AT&T was the orginal corporation started by Alexander Bell, after recieving a patent on the creation of the telephone, originating back in the year 1875. The company was first formed as the Bell Telephone Company, in 1877. The company spread vastly over the the next 120 years, resulting in what was once the world's largest corporation. It provided telephone service to the whole of America. In the 1970's and 1980's anti-trust regulation forced the divestment of AT&T into seven smaller regional telephone companies. AT&T survives today as a premier networking and communications company.
It all started with an idea, as all great things do. The year was 1875, and an inventor by the name of Alexander Bell was perfecting a creation in which some observers detected a value no greater than that of the telegraph. Indeed, few could imagine the incredible scope of change and innovation associated with such a device as the one under Bell’s current development. In principle it was simple, transmit one’s voice, rather than a typed message. Bell called this device a telephone.
In the year 1877, Alexander Bell and two of the men who financed his work with the telephone decided to take advantage of the patents resulting from this work, secured in 1876, and later 1877. The three men founded the Bell Telephone Company, and assembled its first local exchange in the town of New Haven, Connecticut in 1878. The fledgling company began to quickly expand, spreading the network of voice communication to several larger towns, and to the city of New York in the subsequent three years, and soon there were local exchanges in most major American cities, all under license from Bell.
As the network expanded, there was naturally and increasing demand for production of the equipment utilized by the Bell Telephone Company. By 1882 the company purchased a controlling interest in the Western Electric Company, which became the company’s main hardware production center. The Bell Telephone Company began to accumulate most of its licenses as it began spreading across the telecommunication frontier of America; the entire system was known collectively as the Bell System.
On March 3rd, 1885, the American Telephone and Telegraph Company was born as a subsidiary to the Bell Telephone Company, its purpose: To build and operate a long distance telephone service spanning America. By 1885 the Bell System had reached its first milestone, a long distance service from New York to Chicago. This accomplishment only served to cement the dream of spanning America. The Bell System set its sights on San Francisco.
During this period of expansion their efforts met with one of the primary challenges of electrical information exchange: the weakening of electrical signals over long distances. This problem was met with two inventions; first, loading coils, which expanded the effective distance of long distance communication to 2000 miles, came in 1899. To reach San Francisco, Bell implemented the first practical electric vacuum tube amplifiers, or repeaters. The advent of this technology allowed for electrical signals to be transmitted over unlimited distances, occurring in 1915.
On December 30th, 1899 The Bell Telephone Company relinquished its assets to AT&T, which became the owner of the Bell System. Through out the 1880’s others became interested in the prospering business of telecommunication. The Bell system had a great advantage, holding a patent on the telephone resulted in Bell being the only legal proprietor and licensor of telephone technology. This patent expired in 1894, leaving AT&T the burden of competition, and in the following 10 years over 6000 independent telephone companies surfaced, hungry for a share of the explosive market. During this timeframe, the number of telephones in the United States increased from 285,000 to 3,317,000.
AT&T: Strength and Expansion
The rapid rise of independent telephone companies made intertwining of service a nightmare. Consumers of different services were unable to talk with one another. AT&T’s president Theodore Vail was a shrewd man, with a sense of organization and systematic inclusion, he lead AT&T to a great deal of success, resigning from his position in 1887. Experiencing difficulties on multiple fronts, the primary shareholders asked him back to office in 1907. He took the rapidly growing dissention of service caused by multiple providers as an affront to the AT&T dream of universal service across America. Vail formulated a plan to treat telephone service as a utility, provided by a monopoly corporation, which would not deal with competition, instead only regulation from the government.
Vail’s formulation came to fruition in the form of the Kingsbury Commitment in 1913. The Kingsbury Commitment was essentially a letter from the Vice President of AT&T, Nathan Kingsbury, to the Attorney General, in an agreement to monopolize the industry, while divesting AT&T of Western Union. It also provided for the interlinking of current independent exchanges into the Bell System. The government, fearing the consequences of complete monopolization mandated that AT&T make only acquisitions approved by the Interstate Commerce Commission.
