Bell Telephone Company: Once the world's largest monopoly operator

In 1877, Alexander Bell, the "father of the telephone", registered a company based on his invention and named it Bell Telephone Company. Because the invention of the telephone is so popular, the business of Bell Telephone Company is booming, and the customers visiting it are endless.

Not long after, in 1878, Bell and his company ushered in an important lawsuit against the powerful Western Union Telegraph Company. Bell sued the other party, believing that the other party infringed his own telephone patent.

After a fierce court argument, the two sides reached a settlement. The conditions of the settlement are: Western Union withdraws from the telephone business, and Bell guarantees that it will no longer enter the telegraph field. This is equivalent to that the two companies have clearly demarcated the boundaries of their operations, and the well water does not violate the river water.

Obviously, this result is more favorable for Bell. The telephone is the trend of the future. They have lost an important competitor on the road to developing a telephone business. Soon after, Bell Telephone's business continued to expand and soon covered the Chicago area in the middle of the United States and the San Francisco area in the west.

In 1880, Bell Telephone Company officially began to operate the long-distance telephone business. In 1885, Bell Telephone Company established a subsidiary specializing in the long-distance telephone business, named the American Telephone and Telegraph Company, which is the protagonist of our article today-AT&T (American Telephone & Telegraph).

In 1893, Bell's telephone patent expired, and a large number of telephone companies flooded into the market, the number once reached more than 6,000. In the face of cruel market competition, AT&T is not afraid. With their painstakingly managed long-distance telephone network, they defeated countless competitors and continued to consolidate their market dominance.

In 1899, AT&T reverse acquired the business and assets of American Bell and became the parent company of Bell Systems. In 1910, AT&T merged with its old rival Western Union Telegraph Company and gradually became the largest telecommunications service provider in the United States. In 1913, AT&T encountered its first antitrust lawsuit from the US Department of Justice.

At that time, the entire United States was in a turbulent wave of antitrust. Two years ago (1911), the well-known American oil giant, Rockefeller Standard Oil Company, was forced to split into 34 regional oil companies due to monopoly operations, ending its history. AT&T obviously does not want to have the same fate as Rockefeller. So they tried their best to defend themselves.

The final result of the lawsuit is not too bad for AT&T. It was not split, but the court required it to stop merging other telephone companies, withdraw from Western Union’s equity, and assume "universal service obligations." The so-called "universal service obligation" means that AT&T must provide basic universal telephone services to people across the country at an appropriate price.

AT&T, which escaped from the dead, began to operate its main business in a proper manner. Later, AT&T set its sights overseas. In the 1920s, AT&T continued to increase investment in overseas business, opened factories in many countries in Europe, South America, and Asia, and signed many licensing agreements.

This wave of overseas investment has helped many countries establish their own early communications industry, and has also enabled the great invention of the telephone to enter more families. Later, due to the rapid development of the domestic communications industry in the United States, AT&T was forced to abandon many overseas businesses and concentrate on meeting the needs of domestic users.

No one thought that many of these "abandoned" AT&T overseas assets would grow into world-renowned communications companies. For example, Northern Telecommunications (Nortel) in Canada, NTT in Japan, etc., actually all came from AT&T. While actively investing overseas, AT&T has not forgotten the innovation and R&D of core technologies.

In 1925, the then president of AT&T, Walter Kieferd, purchased the research department of Western Electric. On the basis of this department, he ordered the establishment of an independent entity called "Bell Telephone Laboratories". Yes, this independent entity later became the greatest laboratory in human history-Bell Labs.

At the beginning of its establishment, Bell Labs received full support from AT&T. The funding for scientific research in the first year alone reached a jaw-dropping $12 million. You know, that was 12 million U.S. dollars in 1925, and now it is almost billions of dollars! Every year thereafter, AT&T will invest 3% of its revenue in Bell Labs.

