10 years after divestiture by AT&T, Baby Bells and competitors flourish Breaking up HARD to do BELL BREAKUP: 10 YEARS LATER

December 26, 1993|By Michael Dresser | Michael Dresser,Staff Writer

Ten years after the breakup of the nation's telephone monopoly, Ruth Taylor still mourns the demise of Ma Bell.

"AT&T was the only thing that worked perfectly and the government broke it up," says the 79-year-old Towson widow. "It is a shame; it was the only thing that was perfect in this world."

But Robert Allen, chairman and chief executive of American Telephone & Telegraph Co., has long since put away the black crepe. To him, the Jan. 1, 1984, dismembering of AT&T has been a boon for his company and his country.

"The bottom line for most consumers is that the system works better," he says.

A decade after the largest antitrust settlement in U.S. history took effect, it is increasingly clear that the breakup of the Bell System was one of the defining events in U.S. economic history. AT&T's agreement to sever ties to its local operating companies marked a turn away from an era of regulation and stability, and into an era of fierce competition and rapid technological change. It toppled an icon that symbolized respected authority.

"From a legal and business perspective it was one of the biggest stories of the last 25 years, certainly," says John Glynn, the people's counsel who represents consumer interests before the state Public Service Commission. "It had an everyday impact on people's lives that more exciting stories don't."

Today, free-market conservatives point to the drop in long-distance rates since 1984 as vindication of the power of competition. And nobody has benefited from divestiture more than Big Business, the most voracious user of the nation's

long-distance lines.

Still, the AT&T breakup remains profoundly unpopular among ordinary folks, whom antitrust laws were designed to protect.

While the old AT&T could be arrogant and bureaucratic, it was convenient, easy to understand and cheap for those who made few long-distance calls. After 10 years of dealing with separate long-distance and local telephone companies, many consumers remain confused by burgeoning choices.

"The major thing that the breakup did was make the phone bill so confusing," said Sue Fitzsimmons, a state social services worker from Northeast Baltimore. "It used to be we knew exactly who to call if we had a problem with our phone system or our phone bill. Now it's a round robin of where do you call when you have a problem."

Many consumers are also convinced that they have been stuck with the post-breakup bill. The average monthly bill for residential service has risen from $13.35 in 1984 to $18.66 in 1992, says the Federal Communications Commission.

"What you've basically seen since 1984 is that local rates have gone upwith inflation, and long distance has gone down," says Peyton Wynns, the FCC's chief of industry analysis. He estimates that long-distance rates declined 35 percent to 60 percent, adjusted for inflation, though some people might see higher bills because usage is way up.

The FCC's figures aren't universally accepted, however. Bruce Kushnick, a former industry consultant who formed the New Networks Institute to research telecommunications issues, estimates that local service costs rose 315 percent nationwide between 1980 and 1992 when all new charges are taken into consideration. In local service, Mr. Kushnick notes, consumers essentially traded one monopoly for another in the breakup.

There are also signs that the drop in long-distance rates may have ended.

Mike Raimondi, an economist with the WEFA Group in Boston, says the decline in those rates stopped in 1990. Since then, he says, prices have risen as the three main long-distance companies settled into a complacent oligopoly.

"If AT&T raises prices, MCI and Sprint feel comfortable in raisingprices, too," he says.

Nobody has seen fewer benefits from divestiture than those people whom Nicholas Johnson, formerly a member of the Federal Communications Commission, calls "Aunt Polly" -- elderly people of limited means who would be perfectly content with a black rotary-dial phone for chatting with hometown friends. Divestiture ended the subsidy from long-distance calls that kept local rates low.

Confused consumers

The breakup has brought a host of new telephone services, but they have been slow in catching on with confused consumers. Bell Atlantic's call-waiting feature has reached 45 percent market penetration, but a host of others -- including Caller-ID and Answer Call -- have failed to move into double digits.

"Clearly, we've got a much greater range of choices of equipment or services than there would have been if we had left it in one company," says Mr. Johnson, a maverick who prodded the industry toward competition in the late 1960s and early 1970s. "Clearly, we have paid an enormous amount for it."

The highest price for divestiture was paid by people like Lee EstherJohnson of Northeast Baltimore, who lost her job with Western Electric when AT&T's manufacturing arm closed its Southeast Baltimore factory in 1984, soon after the breakup.

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