One of Vail’s primary accomplishments as the leader of AT&T was to put the public first, in the midst of times when the sentiment among many telephone companies was less than desirable. Increased regulation by the ICC was viewed in a bad light by many small independent companies; they had the understanding that in order to serve the public that they would most likely end up interconnected to the Bell System. In an era of public sentiment viewing big corporations as evil, Theodore Roosevelt played a substantial role in the unification of the telephone network by supporting AT&T. Realizing that competing with independent companies would not serve the public good, Vail tried to partner with as many independents as possible.
In the following years AT&T continued to spread and interlink telephone connections through out the United States, beginning to resolve the problem of multiplicity in networks. In the 1930’s a teletypewriter was introduced. This allowed text to be transmitted over the telephone network. AT&T continued to explore methods of alternate communication throughout the 1930’s and 1940’s. According to most accounts, the Bell System was reliable, cost effective, and generally accepted by the American public. This was possibly due in large part to the efforts of Theodore Vail in promoting public service as the benchmark for the communications giant. By 1945 50% of all American households had telephone service. In the mid-1950’s modems were being released, to transmit data with computers. Free from the pressures of competition, the company continued to expand.
AT&T: The Anti-Trust Movement and Age of Diversification
Political philosophy was rapidly changing through out the 1940’s and the 1950’s. These years brought about increased interest in the control of monopolies, and this posed a threat that would become a reoccurring theme for the lifespan of AT&T as the continent spanning telecommunications giant that it was in this age.
In the years 1947-1949 the Federal Government launched a massive investigation of AT&T and the Bell System, amidst allegations of fraud, and deferment. An anti-trust suit was filed by the Federal Government in 1949. This eventually lead to the agreement accepted in 1956, between AT&T and the Department of Justice, stating that AT&T must abandon all interests outside of the telephone service and governmentally sanctioned endeavors.
The 1960’s brought an advance in electric transmission, versus the tradition electro-mechanical methods. This brought about an increase in quality and efficiency throughout the industry. 1962 marked the launch of Telstar I, the first commercial communications satellite, which helped to intensify intercontinental telephony. Despite these accomplishments AT&T still faced a large threat to reign as telecommunication monarch.
Throughout the 1960’s and 1970’s the Federal Communication Commission had been steadily allowing competitors to enter the field of telecommunication. The FCC itself had been placed in charge of wire communications after 1934, when it relieved the ICC. The diversification of the market was prompted by still looming fears of complete monopolization. By the mid-1970’s there was general competition in the long distance service. In 1974 an anti-trust suit was filed against AT&T, one which would hold far reaching consequences for the industry giant.
AT&T: Ma Bell and the Baby Bells
1974 was a grave year for AT&T, in essence, spelling the end of the iron grip with which The Bell System gripped telecommunications in the United States. The 1974 anti-trust suit filed against AT&T was resolved in 1982. In deliberation, the company was presented with three options: crippling legislation, a limiting injunctive order, or divestment of its local exchanges, the Regional Bell Operating Companies. AT&T saw the only way to viably protect investor’s interests was to divest the local exchanges, hence the birth of the ‘Baby Bells.’
The divestment of the RBOCs lead to the formation of seven separate companies, managing regional exchanges and a ‘new’ AT&T managing long distance communication. The seven Baby Bells created were: Ameritech (SBC); Bell Atlantic (Verizon); BellSouth Telecommunications; NYNEX (Verizon); Pacific Telesis Group (SBC); Southwestern Bell Corporation (SBC); and US West (Qwest). There were two smaller companies that AT&T, now nicknamed ‘Ma Bell’, held majority interest in: Southern New England Telephone (SNET) and Cincinnati Bell.
