Ramifications of the 984 Breakup of AT&T

Is Society Better Off After the 1984 Breakup of AT&T?

AT&T (formerly American Telephone and Telegraph) is the world's largest telecommunications company, providing services, products and systems to consumers, businesses, governments and other telecommunication companies. At one time, AT&T had the broadest, most advanced communications network in the world, and created Bell Labs, a premier manufacturer of telecommunications equipment. In 1984, AT&T was forced to divest into separate businesses; the company rebuilt its business to include long distance, computers and manufacturing. In late 1995, the company announced that it would divest into three separate companies along its business unit lines.

The 1984 breakup of AT&T came about because of a suit brought by MCI, one of AT&T's primary competitors today. The argument was that because AT&T was a monopoly, consumers were ill-served. When viewed from the standpoint of service, cost and economic effect, the divestiture has had the opposite effect of its original goal. Rather than benefitting the American consumer, the divestiture left the consumer worse off (when judged by these criteria) than before the divestiture. This paper examines the conditions which led to the 1984 breakup, and how the divestiture has failed to benefit the consumer.

Until the mid-1980s, AT&T was the only provider of local and long-distance telephone service in the country. AT&T worked hard to protect its large capital inve

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ith ten points for each dollar spent. Five thousand points can be redeemed for movie tickets or a tape at a record store; 100,000 points can be redeemed for a three-night cruise to the Bahamas (Hannon 72). Ramifications The ramifications of the 1984 breakup of AT&T are farreaching. In 1982, approximately 91 percent of American households had telephone service; that increased to nearly 94 percent in mid-1992 (McMaster 5). This may be considered a slight improvement, but it is difficult to determine whether the increased penetration is due to the breakup of AT&T or whether the incremental increase would have occurred in the monopolistic environment, as well. Given that the population in the United States has become increasingly more urban, where telephones are and have been commonplace for many years, it is likely that the additional households would have obtained telephone service regardless of whether the AT&T breakup took place. Interstate switched access minutes have greatly increased since the breakup, with a total industry level of 37.5 billion minutes in the third quarter of 1984, and more than double that (85.7 billion minutes) in the first quarter of 1992 (McMaster 6). This indicates that more minutes are being use

Category: Business - R