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The history of AT&T & why Sprint is against the purchase of T-Mobile

With the news of the plans acquisition of T-Mobile USA by AT&T many companies have come out against the idea. Sprint stated that “This transaction will harm consumers and harm competition at a time when this country can least afford it.” Some people say that Sprint is just can’t deal with competition and that is way they do not want AT&T to get bigger. However Sprint is looking out for you more than you may realize. To understand why Sprint feels this merger should not happen you first need to understand the history of AT&T.

 
Both AT&T and Verizon share a common founding company; the Bell Telephone Company. The Bell Telephone Company was started in Massachusetts by Gardiner Greene Hubbard; the father-in-law of Alexander Graham Bell. The purpose of the company was to hold “potentially valuable patents” such as Bell‘s master patent for the telephone. Even then the company had the need to acquire control of the market. In 1881 Bell acquired controlling interest of the Western Electronics Company from its owners; Western Union. During 1880 the Bell Company created a project they called AT&T Long Line. The project created a nationwide long-distances network. In 1885 Bell incorporated the project in New York as American Telephone & Telegraph Company. Four year later the assets of Bell Telephone were transferred to American Telephone & Telegraph Company; a move made to get around the corporate laws in Massachusetts.

 

After that, the American Telephone & Telegraph Company continued to growth by purchasing their competitors. They specifically purchased companies in certain geographic locations in order to effectively increase their control over the nation’s telephone market. They would then sell off the markets they desired the least to independent companies. Through purchases like the patent of the vacuum-tube in 1913 the AT&T was able to not only increase its control of both the manufacturing and distribution of long distance service but build the first coast-to-coast telephone line. In 1918 the government nationalized the telecommunication industry and appointed Theodore Vail ;the president of the AT&T; to manage the telephone system. For  this AT&T was paid a portion of the revenue made by the nationalization. For the majority of the 20th Century AT&T and it’s subsidiaries ; which included 22 Bell Companies that provided local phone service for most of US; basically had a monopoly over long-distance service. Because of this they had control over the cost of service in the industry and its growth.

 

AT&T’s growth and control did not go unnoticed by the government. In 1913 to avoid the government opening any antitrust actions from AT&T agreed to the Kingbury Commitment. As part of the commitment AT&T was required to get the approval of the ICC(Interstate Commerce Commission) before purchasing any of their competitors. This however did not keep AT&T from gaining such a long control over the market. Out of the 274 companies AT&T sought to acquire the ICC only stopped them from purchasing 3. The US actual allowed AT&T to act as a natural monopoly. It wasn’t until other company were not allowed to grow or profit due to AT&T’s control on not only phone service but the phones ;which at the time users did not own but rent from the company; that the problem really seemed to become apparent or at least matter to the government. After several court cases like Hush-a-Phone vs. United States and the Carterfone decision the US finally took steps to end AT&T monopoly. In the 1974 the US filed an antitrust case against AT&T due to its use of monopoly profit from Western Electronics to subsidize the cost of its network. As result of the antitrust case AT&T agreed to split the Bell System into seven smaller companies. Those companies were Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell, and US west.

 

This split up however did not last forever. When the telecommunications industry was deregulated in 1996 these companies started to slowly join back together. But unlike before they did not join to create one company. This time the ended up creating three; what we now know as AT&T, Verizon, and Qwest. Verizon as we know it today started as GTE; a company which starting growing larger once a former AT&T employee took over a president in 1922 and ironically followed in the example of AT&T purchasing other companies(about 340 which they then consolidated into 45 companies). After the deregulation in 1996 NYNEX bought Bell Atlantic which was then bought by GTE in 2000 and became Verizon. Southwestern Bell changed their name to SBC. SBC then bought Pacific Telesis in 1997. Then they bought Ameritech in 1999. Then in 2005 they acquired AT&T Corp and changed their name to AT&T. To finish the acquisition of most of their former companies they bought BellSouth in 2006.

 

In 1907 Theodore Vail ; the president of the AT&T; stated that their goal was “One Policy, One System, Universal Service.” It is this that Sprint is worried about. Their fear is that if AT&T is allowed to merger with T-Mobile that they will have the same control they once had over the landline market over the cell phone industry. The only difference being there would be two systems. With the “duopoly” of AT&T and Verizon they will control the growth of the industry. They will be able to control prices and what new technology will reach the user. They will also do all they can to make the market unfairly balances so competitors will either have to merger with them or close. Once both control the market you will only have the illusion of choice.

 

You may think that Sprint is just worried about competition. But what they are worried about is an unfair competition. Its like expecting a fist fight and having your opponent show up with machine guns and nukes. This will not only affect them but more importantly your wallet. When you only have two really choices they can then charge anything they want to for service. They will set the price to what is in the best interest of their bottom line, not yours. With companies like T-Mobile, Sprint, and MetroPCS in the market it gives the consumer the ability to find the best price and best coverage for them. By AT&T buying up their competitors they are leaving us with fewer options in a shrew attend to live up to their companies first goal of controlling the telephone market.

About Yossarian Norman

Yossarian Norman is a nerd. He knows it, everyone that knows him knows it, and now you know it. His love for technology was nurtured by his parent who did their best to indulge him as he collected phones, took them apart, and studied them. He has spent years learning and working with mobile phones and the ever changing mobile industry.

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