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Breakup of the Bell System
The Bell System held a virtual monopoly over telephony infrastructure in the United States from around the early 20th century until January 8, 1982. It consisted of parent the American Telephone & Telegraph Company (AT&T), which directly provided long-distance service, while local service was provided by 24 local Bell Operating Companies, which owned whole or in part by AT&T, while its manufacturing subsidiary Western Electric produced almost all of its equipment, which was largely designed at the research and development subsidiary Bell Labs. As a result, AT&T had substantial control over the United States' communications infrastructure.
The breakup of the system was initiated in 1974 when the United States Department of Justice filed United States v. AT&T, an antitrust lawsuit against AT&T. Relinquishing ownership of Western Electric was one of the Justice Department’s primary demands.
Believing that it was about to lose the suit, AT&T proposed an alternative: breakup the Bell system. AT&T proposed a consent decree to relinquish control of the local Bell Operating Companies. AT&T would continue to be a provider of long-distance service, retain control of Western Electric, Bell Labs, the Yellow Pages directory services, and the Bell trademark. It also proposed that it be freed from a 1956 antitrust consent decree, then administered by Judge Vincent P. Biunno in the United States District Court for the District of New Jersey, that barred it from participating in the general sale of computers—a field to which Bell Labs had contributed significantly—and required it to depart from international markets (which consisted of relinquishing ownership in Bell Canada and Northern Electric, a former Western Electric subsidiary). In exchange, ownership of the local companies would be transferred to newly created, independent Regional Bell Operating Companies (RBOCs), nicknamed the "Baby Bells", which would no longer be required to obtain equipment from Western Electric. This last concession, it argued, would achieve the government's goal of creating competition in supplying telephone equipment and supplies to the operating companies. The settlement was finalized on January 8, 1982, with some changes ordered by the decree court: the regional holding companies received the Bell trademark, Yellow Pages, and half of Bell Labs.
The divesture of the local operating companies to the Baby Bells became effective on January 1, 1984. This divestiture reduced the book value of AT&T by approximately 70%.
The breakup of the Bell System resulted in the creation of seven independent companies that were formed from the original twenty-two AT&T-controlled members of the System.
On January 1, 1984, these companies and the local operating companies placed under them were:
In addition, there were two members of the Bell System that were only partially owned by AT&T. Both of these companies were monopolies in their coverage areas, received Western Electric equipment and had agreements with AT&T whereby they were provided with long-distance service. They continued to exist in their pre-breakup form after the antitrust case, but no longer automatically received Western Electric equipment, and were no longer bound to use AT&T as their long-distance provider. These companies were:
Regulatory changes brought about by the Telecommunications Act of 1996 allowed the Baby Bells to merge with each other or with non-Bell companies. Subsequently, a series of mergers and divestments has left six companies owning parts of the former Bell System as of 2024.
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Breakup of the Bell System AI simulator
(@Breakup of the Bell System_simulator)
Breakup of the Bell System
The Bell System held a virtual monopoly over telephony infrastructure in the United States from around the early 20th century until January 8, 1982. It consisted of parent the American Telephone & Telegraph Company (AT&T), which directly provided long-distance service, while local service was provided by 24 local Bell Operating Companies, which owned whole or in part by AT&T, while its manufacturing subsidiary Western Electric produced almost all of its equipment, which was largely designed at the research and development subsidiary Bell Labs. As a result, AT&T had substantial control over the United States' communications infrastructure.
The breakup of the system was initiated in 1974 when the United States Department of Justice filed United States v. AT&T, an antitrust lawsuit against AT&T. Relinquishing ownership of Western Electric was one of the Justice Department’s primary demands.
Believing that it was about to lose the suit, AT&T proposed an alternative: breakup the Bell system. AT&T proposed a consent decree to relinquish control of the local Bell Operating Companies. AT&T would continue to be a provider of long-distance service, retain control of Western Electric, Bell Labs, the Yellow Pages directory services, and the Bell trademark. It also proposed that it be freed from a 1956 antitrust consent decree, then administered by Judge Vincent P. Biunno in the United States District Court for the District of New Jersey, that barred it from participating in the general sale of computers—a field to which Bell Labs had contributed significantly—and required it to depart from international markets (which consisted of relinquishing ownership in Bell Canada and Northern Electric, a former Western Electric subsidiary). In exchange, ownership of the local companies would be transferred to newly created, independent Regional Bell Operating Companies (RBOCs), nicknamed the "Baby Bells", which would no longer be required to obtain equipment from Western Electric. This last concession, it argued, would achieve the government's goal of creating competition in supplying telephone equipment and supplies to the operating companies. The settlement was finalized on January 8, 1982, with some changes ordered by the decree court: the regional holding companies received the Bell trademark, Yellow Pages, and half of Bell Labs.
The divesture of the local operating companies to the Baby Bells became effective on January 1, 1984. This divestiture reduced the book value of AT&T by approximately 70%.
The breakup of the Bell System resulted in the creation of seven independent companies that were formed from the original twenty-two AT&T-controlled members of the System.
On January 1, 1984, these companies and the local operating companies placed under them were:
In addition, there were two members of the Bell System that were only partially owned by AT&T. Both of these companies were monopolies in their coverage areas, received Western Electric equipment and had agreements with AT&T whereby they were provided with long-distance service. They continued to exist in their pre-breakup form after the antitrust case, but no longer automatically received Western Electric equipment, and were no longer bound to use AT&T as their long-distance provider. These companies were:
Regulatory changes brought about by the Telecommunications Act of 1996 allowed the Baby Bells to merge with each other or with non-Bell companies. Subsequently, a series of mergers and divestments has left six companies owning parts of the former Bell System as of 2024.