Under AT&T's continuous blood transfusion, Bell Labs has created an extremely amazing result-the Nobel Prize in Physics, 11 people. Turing Award, 4 people. The highest science and technology award in the United States, 16 people. The inventions of Bell Labs are outrageous. For example, transistors, lasers, solar cells, light-emitting diodes, digital switches, communication satellites, electronic digital computers, cellular mobile communication equipment, long-distance television transmission, simulation languages, sound movies, stereo recordings, communication networks... These all come from Bell Labs.

In 1934, the US Congress passed the Telecommunications Act and established the Federal Communications Commission (FCC), which further strengthened the control of the communications industry and AT&T. In 1949, the US government initiated the second antitrust lawsuit against AT&T.

In January 1956, the FCC clearly stipulated that the communication equipment manufactured by AT&T is only allowed to be used by itself; AT&T does not allow data services to be operated and is limited to the communication field; Bell Labs patents must be transferred to other companies in the form of licenses. Although these restrictions are strict, there is no harm to the bones. For AT&T, it once again escaped from the dead.

Since then, AT&T is actually still a monopolistic telecom operator, but the government's control has become more stringent. Entering the 1960s, AT&T ushered in a new challenger-MCI (Microwave Communicatioms, Inc).

Founded in 1963, MCI's main business is to lease long-distance circuits from AT&T and provide dedicated line services to major customers in cities with a lot of business. Because of its low price and good service, MCI has developed rapidly.

In 1974, MCI sued AT&T in the name of antitrust, accusing it of unfair competition. At the same time, some small companies also took the opportunity to booze and filed a lawsuit against AT&T. These lawsuits have attracted the attention of the US government. Thus, the third antitrust lawsuit against AT&T began. The purpose of this lawsuit is to split AT&T's organizational structure. The US government requires AT&T to be separated from its 24 local subsidiaries and West Electric.

After long bargaining, AT&T was forced to agree to the split with the subsidiary in 1981. But there are prerequisites-to retain West Electric Company; to enter the computer industry; to allow data processing business. In 1982, the court accepted AT&T's request. On January 1, 1984, the separation operation officially began.

As a result, the old AT&T was split into a new AT&T (specialized in long-distance telephone business) and seven local telephone companies (respectively Atlantic Bell, Southwest Bell, Western Bell, Pacific Bell, Southern Bell, Ametac, and New New Zealand). Commonly known as "Bell Seven Brothers").

What the US government and people did not expect was that after the split, AT&T became stronger. The split allows AT&T to focus more on its main business, and the data business has grown significantly.

In 1994, AT&T's turnover once reached 70 billion U.S. dollars. Prosperity must decline. By the end of the 90s, AT&T finally ushered in a turning point in its destiny.

At that time, although AT&T was a telecom operator on the surface, it was actually an equipment manufacturer. It not only operates the telecommunications business but also develops and produces telecommunications equipment.

However, its equipment is only sold to itself, not to others. Therefore, the market expansion of the equipment manufacturing department is restricted. Therefore, the person in charge of AT&T's equipment manufacturing department asked, can we withdraw from AT&T and become a new company independently? In this way, we can do business with all operators! This proposal has been supported by most of the company's managers and employees.

The reason is simple, they own the company's stock. It happened that 1995 was another year when American stocks took off. Everyone believed that the wealth brought by stocks far exceeded the normal operating profit of a company. If the manufacturing department is split, it will inevitably bring in a large number of equipment orders, which will definitely drive up the company's stock price, and everyone can profit from it.

Of course, Wall Street investment managers also understand this. Therefore, under the combined action of internal and external forces, in 1995, AT&T swung a knife from the palace and carried out a fatal split. The original company’s network department, the Western Electric Company, which was previously responsible for manufacturing switching equipment, was separated and became Lucent. The information processing subsidiary of the original company was separated and became the NCR company.

NCR Corporation (National Cash Register Company) was an independent company at first. It was acquired by AT&T in 1991. After the acquisition, it was mainly engaged in computer research. Bell Labs was also divided into two in this split, half went to Lucent, and the sign was taken away by Lucent. For the remaining half, AT&T changed its name to Shannon Labs and kept it.

