AT&T and the consent decree

For years AT&T has been accused of being too big, too powerful and too pervasive. Since the late 1960s, FCC decisions aimed at introducing limited competition in some areas of the telecomunications market have eroded AT&T's monopoly position. Then, in 1974, the Department of Justice filed its antitrust suit seeking to dismantle the Bell System. In January 1982, AT&T signed a Consent Decree requiring them to divest the local portions of its 22 Bell operating companies. In this comment, Charles Brown (Chairman of the Board of AT&T) describes the build-up to AT&T's decision to agree to divestiture, and outlines how AT&T os adapting to the new telecommunications environment.     

The effects of divestiture,privatization, and competition on productivity in U.S. and U.K. telecommunications

The telecommunications industries in the United States and the United Kingdom have undergone massive changes during the 1980s. This paper decomposes the total factor productivity growth of AT&T and British Telecom into their various components. It finds that while a great deal of the productivity increases apparently resulted from continuing scale economies, competition for AT&T and privatization of BT have been responsible for 17 percent and 25 percent of their respective gains in recent years. Among other variables, divestiture appears to have initially depressed AT&T's productivity growth, and competition for BT is too insignificant to yet have an impact.     

Price convergence in contestable market structures: The impact of time and price-caps on intercity telecommunications rates

In this study, we tested if long-distance rates among AT&T, MCI, and US Sprint between New York City and six major SMSAs during 1980–91 have converged. Empirical findings show that rates have converged over time, that rate ratios or differences increased under price cap, and that distance does not have any impact on rate convergence. The variables of TIME and price cap (CAP) have greater impacts on rate convergence for AT&T/US Sprint than AT&T/MCI. Regression results based on pooled cross-section and time-series data yield better results.     

Bell system R&D activities: The impact of divestiture

Divestiture of the US Bell System in 1984 caused concern about the future of research and development activities conducted at Bell Labs. This article 4describes the history of R&D in the Bell System, and in the organizations which have been formed since divestiture, and looks at likely future trends in research. In terms of both staffing and funding levels, no major changes have occurred as a result of divestiture. However, competitive pressures on AT&T may cause AT&T Bell Labs to be more secretive and proprietary about its research. There is also cause for concern about the stability of funding levels. Vigilance is warranted for the future.     

Antitrust and regulation: Forestalling competition in the telecommunications terminal equipment market

This article examines how AT&T responded to competition in the terminal equipment market by requiring a telephone company provided connecting arrangement. We test the hypotheses of whether connecting arrangements were used to protect the integrity of the system or to forestall competition. Through analysis of various antitrust cases, we conclude that AT&T attempted to monopolize the market through the connecting arrangement requirement. This conclusion is important because it suggests that a regulated firm has the ability to use its market power to thwart competition in non-regulated markets.     

Convergence and unbundling of corporate R&D in telecommunications: is software taking the helm?

This paper presents a view of the changing structure of corporate R&D in telecommunications – one that is close to Adam Smith’s insightful and enduring idea of division of labor – that perhaps we are witnessing the beginnings of vertical disintegration and unbundling of important segments of the industry’s R&D activity. The paper maintains that the emergence of an independent software industry – aided by the convergence of computer, telecommunications and imaging technologies – and the rapid growth of technology-based alliances are at the heart of this trend. So extensive is the vertical disintegration of R&D that, in 1997, the top 10 independent software vendors in the US spent more on R&D than the combined spending by AT&T and Lucent whose sales were well over three times as large. It appears that the source of future innovation in the telecommunications industry lies not in its services segment but rather in telecommunications and Internet equipment firms and independent software firms. Increasingly, the fortunes of large service providers like AT&T will depend less on innovation and more on their ability to configure and market complete one-stop-shopping solutions to customers by combining internal resources with outsourced technologies, products and services.     

Viewdata—a product in search of a market?

