The Irony of Divestiture

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Remember Divestiture, that 1984 blockbuster culmination of a DOJ antitrust lawsuit initiated ten years earlier? The one that broke up the mighty Bell System into AT&T and the seven “dwarfs?”

The result of a consent decree that ended AT&T’s alleged monopoly over telecommunications services and equipment (via Western Electric) in most of America?

The singular event that fostered the creation of NECA, BELLCORE and ICORE, among others, and took the “I” right out of USITA?

Besides Alexander Graham Bell’s first completed, if abrupt, call to Thomas Watson, the most important event in the history of telecommunications?

Funny how this noble governmental exercise in consumer protection has evolved.

The “dwarfs,” or Baby Bells as they were affectionately known back then, have had varying degrees of success. One of them, Southwestern Bell (SBC), actually bought mother AT&T, while retaining mom’s good and valuable name.

Another of the Babies, Verizon (originally Bell Atlantic), has become a multinational telecommunications conglomerate and the largest wireless carrier in the U.S. With key mergers and acquisitions – sibling Baby Bell NYNEX, General Telephone (then the largest Independent Telephone Company in the country) and MCI (the monopoly-busting long distance pioneer) – some serious competitors vanished, and Verizon began to establish its empire. FIOS made Verizon a major player in subscription TV.

The addition of other established and start-up companies, including Vodaphone and Alltel, along with  Cyberburst, Terremark and Social Radar, and its currently much-anticipated acquisitions of Charter Communications and Yahoo, will eliminate even more of its competition. These moves will also produce some new service offerings, further solidifying Verizon as an extremely powerful and formidable force in mobile, broadband, TV, data, security, social media and related markets.

Despite Verizon’s meteoric rise, the new AT&T seems to have weathered the Bell System break-up as well as, or better than, any of the separated siblings (including Verizon) that were ripped so callously from the original AT&T’s not-so-benign bosom.

It has become the largest (by revenue) telecommunications company in the world, and the 12th largest overall. It is the second largest wireless carrier in America, trailing only — you guessed it – Verizon, and the largest wireline telephone company in this country. With its purchase of DirecTV, it now offers satellite TV service, as well as cable under its U-verse brand. In many markets, the choice of subscription TV is limited to the two AT&T offerings.

At over 135 million mobile customers worldwide, it also provides wireline service in the U.S. through ten of the original twenty-two Bell Operating Companies – Bell South and Bell Central, Illinois Bell, Indiana Bell, Michigan Bell, Wisconsin Bell, Ohio Bell, Pacific Telephone and Telegraph, Nevada Bell, and Southwestern Bell. If its efforts to buy Time Warner are successful, it will become a giant in the media market as well.

There is still competition in the industry, although there seems to be less with each passing year, so it can be argued that Divestiture has been a success. And we now have TWO gargantuan, multi-faceted telecommunications behemoths, both bigger and badder than the old, monopolistic AT&T that spawned them.

Humpty Dumpty has not been completely reassembled, but the post-divestiture world does seem to prove at least one old adage – You Can’t Keep a Good Monopoly Down.