Does This Ring A Bell?

The chatter around breaking up Facebook makes it a great time to talk about why the last effort to break up a communications giant, AT&T, didn’t really work.

By Ernie Smith

Today in Tedium: No matter your ultimate lean on politics, you have to admit it’s pretty strange to sit with the knowledge that OAN, a conservative news network, was effectively funded by AT&T, right? This is a strange headline that kind of shakes through people’s heads in part because of what AT&T used to represent, as the phone company that we all had to use. (Now, at least with the dust settled, we have something of a choice.) The irony of the company that currently owns CNN bankrolling something that is literally the opposite of CNN in every way that matters is too bizarre to ignore. Now combine this with the effect of Facebook’s many negative headlines this week (including its downtime), creating the real possibility that Facebook is the AT&T of social media (down to the permissive approach around controversial content) and might need to be broken up, and you have some real knotty fodder to think about. Today’s Tedium considers the messy effects of AT&T’s breakup with the Baby Bells in a modern context. — Ernie @ Tedium

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“When we had only AT&T as our sole supplier of telephones, we had no need to worry about equipment quality or whether we were getting our money’s worth. AT&T guaranteed the quality. Whether the rental price of telephones was fair (cost-justified) did not arise since the absence of alternatives made the question one for regulators, not us consumers.”

— Former FCC commissioner Glen O. Robinson, writing about the AT&T breakup in The Yale Journal on Regulation in 1988. Robinson’s essay, a review of Gerald R. Faulhaber’s Telecommunications in Turmoil: Technology and Public Policy, highlights the fact that a lot of people actually liked the old monopoly, to the point of nostalgia. “No doubt nostalgia for the good old monopoly days has been generated partly by the discomfort of the transition from the old to the new,” he wrote. “One major discomfort results from a mixed blessing: the freedom to choose among market choices formerly unavailable.”

ATT Coax Cable

This cut-open coaxial cable, not looking unlike a flower, really highlights just how powerful AT&T really was. (YouTube screenshot)

How the AT&T breakup led to the immediate effect of pushing TV providers to the satellite industry

AT&T, love or hate their role as a monopolizing figure, nonetheless played a direct role in popularizing a number of technologies that we use today. Unix, for example, has roots in Bell Laboratories, which was AT&T’s research and development arm.

One of those technologies was the nationally televised football game, something enabled through AT&T’s Long Lines service, which evolved from a distribution network of wired cables to allow for long-distance phone calls to use coaxial cable for distribution, then a series of microwave transmitters that allowed millions of phone calls, along with lots of television signals, to be transmitted around the country in a live format. That meant that television shows could be distributed across the country, live—creating the circumstances that allowed Monday Night Football and lots of other nationally broadcast live programs to exist.

While primitive compared to what we use today, the use of massive coaxial cables and microwave services made it possible for an entire country to watch the same thing at the same time on television. (It also created some awesome looking towers in the process.) The clip above is a great description of how these technologies came together to broadcast to homes across the country at the same time.

But let’s be clear: The major television networks used AT&T Long Lines because there was no other choice. This was something Bell/AT&T fought really hard for. As a passage from Telecommunications in Turmoil explains:

Bell battled hard so that it alone had the right to transmit such signals. Bell was not the only firm with the technology. Philco and Raytheon, among others, had developed a wartime microwave capability and wished to serve this fast-growing market. Indeed, the demand from the TV broadcasters outstripped Bell’s ability to put microwave facilities in place, and early TV signals were carried on coaxial cable or even over private microwave systems that the FCC permitted to be built under experimental license, only where Bell had no facilities. These private systems were limited in extent and, as Bell’s network expanded, were gradually phased out. Bell argued before the FCC that it was putting in the facilities to do the job, it had the legal monopoly over common carriage of interstate electronic transmission, and it could use this profitable new service to offset the costs of the new facilities and keep rates to telephone users low. The FCC agreed with Bell, and for more than twenty years Bell kept the TV trans-mission monopoly.

(The book goes on to point out that AT&T was so focused on inter-city transmission that it missed out on the fact that the real money was to be made in broadcasting and television production.)

