AT&T - Monopoly & Innovation, Part One

AT&T is a global brand and telecom icon. Its ubiquitous acronym conjures thoughts of American ingenuity, old "Reach Out and Touch Someone" commercials, and the irony that the most market-driven, capitalistic economy on Earth allowed a "natural monopoly" in telecommunications for over a century.

The story of AT&T is the story of how really smart people can dream up the stuff that runs the modern world, and how their love of monopoly would rob them of their innovation's benefits.



Being a monopoly, and the largest corporation in the world, AT&T could spend lavishly on research and development. Indeed, the scientists at Bell Labs invented entire swaths of the technology we associate with the 20th century: the transistor, digital computers, UNIX and the C programming languages, networking, the laser, fiber optics, radar, communications satellites, fax machines, modems, cellular telephony, and the national landline telephone system.

Any one of these technologies could have created a multi-billion dollar spin-off. But AT&T saw maintaining its monopoly on the American telecommunications business as critical—at any cost. In 1949 the U.S. government filed an antitrust lawsuit. It was the first of several attempts to break-up the Bell System and colored the way AT&T treated its considerable intellectual properties.


Bell Labs scientists Shockley, Bardeen, and Brattain invent the transistor.


After Bell Labs won the Nobel Prize in 1956 for the transistor, AT&T, fearing antitrust arguments from the Justice Department, agreed to share this technology. For modest sum of $25,000, companies such as IBM, Sony, GE, and Texas Instruments licensed transistor technology.

Disrupting the Marketplace
Unleashing such a disruptive technology into the marketplace allowed the licensing companies to make billions and become household names in their own right. But AT&T was content to use the transistor to improve long distance communications, while letting others develop integrated circuits, microprocessors, and the beginnings of the digital revolution.

AT&T believed its telecom monopoly was in the best interest of the public. It held on to this belief so tightly, and so arrogantly, that it squeezed countless opportunities into the waiting hands of others.

An upstart company called Microwave Communications, Inc. wanted to construct microwave towers to provide a limited scope of wireless long distance service for truck drivers on routes between St. Louis and Chicago. AT&T saw this as a threat to their sovereignty and unleashed a hundred lawyers on the embryonic firm.

If AT&T had ignored this small venture, it very likely would have died on its own. But AT&T opposed the company that would eventually be known as MCI with such hubris and vigor that it led to their demise and breakup into a long distance company and seven "Baby Bells."

Mobile Mistake
AT&T missed another opportunity in 1983 by not retaining licensing rights to the cellular technology it invented. By ceding the cellular business to the Baby Bells, AT&T didn't just leave hundreds of billions of dollars on the table—like with the transistor. The mistake in the mobile business let all those dollars go to future competitors while also robbing AT&T of critical access to its customers.

Labels: ATT, business, technology, Telecommunications

posted by Mark @ 7:03 PM