One of the classic marketing fiascos of the pasr decade was the $200 million boondoggle project hatched at the Bell Telephone Laboratories, known as Picturephone® service. Heralded as the new telephone of the 1980s, rosy sales projections suggested that as many as 1 000 000 Americans would have Picturephone® sets in their homes and offices by the mid 1980s. Wile these figures look delightfully quaint today, the shareholds of AT&T must not have felt so amused by that $200 million expenditure on engineering a system that no one wanted. Through the year 2000, MBA students at Harvard will be able to rediscover in case study form just how dangerous it can be for an organization to allow its engineering department to dictate new product development to the marketing staff. Of course in the Picturephone® case, AT&T could proffer a legitimate excuse: the Vice President of Marketing position at Bell had lain dormant and abandoned for almost a quarter of the century. After all, who needs to sell telephone service?     

Rural telephony since divestiture

This paper determines whether local rural telephone rates have increased as well as whether rural rates have increased more or less than other telephone rates since the divestiture of AT&T. Also, examined are long distance rates, penetration levels and subsidization in rural telephone markets in an attempt to ascertain whether universal service is in jeopardy in rural areas.The author would like to thank Erwin A. Blackstone, Gerald Faulhaber and Alfred E. Kahn for their helpful comments.     

Impact of deregulation on marketplace diversity in the USA

The current deregulatory mood sweeping Washington has changed the policy approach from one of government enforced diversity to one of marketplace-facilitated diversity. This is evidenced in the recent bills to revise the Communications Act of 1934, and the settlement of the AT&T antitrust suit. This article explores these public policy shifts as they relate to the information industries and suggests some impacts on the concept of diversity.     

The Year in Review: Economics at the Antitrust Division: 2011

Last year, we had to defer discussion of two matters that we understood were of considerable interest, but were still ongoing. Those matters have, if anything, proven to be even more momentous than we anticipated. This year??s article will, consequently, focus on two of the most noteworthy antitrust challenges by the Antitrust Division in years??U.S. and Plaintiff States v. AT&T Inc., et?al. and U.S. v. H&R Block, Inc., et?al.??both of which were successfully challenged. The Division prevented substantial economic harm to consumers and did so with sound economic analysis.     

The US telecommunications industry in transition: Bypass,regulation and the public interest

Since the AT&T divestiture, the Federal Communications Commission has been attempting to introduce competition into the telecommunications industry in the USA. This article discusses the problems of the transition period, particularly the contradictions between the policy of widespread availability of affordable basic telephone service, and the short-run burdens on most subscribers as competition erodes the toll-to-local subsidy. The authors discuss welfare economics in the telecommunications industry, and propose an interim and self-terminating plan for gradual deregulation. The proposal includes an empirical test of economic or uneconomic local exchange bypass, and a social compensation option which meets the requirements of Pareto superiority.     

Antitrust in High-Tech Industries

Recent economic growth has been led by high-technology industries (See Jorgenson, Ho & Stiroh (2005) for a summary of the research on the recent acceleration of productivity growth). Many firms in these industries have achieved a dominant market position, thereby attracting the attention of competition authorities, often resulting in major monopolization cases. Unfortunately, this attention has not resulted in improved market outcomes. In this paper, we evaluate the effect of Section 2 Sherman Act cases brought against IBM, AT&T, and Microsoft. We conclude that these cases had limited effect on consumer welfare because they did not stimulate entry or innovation. In these industries, competition authorities cannot expect to promote simply an expansion of output and lower commodity prices; rather they should focus their remedies on promoting innovation—new products that replace or compete with the dominant firm’s products.     

Telecommunications market structure in the USA: The effects of deregulation and divestiture

AT&T divestiture of its 22 operating companies in January 1984 ended the world's largest vertically integrated channel of telecommunications distribution. At the same time, customer premise equipment sales were deregulated in the USA by the FCC. This article explores the background policies which led to the changes, and examines the marketing opportunities which have arisen, together with likely future structural changes. The author concludes that the network will become more competitive and more responsive to customers' unique equipment needs.     

