A masterly interpretation of the events leading up to the 1984 dismemberment of AT&T, which, until its convulsive partition, had given the US the world's best telecommunications service. Before getting down to post-WW II cases, Stone (Poli. Sci./Univ. of Houston and a former FTC attorney) reviews the Bell System's history, from the disputed patenting of the telephone in 1876 to the still-volatile present. Leaving little doubt that he considers the breakup a grave mistake, the author assesses latter-day developments (computers, interconnect equipment, satellites, TV, et al.) that helped precipitate antitrust suits against Western Electric in 1949 and the parent organization 25 years later. The Justice Department's 1974 bid to divest AT&T of its operating telephone companies stalled until, 1979, when private complaints by MCI and other would-be rivals, as well as an activist judge, revived the flagging federal case. Under intensifying pressure, management finally acceded to a Draconian dismantling that left the sometime colossus with a long-distance operation, Bell Labs, and Western Electric, plus leave to enter the EDP field from which it had been barred by a 1956 consent decree. The immediate cause of AT&T's surrender was a prosecutorial conviction that the coexistence of regulated and unregulated enterprises within the Bell System was an affront to free-market theory. As Stone makes clear, however, the company had been under siege for many decades. Over lime, he argues, big-business users of telecommunications services persuaded regulators, trustbusters, and the courts that drastic policy changes (clearly to their advantage) were in the public interest. But, the author concludes, the public-interest standard now in force protects competitors, not competition. In the meantime, residential subscribers are paying appreciably more for local phone service, while financial resources are being diverted from R&D or other productive uses to TV advertising—an outcome that puts Bell's national switched network at real risk. An authoritative, provocative, and cautionary account of a consequential conflict—whose resolution clearly owes more to politics than economics or sound public policy.
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