Ma Bell is back. Should you be afraid?

The law, lawyers, and the court.
Jan. 4 2007 5:47 PM

Bellwether

Ma Bell is back. Should you be afraid?

Ma Bell is back. Blown into eight pieces by an antitrust court in 1984, AT&T, like a self-repairing robot, has slowly put itself back together. Last Friday, the Federal Communications Commission, demanding net neutrality and other conditions, approved AT&T's acquisition of BellSouth. That will make AT&T—once again—the world's largest technology company. And don't just think big. Think Goliath, with about $110 billion in annual revenue, more than 300,000 employees, and 90 million paying accounts. Google, by way of comparison, brings in about $9 billion a year. Even Microsoft, at $45 billion, is a mere elephant compared to the AT&T mammoth.

So, should you be afraid? A little. AT&T will wield power over the nation's information networks to a degree unprecedented in the Internet age. How you feel about that depends on whether you trust the company, and unfortunately, AT&T has the corporate version of a criminal record. From the 1950s through the 1970s, AT&T—while creating the greatest network on earth—also killed long-distance competition, bottled up new technologies like the cell phone and home answering machine, and resisted the innovations that were later known as "the Internet." Some will argue that letting AT&T run the nation's networks is like putting Hannibal Lecter in charge of making dinner.

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Yet the passage of time has also clarified the lessons learned from that era. Chiefly this: The danger posed by AT&T, both then and now, is not merely size. There is such a thing as a friendly giant, and perhaps a reformed AT&T will be the Hogwart's Hagrid of telecom. The enduring danger is that AT&T will instead be the evil giant who uses its power to mess with everything attached to the AT&T system. Today, that would mean messing with search engines, slowing down your cousin's blog, degrading YouTube or voice-over-IP, and so on. Guarding against those dangers are the milestone network-neutrality rules—the most important rules the FCC has made AT&T agree to. But those rules will last only two years, and it is now clear that Congress needs to make those rules into enduring law.

From 1913 through the 1980s, the Bell Company, now AT&T, held a near–total monopoly over telephone service in the United States. The company was a magnificent product of American ingenuity, famous for reliable service and a sponsor of important research. But that AT&T also had a dark side. The company blocked or tried to kill emerging competitors for long-distance services. It also suppressed a range of new consumer technologies. The firm took centralization and integration to new levels, exercising total control over the nation's local lines, long-distance service, and even telephones. Its old motto was "One Policy, One System, Universal Service." Catchy, but it also left little room for anyone else. Today's sloppy collectivism of Wikipedia or the blogosphere was not exactly the AT&T way.

In the 1970s the U.S. government, under the banner of "deregulation," awoke to AT&T's abuses and began an attack on its power, through a strategy we might call slice and dice. It sliced the company into eight separate pieces—a long distance company (as AT&T-in-exile, it kept the name) along with seven regional local phone companies—Bell Atlantic, Pacific Bell, and so on. Meanwhile, a different line of FCC efforts severed AT&T's local line monopoly—the "bottleneck"—from the rest of the business world. The FCC barred AT&T from using its power over local phone lines to mess with any of the businesses surrounding it, meaning that AT&T was forced to allow consumers to plug in any phone they wanted and use any long-distance service or Internet service provider they liked. These neutrality rules (known as the Computer Inquiries in telecom jargon) are the direct ancestors of today's network neutrality rules.

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We will never know what would have happened had Bell been left alone. Yet like ferns growing out of a fallen redwood, new firms grew out of AT&T's carcass, making the years since the slice-and-dice operation the most vibrant in the nation's communications history.

Optimists predicted cheap telephones and long-distance service. That's happened, but no one anticipated the full consequences of free market entry in telecom. Among the bounty: the appearance of a cell-phone industry, the birth of a mass Internet created by companies like AOL and Earthlink, and, in time, the myriad companies of the World Wide Web, from Netscape through eBay, Google, the blogosphere, and Wikipedia. In 1984, no one imagined that more people would be watching lonelygirl15 than 60 Minutes, over the lines once policed exclusively by AT&T.

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