up a Deal with Pac Bell”, following the TCA of 1996, many of those seven Baby Bells became more than duopoly

• The same year NYNEX and Bell Atlantic Merged, the latter would become the new name.
• Later in the decade. Ameritech, and Pac Bell would become part of SBC (formerly the old Southern Bell)
• GTE would merge with Bell Atlantic, so they created a name called “Verizon” by 1999.
• Later in the early oughts, US West became part of Quest Communications

At the same time, cable companies by the late 90s offered broadband internet, at rates doubled of highest rate of dialup (56 kilobits a second – that all depended on if it was end to end), with an always on connection. Competitively the phone company’s answer was Digital Subscriber Lines. DSL worked well in underserved markets or lower income families or people. By the 2000s, “Triple Play” services were offered by the cable companies offering broadband Internet, phones and cable TV on a single pipe using technology known as DOCSIS, the cable devices would communicate on very high, low range and tight FM frequencies, these very physically compressed signals carrying one “station” of TV, another on Internet and phones, the cost would be much less. By the 2010s, most cable providers gave free domestic long distance, which. goes back to the root of the Divesture in the first place.

AT&T was undervalued by the market. In late 2004, it was announced that SBC, the Baby Bell would buy Ma Bell, but inherit the name for brand awareness sake. Since then AT&T operated more like a growth company, and cut corners. By 2006, they bought Bell South, basically getting landlines from 2/3s of the country, while the other 1/3d was Quest, Verizon and a few smaller companies that bought out Verizon or AT&T’s more rural markets (because the poor hicks are too “expensive” for their profit margins.)

Several devastating hurricanes battered Florida, Texas. and unfortunately New York and New England got hit with Hurricanes Irene and Sandy in 2011 and 2012 respectively.  Verizon for New York and New Jersey; and Massachusetts and Rhode Island and AT&T for Connecticut followed the same path for their Southern customers, and didn’t fill in new copper. It was Fiber or GTFO! While this ends in a full circle, AT&T’s original 5ESS and its related business was bought and sold, by the mid 2010s, Alcatel-Lucent. bought Ericsson from Sweden, which was so removed from Western Electric. 5ESS development ended in this decade, resulting in refurbishing with no planned replacement solution. Genband bought out Nortel’s carrier business during the 2009 bankruptcy.

With disasters both in tech and IRL, with the rate of increased broadband (for residential customers it was nearly comparable to DSL times 5 in 2010, by the end of the decade, it was nearly 100 of that with downspeeds at 1/2 a gig, with 1/4 gig upload.) SIP, “Cloud PBX” and other alternative technologies basically became mature because the infrastructure supported it. I’ve seen SIP phones as far north as Errol, New Hampshire, which is a couple towns and fifty miles to the Canadian border.

All this “look how far we come” came at a result of middle class labor work that was displaced and wasn’t replaced well. people who refurbished Western Electric phones or made AT&T hardware or worked as operators were the many were part of headlined “layoffs” over the same 4 decades; and some migrated to trucker-hat-red-president that would claim to be supporting those people but in reality did a political magic trick to support the C-suite instead.

I wrote this in dedication to the blue collared workers who have been displaced because this story of the Divestiture is often misexplained from both a technical and political science perspective

Draft copy written on January 1st, 2020 as a 35 year retrospective, a revision completed in December 2025