In 1998, the then CEO Michael Armstrong pushed AT&T's transformation ambitiously. He wanted AT&T to transform from a long-distance telephone company to an all-media information group (at the time, the Internet bubble was inflating). In those years, AT&T made several large acquisitions and successively bought TCI and MediaOne. Soon after, the crazy acquisition of AT&T began to suffer its own consequences.

Their aggressive marketing strategy did not achieve the expected results due to a lack of technological innovation and weak customer demand. Instead, they encountered the siege of competitors. At the same time, in 2000, the global Internet bubble burst, which also dealt a severe blow to AT&T's cash flow.

The company's performance fell sharply, and the stock plummeted. In September 2000, AT&T was forced to reorganize again and set up four companies: Consumer, Enterprise, Broadband, and Wireless.

Lucent's life is not easy

When it was first split, Lucent's performance was not bad. Because it was able to receive orders from MCI and Sprint, Lucent's stock price soared, and its market value once reached $134 billion (1999). Later, in order to cater to shareholders and create the illusion of "business prosperity", Lucent adopted the wrong sales strategy and made many fake orders. As a result, when the financial crisis came, Lucent was beaten back to its original state, and its performance plummeted.

In 2006, Lucent was acquired by Alcatel of France at an ultra-low price, and Alcatel-Lucent was established. Later, in 2015, Alcatel-Lucent was acquired by Nokia. This is something. In 2005, when AT&T was faltering, something unexpected happened.

A company came to the door and asked to buy itself. And this company turned out to be his own son-Southwest Bell. Southwest Bell is one of the "Bell Seven Brothers" split in 1984.

That year, Bell Southwest only inherited the business of five Southwest states including Texas. The economy of these places is relatively backward, so Southwest Bell's family property is very meager, ranking at the bottom of the seven brothers. Southwest Bell, which grew up low-key, changed its name to SBC in 1995.

In 1997, SBC successfully merged with Pacific Bell, headquartered in San Francisco. Two years later, they will merge with Asiamedic, which is located in the Midwest of the United States. In 1996, the United States’ new Telecommunications Act was promulgated, breaking the boundaries between communication methods, allowing local telephone companies to enter long-distance and television transmission while opening up the local telephone market.

As a result, several regional Bell companies, including SBC, took the opportunity to penetrate long-distance and wired cables, and their business developed rapidly and the company's scale was further expanded. Among them, the Atlanta Bell Company formed the now-famous Verizon after a series of mergers and acquisitions.

And SBC company finally completed the acquisition of AT&T (16 billion US dollars). After SBC acquired AT&T, it continued to retain the AT&T name and gave up its original name SBC. After the merger was completed, the new AT&T (previously SBC) did not stop the acquisition.

In 2006, it completed the acquisition of Bell South, costing US$86 billion. This acquisition allowed AT&T to acquire Cingular (the largest wireless operator in the United States at the time, with SBC and Bell South being the major shareholders), which was of great significance.

Under continuous mergers and acquisitions, the new AT&T has gradually become one of the world's largest telecom operators and the largest broadband, wireless, local access, and enterprise service provider in the United States. In the US telecommunications market, a tri-oligopoly has also formed: AT&T and Verizon are firmly in the top two positions in the industry, followed by Sprint.

Since then, AT&T has continued to develop in the direction of wireless operators and content service providers, and has made many acquisitions: In 2015, AT&T acquired DirecTV, the largest satellite TV operator in the United States, for US$67.1 billion. In 2018, AT&T acquired Time Warner, the world's third-largest wireless television, film, and television production and entertainment company, for $85.4 billion, shocking the world.

Today, AT&T is still the largest telecommunications operator in the United States, headquartered in Dallas, and employs 247,800 people. In 2020, AT&T's performance was not satisfactory. Their annual revenue was US$171.8 billion and a net loss of US$5.4 billion. The ranking of the worlds top 500 has risen several places, from the 25th in 2019 to the 22nd in 2020.

For a century of AT&T, the long road ahead is full of ups and downs. In the fierce and cruel competition, can it continue to write its own century-old legend? Let us wait and see!

2 views0 comments

Recent Posts

See All