AT&T went from having assets valued at $149,500,000,000 to $34,000,000,000 and from having 1,009,000 employees to 373,000. In addition to the huge reduction of the company the agreement also annulled the 1956 agreement. This caused the long distance industry to quickly become extremely competitive, and allowed AT&T to invest in whichever interests the company chose. AT&T’s marketshare fell from 90% to 50% over the next twelve years.
AT&T: New World Market
In the 1980’s and 1990’s the frontier of telecommunications changed quickly and drastically. New technology, predominantly fiber optic advances; along with purely electronic switching, great efficiency increases in coaxial cable, and lower fixed costs due to competition lead to a 40% decrease in the cost of telephone subscriptions. This resulted in an explosion of volume, on top of already exponential growth. In 1984 the volume was 37,000,000 calls. In 1989 the volume expanded to 105,900,000. In this same period, more and more data was transmitted over the network. Seeing this increase in data related applications, AT&T acquired the National Cash Register Corporation (NCR) in an attempt to get an edge on data communication.
The 1990’s also saw the advent of cellular technology, AT&T’s response was to acquire McCaw Cellular for $11,500,000,000 and create AT&T Wireless. In this age of rapidly growing technology, AT&T found and increasing rift growing between its research and development facilities and production centers; in September of 1995 AT&T made the shocking announcement that it was restructuring into 3 distinctly traded companies: Lucent Technologies, NCR, and AT&T. Increasing long distance computer integration led AT&T to become a integrated voice and data telecommunications company.
In its quest to become an integrated voice and data telecommunications company, AT&T shifted focus to the internet. It started a proprietary internet service, AT&T WorldNet, and sold non-profitable assets such as its submarine development and SkyNet systems. AT&T also redefined its objective: “To go from a long distance company to an any distance company.”
The years from 1998 to 2002 marked fast paced growth in a new direction. The company spent over $35,000,000,000 in upgrades to its infrastructure in order to handle the massive bandwidth constraints of the volume of IP and data traffic. Among assets acquired are TCG and IBM Global Network. AT&T merged with TCI and MediaOne. The company is now comprised of three rapidly growing networks: Data, Broadband, and Wireless; which are contained in four distinct businesses: wireless, business, cable, and consumer. The year of 2000 was an important benchmark as it was the first time that the data transmissions exceeded the voice transmissions.
AT&T: Networking the Future
The telecommunication industry experienced a very rough time, marked by the year 2002. Cases of oversupply, a complex regulatory environment, several instances of fraud, and pressure related to pricing lead to widespread panic in the industry. Once again, AT&T found it necessary to evolve. From 2002 to 2004 focus was shifted to an enterprise focused networking company, as well as a providing a global IP network. AT&T introduced a new technology, which allows users to transmit their voice through internet protocol. This technology is called Voice over Internet Protocol or VoIP.
Presently AT&T has just been acquired by SBC Communications Inc. on November 18th, 2005 to form the industry’s foremost communication and networking company under the name of AT&T.
AT&T was once the world’s largest corporation, and has had a profound impact on the telecommunication industry, as well as the whole of America. From its roots in the invention of a single man, to the corporate giant that once connected America, and finally to the advanced networking and communication company that it is today, AT&T has a left legacy that is matched by very few institutions in the world, and has created a world of technological opportunity.
"There are two giant entities at work in our country, and they both have an amazing influence on our daily lives...one has given us radar, sonar, stereo, teletype, the transistor, hearing aids, artificial larynxes, talking movies, and the telephone. The other has given us the Civil War, the Spanish American War, the First World War, the Second World War, the Korean War, the Vietnam War, double-digit inflation, double digit unemployment, the Great Depression, the gasoline crisis, and the Watergate fiasco. Guess which one is now trying to tell the other one how to run its business?"
Sign found in many Bell facilities in 1980
(Bell Telephone Magazine - March-April 1975 edition)
(Bell Telephone Magazine - May-June 1975 edition)