AT&T, Inc.

AT&T, Inc.

AT&T, Inc., the largest telecommunications company in the United States following the merger in 2005 between SBC Communications Inc. and AT&T Corp. After receiving regulatory and shareholder approval to acquire AT&T in November 2005 for $16 billion, SBC decided to adopt the AT&T name, keeping alive the brand name of the former American Telephone and Telegraph Company, which held a virtual monopoly on telephone service in the United States until 1984, when it was forced to divest itself of local telephone operations under the terms of an antitrust agreement. The new company was named AT&T, Inc.

II

ORIGINS

AT&T traces its roots to Alexander Graham Bell, who invented the telephone in Boston, Massachusetts, in 1876. One year later Bell founded the Bell Telephone Company and began licensing telephone exchanges to route telephone calls throughout New England. Bell Telephone Company quickly became embroiled in a dispute with the Western Union Telegraph Company, which had filed a patent for the telephone just hours after Alexander Graham Bell. As part of a compromise reached in 1879, Western Union sold its 55-city telephone system to Bell Telephone Company and backed out of the telephone business. Bell Telephone agreed to abandon the telegraph business and pay royalties to Western Union. In 1882 Bell acquired Western Electric Company, the largest manufacturer of electrical equipment in the United States, from Western Union.

In 1885 Bell Telephone created the American Telephone and Telegraph Company to finance, build, and operate the parent company’s rapidly expanding long-distance system. Many technological advances followed, including the pay telephone, an automatic dial system, and party lines that allowed several people to share a telephone line. In 1899 AT&T itself became the parent company for the entire Bell system. AT&T owned almost all of the long-distance circuits in the United States, while its subsidiary, the Western Electric Company, manufactured most of the telephone equipment. Although heavily burdened with debt, the system had more than 3 million telephones in operation by 1907. That year a group of investors led by American financier J. P. Morgan took control of the company. Morgan appointed Theodore Vail, a former associate of Alexander Graham Bell, as president. In 1909 AT&T purchased Western Union. This acquisition raised complaints that AT&T had become a trust, an illegal corporate monopoly organized to eliminate competition. In 1913 the U.S. government forced AT&T to sell Western Union and grant independent local telephone companies the right to connect to its long-distance lines. AT&T, however, maintained its monopoly on long-distance service and retained control of Western Electric. In return, AT&T president Vail agreed to accept government regulation.

AT&T developed many technological innovations, such as the first long-distance television transmission in the United States (1927), the invention of the transistor (1948), and the first transatlantic telephone cable (1956). In 1962 AT&T launched Telstar I, the first Earth-orbiting commercial communications satellite. In 1964 the company developed the Touch-Tone phone, which featured push buttons rather than a rotary dial. Beginning in 1949, AT&T faced a new series of antitrust suits. Federal officials banned AT&T from entering unregulated businesses in 1956, took away the company’s telephone equipment monopoly in 1968, and gave microwave-based long-distance companies the right to access AT&T’s lines in 1969.

III

RECENT DEVELOPMENTS

In 1974 the Department of Justice filed two antitrust suits against AT&T. One of the complaints asked that the communications giant be dismantled. While these cases were tied up in the courts the company continued to make enormous financial gains. AT&T’s $6.9 billion profit in 1981, the highest ever recorded by any company at the time, only fueled charges that the company was an illegal monopoly. In 1982 AT&T and the government announced that the Bell telephone system would be broken up, and that the company would be permitted to enter the unregulated computer and information systems markets. In 1984, as part of the antitrust settlement, AT&T lost control of its 22 regional telephone systems, which were replaced by seven firms that became known as the Baby Bells, including the firm that eventually became SBC Communications. Although the company retained its long-distance business, the breakup reduced AT&T’s $150 billion in assets—more than any other corporation in the world—to $34 billion overnight.

AT&T spent much of the 1980s and 1990s searching for a new course. In 1994 the company acquired McCaw Cellular Communications of Kirkland, Washington, then the largest provider of cellular phone service in the United States. This business, renamed AT&T Wireless Services, provided cellular phone services in more than 1,000 cities. In 1995 AT&T announced plans to establish its communications equipment and computing divisions as separate companies. The following year AT&T spun off its communications equipment division and Bell Laboratories as an independent company called Lucent Technologies. NCR, a computer company that had become a subsidiary of AT&T in 1991, also spun off as an independent company in 1996.

The Telecommunications Act of 1996 deregulated the U.S. telecommunications industry, creating new opportunities and challenges for AT&T. The company extended its activities in a number of markets, including Internet access, satellite television, local phone service, and wireless communications. In 1998 AT&T agreed to purchase Teleport Communications Group, Inc. of New York for $11.3 billion in order to expand AT&T’s local phone markets to more than 60 U.S. cities. That same year AT&T announced it would reduce its workforce by up to 18,000 employees, primarily through voluntary early retirement incentives.

In 1999 AT&T paid an estimated $55 billion to acquire Tele-Communications, Inc. (TCI), one of the largest cable-television companies in the United States. Based in Englewood, Colorado, TCI provided cable television service to more than 10 million U.S. homes at the time of the merger. Through the acquisition, AT&T intended to make TCI’s cable lines capable of offering local telephone service to consumers. This prospect was appealing to federal regulators who approved the merger, because they had long sought to open local telephone monopolies to competition.

The merger also enabled AT&T to enhance its Internet business by offering high-speed Internet access through TCI’s cable lines. The company named its cable television and high-speed Internet access business AT&T Broadband. In late 2001 AT&T reached an agreement to sell AT&T Broadband to Comcast Corporation, based in Philadelphia, Pennsylvania. Federal regulators approved the merger in 2002.

In 2004 AT&T Wireless was acquired by Cingular Wireless, a company founded by SBC Communications and BellSouth Corporation with a controlling interest by SBC. The acquisition set the stage for SBC to acquire all of AT&T. In January 2005 SBC announced a deal to buy AT&T for $16 billion in stock and cash. The merger was approved by regulators and shareholders in November 2005 when SBC announced that it would adopt the AT&T name.