But AT&T’s single-minded monopoly over the microwave system in the U.S. created an opportunity for something that AT&T wasn’t used to: Competition. Satellite providers, working far above the earth’s surface, were not subject to the rules that allowed AT&T to assert its monopoly dominance over television transmission—with a 1973 FCC ruling allowing other companies to offer satellite-based telephone service.

For television providers, satellite technology was both cheaper and more accessible than Bell’s system, and allowed companies such as Turner Broadcasting System to expand nationally without the barriers AT&T created. Combined with cable systems, it opened up markets that just a few years earlier had nowhere to go.

Bell System

A Bell System manhole cover. (Washthebowl/Flickr)

By the time the AT&T breakup went through, television broadcasters had pretty much gone all in on satellite distribution—just in time for Captain Midnight and the Max Headroom incident to happen.

As I have written in the past, efforts to break the AT&T monopoly only started to emerge slowly—with one notable one, the TTY machine, coming from Deaf customers who were poorly served by the existing telephone lines. The Federal Communications Commission’s 1968 Carterfone decision, which allowed people to attach a radio receiver to their telephone, helped to create room for adaptations of the telephone system, such as some of the earliest ringtone-style effects.

AT&T gave us lots of innovation—down to the roots of the operating system you might be using, if it’s not Windows—but one could argue they took away a lot more in the process.

56k

The number of jobs that were eliminated during the breakup of Ma Bell, according to a 1986 Washington Post article. The breakup also disrupted another 150,000 workers’ careers because of job transfers, and the Baby Bells saw another 15,000 jobs cut as a result of the breakup. “The people who built the world’s best telephone system are being tossed onto the economic scrap heap while the telecommunications industry pursues higher profits but provides lower quality of service to consumers,” said Morton Bahr, the president of the Communications Workers of America, in comments to Congress about the breakup.

Yellow Book

(Silver Tusk/Flickr)

The breakup’s messy effects created long-term technological weaknesses that took years to repair

When news of the likely breakup began to emerge, there was a high degree of Stockholm Syndrome happening, with pointed criticism targeted at the Justice Department.

“What a crock,” one Stockholm Syndrome victim wrote to U.S. District Judge Harold H. Green, who approved the breakup. “You should apologize to the company and the public for a grotesque miscarriage of ‘justice,’ leave AT&T alone, permit them to engage in any business they wish, and then go back to chasing ambulances. Or even better, get an honest job.”

In some ways, this harsh stance was somewhat understandable, because we didn’t know any better—as a country, we had never really experienced a phone system that wasn’t almost entirely managed by one conglomerate.

As a 1989 article in CIO explains, the regional Bells had a level of operational scale and excellence that often did not match its internal systems:

Given this impressive sophistication in operational applications, it comes as some surprise that the telephone companies’ internal systems are so, well, archaic. Rather than advancing the companies they serve, the inadequacies and inflexibility of these creaky throwbacks threaten to strangle the very industry itself.

Consider the way that the marketing information systems at the regional Bell operating companies (RBOCs) lag behind those in other industries. For example, the IS operation at any self-respecting insurance company is likely to be able to pick through the firm’s various databases to pull together a unified file contain-ing a variety of information about even its smallest customers. In contrast, the information systems at the RBOCs are so hamstrung and unintegrated that getting information about even their largest customers is likely to be a six-month project.

Or how about the example of the BOC (one of the local divisions of an RBOC) that has eight different telecommunications networks sup-porting its own information systems. In this organization, it’s not unusual to see employees’ desks crowded with three or four different terminals, each hooked into a different system.

Or consider the study of the provisioning system at one of the RBOCs that found instances in which an employee had to interface with 32 completely distinct systems in order to place an order for installation of service to a new customer.

Despite having many years and billions of dollars to throw at the problem, trying to fix the complexities of the gigantic system that AT&T put in, and then had to tear apart, was so insanely challenging that it took years for these companies to find their footing again.

And this kind of organizational cruft displayed itself in unusual ways, especially at the beginning of the breakup. One example, circa 1984, involves a connection between border towns in New Hampshire and Massachusetts that would have directly connected only 10 miles away, but instead was redirected to an AT&T Communications line in Philadelphia, forcing a 860-mile connection that went way out of its way because of the regulatory complications.

