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Start of a revolution

Marketplace Staff Jan 15, 2007

TESS VIGELAND: If you tuned in last Friday, you heard us tell you about another branding effort going on at AT&T. It’s wrapping up a subsidiary — Cingular Wireless — and renaming it . . . AT&T.

The company has now gone from behemoth to also-ran and back to behemoth in just a couple of decades. It’s 25 years this month since the splintering of Ma Bell — the greatest corporate break-up in American history. Commentator John Steele Gordon says it was the beginning of a communications revolution whose end is nowhere in sight.

JOHN STEELE GORDON: Alexander Graham Bell died the richest of the great 19th century inventors. It was not because he invented so many things — Edison had many more patents. Instead it was because his father-in-law, Gardiner Hubbard, was a business genius.

Hubbard established the Bell Company in Boston to exploit his son-in-law’s telephone patent. In 1884, he created AT&T to build long-distance lines between New York and Boston. As AT&T’s long-distance lines spread — they reached Chicago by 1892 — Hubbard used AT&T’s monopoly of long-distance as a lever to gobble up local phone companies, because he wouldn’t let them connect to AT&T without control.

By 1915, when AT&T reached San Francisco, it was by far the largest phone company in the world. Although a monopoly, it tried hard to please customers and there is no doubt that it provided the world’s best phone service. That’s not surprising, perhaps, seeing as phone service in most countries was provided by government monopolies — which are even worse than private ones.

But AT&T’s monopoly began to erode in 1969, when MCI got permission to provide long distance-service by means of microwave transmission instead of copper wire.

It was the camel’s nose under the tent of AT&T’s monopoly. Prices crashed, innovation soared and usage exploded. There were only 20 million overseas phones calls made in this country in 1970. Today, they number in the billions every year. There were no cell phones then and only 11 million in 1990. Today, there are over 2 billion around the world.

How did AT&T fare in the new telephonic world order it helped to create? Not too well — in fact, it stumbled so badly that one of the baby bells, the SBC Corporation, bought its old parent in 2005 and took the hallowed name and its hallowed stock symbol, “T,” as its own.

Well, that’s capitalism, folks.

VIGELAND: Business historian John Steele Gordon’s latest book is “An Empire of Wealth.”

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