Breakup of AT&T in 1981

This research examines the break-up of AT&T in 1981. The issues leading to the antitrust case against AT&T, AT&T's objectives and motivations, the antitrust action that culminated in the break-up of the company, and implications of the break-up of AT&T for the contemporary period are addressed.

Issues Leading to Antitrust Action Against AT&T

Prior to the break up of AT&T, the telecommunications industry in the United States consisted of AT&T (the Bell System), and "many franchised, independent telephone companies." Although franchised and independent telephone companies were in the telecommunications market in the United States prior to the break-up of AT&T, the Bell System controlled in excess of 80 percent of the telecommunications market.

The dominance of the existing telecommunications market in the United States by AT&T provided a central motivation for the Antitrust Division of the Justice Department to pursue the action to force divestiture on AT&T. The rapidly developing changes in the telecommunications environment provided a second strong motivation for the antitrust action, for the federal government did not desire for a single firm to dominate the new technology. AT&T management at this point had to decide how to respond to the situation. Especially to the changes in the long-distance telephone communications market.

The trend of telecommunications policy in the United States has been liberalization and competition since the late-1950s. The Above 890 decis

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stage. The hardest shots were yet to come. Back in March 1974, MCI filed an antitrust suit against AT&T. Later that same year, the United States Department of Justice filed an antitrust suit of its own, charging the Bell System with illegally restricting competition and monopolizing the marketplace. The suit's stated goal: the breakup of Ma Bell. The Department of Justice's pursuit of the case would be complete: Assistant Attorney General William Baxter promised to "litigate this case to the eyeballs." United States vs. AT&T came to trial in March 1981 before United States District Judge Harold Greene. As the Department of Justice presented its case, it became increasingly clear that AT&T was fighting a battle it could not win. In December of that year, AT&T resumed negotiations with the Department of Justice to put the case behind them. AT&T's only hope was to cut its losses and try to have a say in its own future. On 8 January 1982, the two parties announced their settlement. The Modified Final Judgment required AT&T to divest the company's 22 operating companies. AT&T kept the company's long-distance business, as well as the core businesses of Bell Labs and Western Electric. AT&T also was given the right to enter

Category: Business - B