The decline and fall of American Telephone and Telegraph : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Global View: The decline and fall of American Telephone and Telegraph

(10/30/00 6:06:42 AM PT)

Michael Elliott

The decline and fall - for such it is - of AT and T is one of those business stories that tell you more about the world than you first imagined. Sixteen years after 'the phone company' was first broken up, with its local telephone business going to the Baby Bells (pretty big babies, these days) the remaining businesses of the Bell system are now to be split into four separate companies. AT and T Broadband will run the largest cable operation in the United States; AT and T Wireless will look after mobile phones; AT and T Business Services will run the long-distance calling and data networking for corporate clients; and AT and T Consumer Services will do much for the same for the residential side of the business. None of these independent entities is exactly a shrimp; the two smallest of them (Wireless and Consumer Services) will employ around 18,000 people each.

Still, by comparison with the behemoth that once was the telephone industry in the largest market on earth, the new corporations are playthings. For most of the last century, Ma Bell provided an integrated, comprehensive telephone service; everything from making the phones, to developing new technologies, to providing the wherewithal to make local, long-distance and international calls. It was less of a company, in the standard sense of the word, than a sort of private-sector bureaucracy. Indeed, its every activity was tightly regulated by Washington. To even imagine way that the company as it once was is to enter a different world. Thirty years ago, if you thought of 'the telephone company' you might imagine of scores of thousands of American men (yes, men) with crew cuts and neatly pressed white shirts. Play the same game now and get a rather different image in return; say, Japanese teenage girls with died hair and platform shoes playing games on a small handheld device designed in (who would ever have guessed this) Finland.

What happened? A number of expected things, and some unexpected. The bureaucratic nature of the Bell system was unable to adapt quick enough to changing technology; new competitors proved themselves more nimble - and, crucially, better at lobbying Washington. In the last year, technological developments once hailed as the company's savior, like the advent of broadband, faced an uncertain future. And perhaps above all, the power of the markets - or more accurately, the voracious appetite of Wall Street analysts for better results each quarter - nibbled away at the plans of AT and T's managers. In the last few years it's been hard not to sympathize with Michael Armstrong, the company's CEO, as his coherent - but long term - vision for AT and T's future has been continually second-guessed by a financial community fixated on the short term.

There is a larger lesson, though, in the disintegration of Ma Bell. Companies, even large and great ones, are not guaranteed a permanent place in the natural order of things. Think of the household names, like Westinghouse and Mannesman, that have recently disappeared as independent entities. Think of a company like ICI, for five decades the symbol of British manufacturing, whose proud initials now mask a rather small, unexciting firm that has but a fraction of the assets that it once had. Capitalism, Joseph Schumpeter understood in the 1930s, involved a process of creative destruction. As new ideas and technologies challenge old ones, as the promise of new markets displaces the performance of established territories, what were once supposedly fixed features of our life shrink and disappear. Quick: is the name of your bank the same name as your parents' bank? Do you even know the name of your bank?

This constant churn of corporate life is what makes capitalism the greatest method of delivering prosperity to the greatest number yet devised. But market capitalism is not - never has been - a comfortable phenomenon. A few weeks ago, Business Week did one of those cover stories that makes editors (like this writer) slap their head and exclaim 'Why didn't I think of that?' The story was on the relative decline of Chicago as an economic center, as more and more of its 'native' companies have been bought by outsiders, or have simply come to the end of their natural life. Chicago won't disappear with its charter companies, of course, and new ones will replace the old - just as Motorola once replaced Pullman as a key player in the Windy City's corporate makeup. But the story reminded us that great corporations are more than vehicles for the delivery of 'shareholder value' (apologies for the most overused phrase of the new century). They are webs of social interactions; when they whither and die, a small part of our social sense dies with them.

AT and T, of course, was so big that there was never one locality with which it was closely identified. At the height of its power, however, it was a symbol of something rather valuable - a predictable, reliable frame around an intimidating, transforming technology. Yes, we can now use that technology in many more ways, on many more 'platforms,' and at less cost. The Schumpeterian gale has created something valuable. But it destroyed something, too.

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-- Martin Thompson (, October 31, 2000

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