Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 11, 1992 TAG: 9201110145
SECTION: BUSINESS PAGE: E-1 EDITION: METRO
SOURCE: By SUSAN MOFFAT
DATELINE: LENGTH: Long
TEN YEARS LATER, AT&T SPLIT FAVORS BUSINESS INTERESTS
It's been a decade since the biggest company in the world agreed to break itself up in the most sweeping experiment in American industrial perestroika ever.And what have we got to show for it?
Telephones answered by machines. Phone bills that take an accounting degree to decipher. Sex-talk lines. Tape-recorded sales pitches.
For this, we killed Ma Bell?
Like disgruntled citizens of a dismantled empire longing for the good old days of stability and simplicity, some American consumers are still traumatized by the breakup of the country's most familiar monopoly.
Long-distance calls are far cheaper, and offices and factories are more efficient because of the greater choice of equipment, long-distance companies and hard-working machines that act both as phones and computers. But some people still aren't sure they asked for all this confusing variety.
And some experts say consumers haven't really gained that much by the restructuring of the U.S. phone industry, which in effect removed the large subsidy that businesses and other heavy long-distance users paid to keep local phone service cheap.
"The U.S. business community has been a big, big winner," said Bill Davidson, a management professor at University of Southern California. "Their options have increased and prices dropped dramatically.
"But when you look at non-business consumers, frankly, there's been very little positive news," said Davidson, who had to walk a mile from his hotel in Kauai to return a reporter's phone call because the area's lines had been inexplicably dead for 16 hours.
What the numbers say is that although businesses have seen windfall savings, consumers have come out slightly ahead of where they were a decade ago.
Long-distance rates have dropped 40 percent and local rates have risen 53 percent since the breakup. Compared to other consumer expenses, overall phone service is still a bargain, its cost rising a little more than half as fast as everything else in the past decade. Experts conclude that telephone service quality - Kauai and the New York airport blackouts aside - has improved.
Overall, Americans now spend about 2 percent of their incomes on phone service - the same amount they did before the wrenching changes that came with AT&T's breakup. But they're spending a lot more time on the phone.
Not surprisingly, Bert C. Roberts Jr., president of MCI Communications Corp., the Washington-based long-distance company whose revenues grew tenfold to $7.7 billion in the past decade, believes that everyone `from the biggest company to the smallest consumer" has benefited from increased competition.
"When I was growing up, a long-distance call was an event around the house. You put out a little egg timer and when the salt ran out you better hang up," Roberts said. "To my kids, it's just another call."
Indeed, long-distance phone calls, like oranges and air conditioners, have gone from luxury to commodity. In 1930, a 10-minute call from Los Angeles to New York cost $33 - or $272 in 1991 dollars. In inflation-adjusted dollars, by late 1991 it was only $2.45.
When it happened, the breakup of AT&T seemed nearly as shocking for the 1 million Bell System employees - more troops than the U.S. Army had then - and 70 million customers as the breakup of a country. AT&T, with assets of $150 billion, was indeed vast - bigger than General Motors, General Electric, U.S. Steel, Eastman Kodak and Xerox combined.
It was Jan. 8, 1982, that AT&T announced that it had settled an antitrust suit by the U.S. Department of Justice by agreeing to divest itself of the local Bell telephone companies.
The banner headlines on the divestiture were as big as for breakup of the Soviet Union in 1991. Experts and AT&T managers described the breakup into regional fiefdoms as the tragic dissolution of a great nation with its own culture and unique ethos. Sociologists and psychologists flocked to study the enormous experiment.
Hundreds of thousands of managers used to a comfortably regulated world of lifetime employment, centralized five-year plans and a deep-seated belief that the rich should subsidize the phone service of the poor were suddenly thrust into an unfamiliar world of competition, freer markets - and layoffs that along with the divestiture shrank AT&T's telephone work force by 745,000 people.
Starting in 1984, under the guidance of U.S. District Judge Harold Greene, AT&T was cut off from the local phone companies, the "Baby Bells," which were to continue as virtual monopolies and quasi-utilities in a still heavily regulated environment, providing local phone service while staying out of the lucrative long-distance, manufacturing and information services markets.
The new AT&T was to compete with MCI, Sprint and foreign manufacturers, with much reduced regulation.
Service has improved greatly and prices have fallen, as deregulation advocates predicted. But the angst and anger have not ceased; one professor titled his book on the breakup "Wrong Number."
Not everyone would agree. Business telephone customers have seen expenses drop and productivity-building services increase. Large corporations have seen long-distance rates drop even more than the overall 40 percent as they negotiate volume discounts.
Telephone systems have become, in the words of one industry executive, "computers with long wires." Two huge industries have lost the border between them. Networks of personal computers "talking" to each other over private and public telephone lines are replacing mainframe computers themselves.
Newspapers, cable television carriers and telephone companies are becoming fierce rivals to deliver information and entertainment.
Foreign manufacturers have gained a huge spot in the U.S. market. From a positive $817 million balance of trade in telecommunications equipment in 1981, the United States slipped into a $2.6 billion deficit in 1988 and hasn't recovered.
And the future? Some new services, such as home shopping and banking, electronic yellow pages and movies delivered by phone lines, are under development or in test phases.