“It’s just an excellent example of the insanity that’s going on out there,” an engineer told Computerworld of the bizarre connection.

(AT&T, for its part, had been allowed to enter the PC market as a result of the breakup, but that didn’t really work out, though it gave us a really cool tablet in the process.)

It’s no wonder that most of the Bell system had merged back together with itself in the span of only about 20 years. The modern AT&T is essentially the former Southwestern Bell Corporation, which became late enough to acquire two other former baby Bells, then AT&T, then another baby Bell. Verizon is made up of two former baby Bells, while just one company (U.S. West, now part of Lumen Technologies just like Level 3 Communications), has remained separate from the other six.

While we can’t be sure because we have no idea what might have happened if AT&T had stayed together or even become nationalized, but let’s be clear—the breakup ultimately turned out to be really great … for the telecom industry. The firms that were powerful before the breakup became even more powerful after, because the industry was ultimately a deregulated version of itself. It wasn’t as bad, perhaps, as what happened with Clear Channel, but given that we had to stop AT&T from buying T-Mobile a decade ago, it sure feels awful close for comfort.

We gave up too soon.

“If you accept their observations and arguments as mostly compatible pieces of a larger story, what stands out is a corporation that, at crucial moments, did just about everything right. In the early 20th century, the Bell system got there before its competitors. It learned how to fight or game the emergent regulatory system better than its rivals. AT&T publicly framed its purposes better than its critics. It used advertising not just to promote itself, but to sanctify its mission. And the corporation mastered the art of backing away from its darker ambitions at strategic public moments.”

— A 2011 Wired piece about AT&T, titled “How AT&T Conquered The 20th Century,” discussing how AT&T successfully framed itself in such a way that regulators left it alone for decades, allowing it to grow into a pseudo-national empire of a company. While this piece is by no means an exhaustive history, the Wired piece very much is. I encourage a read.

So to put this whole discussion another way: As we look at companies like Facebook and question the risks of tearing it apart or letting it stay together, it’s important to point out that the AT&T breakup allowed the company, over time, to expand to even bigger sizes, while allowing it to benefit from the eventual deregulation that came with the Communications Act of 1996.

Who knows what will happen with Facebook in the long run? But it feels like a very comparable situation to me, as a casual observer. Here is a company that has intentionally integrated things in such a complicated way that tearing things apart will hurt. If one goes down, so do the other two. If we use regulatory measures to tear them apart, it will leave a broken-apart WhatsApp and Instagram with the same kinds of organizational morass that the Baby Bells had and eventually had to resolve.

I’m sure that if Facebook ever gets to the point where a regulator wants to tear them apart, the decision will be the easy part. The breakdown will be really hard, and people will have nostalgia for the way things were before … and send the judge that makes the eventual call angry letters that imply Stockholm syndrome has taken over.

And I bet there will be pressure to deregulate in a way that threatens to bring the networks back together.

Now, it’s worth noting that AT&T wasn’t killed in one regulatory shot: As Business Insider notes, it took nearly 80 years from the first antitrust complaint for the breakup to actually happen, with early efforts warded off after the company agreed to divest Western Union, but in a way that largely benefited AT&T.

One big difference between AT&T and Facebook seems to be tactical; AT&T largely encouraged a largely positive portrayal of itself, while Facebook’s PR folks are literally fighting with journalists on Twitter, so maybe they’ll fold faster than AT&T did.

Everything happens faster with Facebook. Perhaps that means we’ll see a breakup a lot faster than it came with AT&T.

But the challenge with a potential breakup or regulatory efforts that are this complex is that if we put our foot off the gas long enough, we’ll be back at square one. Look at AT&T now, compared to where it was four decades ago. It just got accused of funding propaganda, but nobody is going to be talking about breaking it up.

It’s all because of the approach we took to reining it in after the breakup. If we do the same to Facebook, we cannot let up.

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Ernie Smith

Your time was just wasted by Ernie Smith

Ernie Smith is the editor of Tedium, and an active internet snarker. Between his many internet side projects, he finds time to hang out with his wife Cat, who's funnier than he is.

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