Newark Star-Ledger, Sunday, November 20, 2005
 
AT&T, 1885-2005, the mother of invention: An appreciation

Telephone titan was never the same after 1984 breakup of its monopoly


BY JEFF MAY

AT&T, a one-time symbol of corporate might that helped change the way generations of people communicate, died Friday after a long illness. It was 120.

Known affectionately as Ma Bell, the company will have its name carried on by one of its surviving children, SBC Communications.

Over its long life, AT&T earned a reputation as the world's best telephone system. It was reliable and affordable, providing service to virtually anyone who wanted a phone.

It was the biggest company on earth in its prime, and as late as 1983 employed a million people, second only to the federal government. Reaching into most American homes and businesses, the company at one point accounted for almost 2 percent of the U.S. gross national product.

"There's no such thing as unlimited resources, but it was as close to unlimited resources as you can get," said Richard Roscitt, a former president of AT&T's business services group.

AT&T's greatest days came after 1913, when federal regulators allowed it to become a government-sanctioned monopoly, and before 1984, when the company shed its local phone operations to settle a landmark federal antitrust suit.

Unused to competition, AT&T steadily lost its commanding share of the phone market during the next two decades. In recent years, it pulled back from the consumer long-distance business, lost its place in the Dow Jones industrial average and found itself eclipsed by the same regional Bell companies, such as SBC and Verizon, that it jettisoned two decades ago.

The long, slow decline hardened many AT&T veterans.

"I don't feel sad. I don't feel happy," Ken Bishop, a longtime company employee and union local president, said of the company's $16 billion purchase by SBC. "It's just business as usual. I'm just thankful next week that I've got a job."

"THE FATHER-IN-LAW"

Born in 1885, the American Telephone & Telegraph Co. was incorporated nine years after Alexander Graham Bell won a patent for the first telephone. It was the successor to the American Bell Co., which was  founded by Bell and his father- in-law, Gardiner Hubbard.

Critics regarded Bell's invention as little more than a toy, with no mass application. But even with early technical limitations, the
phone's advantages were obvious. Conversations in the late 19th century were limited by proximity -- you had to be near someone to hear them. Messages could be delivered over long distances by mail or tapped out on a telegraph, but the telephone offered a more personal and immediate form of communication.

"I think for people who lived in the countryside, it had a huge difference, because it ended the terrible isolation and loneliness,"
said James Katz, a Rutgers professor who has studied the social impact of the telephone. "It's also been said that without the telephone, it wouldn't make any sense to have skyscrapers. The telephone allowed dramatic revisions to urban landscapes."

Early adopters had to endure their share of inconveniences. Mark Twain wrote to complain about his local service in Connecticut in an 1890 letter to Hubbard, whom he tweaked as "The Father-in-Law of the Telephone."

"The Hartford telephone is the very worst on the face of the whole earth," Twain wrote with mock indignation. "No man can dictate a
20-word message intelligibly through it at any hour of the day without devoting a week's time to it, and there is no night service."

Still, the technology was promising enough that when Bell's patents expired in 1894, the company soon faced thousands of competitors. None of the different phone systems could connect with each other, however, which turned out to be a nightmare for customers.

AT&T's solution was to buy out as many of its rivals as it could, which attracted the attention of federal antitrust lawyers.

To avoid a federal takeover of the phone system, legendary Chief Executive Theodore Vail in 1913 signed off on the Kingsbury Commitment, an agreement that recognized AT&T as a private monopoly. AT&T pledged not to buy any more phone companies without permission and agreed to spin off the telegraph company Western Union and allow some independent phone companies to tap into its long-distance network.

A SPECIAL BLEND

AT&T consolidated its hold over the nation's phone systems in subsequent decades, and became a blue-chip stock known for its
unfailing payment of dividends.

Its research labs had a hand in some of the 20th century's biggest innovations, including the transistor, satellite transmissions,
television, laser technology and cellular phone service. The company was also a pioneer in industrial organization, public relations and
customer service.

"If we wish to know the corporation in the Age of the Corporation, we can hardly begin at a better place than by studying AT&T," the financial journalist John Brooks once wrote in a book about the company.

Although incorporated in New York, AT&T always had a large presence in New Jersey. The state's pre-eminence in company affairs was underscored in the mid-1970s, when AT&T moved its operating headquarters to a sprawling campus in Basking Ridge -- complete with an indoor waterfall -- that symbolized its stature. (In recent years, the company's executive offices were shifted to less awe-inspiring surroundings in Bedminster).

The company embraced a strange blend of capitalism and bureaucracy. Management positions were keyed to a complicated letter system. Furniture and office space were rigidly proscribed by job title. AT&T encouraged conformity, but employees were also infused with a purpose beyond simple profit.

Before the 1984 breakup, employees spoke proudly of "the Spirit of Service," a slogan that appeared regularly in AT&T advertisements.

"It was like working for an outfit that was halfway between the military and the Red Cross," said Burke Stinson, a retired AT&T public relations man. "It really was a cause and not a company."

TALK BECAME CHEAP

But exposure to market forces slowly wore away that attitude, and the company's fortunes. MCI, which started as a radio communications service for truckers, began to challenge AT&T's monopoly status during the late 1960s. Then in the 1970s, the federal government began an antitrust investigation. After a protracted legal battle, AT&T agreed to part with its seven regional phone companies.

When the breakup took effect in 1984, AT&T saw its assets drop from $149.5 billion to $34 billion. Its core business was now long-distance, the most profitable piece of phone service. The bad news: AT&T had nowhere to go but down, and its long-distance franchise was under attack by MCI, Sprint and others. The battle for customers became a rout once Congress rewrote the telecommunication laws in 1996 to promote local phone competition -- which opened the door for SBC, Verizon and BellSouth to offer long distance.

When Vail died in 1920, the New York Times wrote: "He died believing that talk around the world eventually would become both common and cheap." But in the new century, talk had become too cheap -- in a letter to employees last week, AT&T Chief Executive David Dorman said the average price of a minute of long-distance service had declined almost two- thirds in recent years.

"It was apparent to me that in order to survive, AT&T would have to transform itself in ways that hadn't been previously contemplated," Dorman wrote.

Over the years, AT&T had tried many ways to broaden its base. Forays into computers, cell phone service and cable television cost tens of billions of dollars, but eventually fizzled, either from poor management or crushing debt. That left one final option: a sale of the
company.

"All (AT&T) knew how to do was lobby federal politicians and state regulatory agencies," Milton Mueller, a Syracuse University professor who specializes in telecommunications, wrote in an e-mail response to questions about the company's demise. "When faced with a competitive market, it made one disastrous mistake after another."

In his letter, Dorman said the acquisition by SBC will lead to a "new AT&T."

But employees who worked for the company in its glory years know better.

Said Richard Romano, a 38-year veteran of the company who retired as a vice president of state government affairs, "The AT&T we loved and worked for has been gone a long time."