Past & Present: The 'Trust-Busting' Of AT&T

Jan 8, 2019

When historians talk about the “trust-busting era” in US history, we are probably referring to the early 20th century when the federal government broke up several large, corporate monopolies in order to promote economic competition. However, the largest corporate breakup actually took place in 1982.  

On January 8th, the AT&T Corporation relinquished control of the Bell Operating Companies that provided local and regional phone service throughout the United States and Canada. While AT&T maintained control over long-distance service, the Bell System was divided into separate regional providers. While this radical change sent shockwaves through corporate America, AT&T knew that it could have been worse. 

Eight years earlier, the US Department of Justice filed an antitrust suit against AT&T. At the time, AT&T was the only telephone service provider in the United States. In addition, AT&T’s subsidiary, Western Electric, made most of the telephones sold in North America. In the case, US v. AT&T, the Department of Justice argued that the company violated US antitrust law by using profits from Western Electric to subsidize the costs of its networks. The plaintiff asked the district court to order AT&T to sell off Western Electric. 

Thinking that they would probably lose the case, AT&T proposed an alternative—breaking up the nation’s largest corporation. In the consent decree, AT&T agreed to give up control over the Bell Operating Companies. In return, however, it retained control of Western Electric, the Bell trademark, Bell Labs, AT&T Long Distance, and the Yellow Pages. In addition, AT&T would be freed from a previous court-ordered agreement that had barred it from participating in computer sales. This agreement ended the company’s monopoly over 20th-century ventures and momentarily decreased the value of the company by 74 percent, but it also opened up future possibilities for AT&T’s growth in the 21st century.