On modifying the MFJ

When the Bell operating companies (BOCs) were separated from AT&T in 1984, restrictions were imposed on the BOCs' business operations. The US Department of Justice was required to report every three years on the continuing need for these restrictions. Two reports were filed in February 1987 which contain a wealth of information and analysis, and recommend a waiver of most of the restrictions. This comment examines the mechanism by which regulation has historically distorted economic efficiency, and how the two reports address the mechanisms of monopoly distortion.     

Recent developments in US wireline telecommunications

This article presents a selective survey of several recent developments in the US market for wireline telecommunications services spanning the 2003–2005 period. Specifically, the article discusses the recent decline in overall telephone penetration rates, the substitution between wireline and wireless telephony, intermodal competition issues raised in the context of the FCCs review of the Cingular/AT&T Wireless merger, and the potentially anticompetitive effects of incumbent local exchange carrier tying of voice and DSL service. The article identifies several areas for future research motivated by each one of these developments.     

Affective and continuance commitment and their relations with deviant workplace behaviors in Korea

This study examined the nature of the relations between affective and continuance components of organizational commitment (Meyer & Allen, 1991, Human Resource Management Review, 1: 61–89) and deviant workplace behaviors (DWB; Bennett & Robinson, 2003) in a sample of 120 Korean employees and their supervisors. As expected, we found that affective commitment was negatively related, and continuance commitment was positively, albeit modestly, related to supervisor ratings of DWB. Implications for the theory and practice are discussed.     

The use of picturephone service in a hospital

A Picturephone® two way visual communications system was operational from March 1973 to April 1976 at the Bethany-Garfield Hospital in Chicago, and achieved metered usage as high as 1800 calls per month. To assist the AT&T Marketing Department in its visual communications market exploration programme, interviews of Bethany-Garfield personnel who had access to the system were conducted. When asked to rate a number of individual features of the system, the high and medium users rated the fast access feature above all others. Thus the main reason for the high usage of the Picturephone system appears to have been less related to its visual communications feature than to its ‘hot-line’ capability to reach contacts quickly.     

“If I was going to design a chair,the last thing I would look at is a chair”: product analysis and the causes of fixation in students’ design work 11–16 years

Creativity is acknowledged to be important for economic growth and as an everyday life-skill, however several influential reports have suggested that education could do more to harness creative talent. Creative cognition literature suggests the lack of creativity is at least partly the result of ‘fixation’ (difficulty in generating novel ideas due to imagination being ‘structured’ by existing knowledge). This paper focuses on the secondary (students aged 11–16 years) design and technology (D&T) context in the UK. Here we examine whether teacher practice can contribute to fixation by focusing on one specific facet of teacher practice in D&T; the use of product analysis to inform the generation of creative design ideas. Data is drawn from the preliminary phase of a research and intervention project from interviews with D&T teachers (N = 14), students (N = 126) and lesson observations (N = 10) and an analysis of documents and student work. Product analysis is widely used at different points in design projects but, as is shown, in all cases current practice can lead to fixation, as thinking is constrained down specific paths and tasks are at best at procedural rather than comprehension level. The implications of these findings and tentative ways forward for practitioners are discussed.     

Financial planning issues concerning funding, pricing and organization of corporate R&D activity: A case study

This paper is a case study of financial planning issues concerning funding, pricing, and the organization of corporate research and development (R&D) activity faced by American Telephone and Telegraph Company (AT&T) after the break up of the Bell System. The paper concludes that from the standpoint of financial planning, and in the context of firms similar to AT&T, a variant of the predivestiture model, rather than a profit centre model or a market model, appears to be the most efficient way of funding, pricing and organizing corporate R&D activity.     

Utilization of video conferencing

Stressing the importance of accumulating systematic empirical information on the users and uses of video teleconferencing, the authors present the findings of a pilot study of AT&T's Picturephone Meeting Service. They then set out preliminary conclusions that may be drawn from those findings. The authors suggest that video telecommunication is likely to be beneficial to decision making processes in modern organizations.