By Force of Law

This short chapter, written in 2007, is a cautionary tale about the court's ability to rein in the excess powers of a corporation. In short, AT&T was broken up because it was a monopoly in 1982. Court rulings and regulations notwithstanding, by 2007, AT&T had, by their own admission, 98% of the telecommunications market.

If this were written today, the seemingly reasonable suggestion of the corporations policing their behavior would never see print. The solution is Effective Direct Action. 

Cliff Potts
September 22, 2014

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By Force of Law

Government intervention in corporate life leads to even more interesting social phenomena. AT&T was deregulated by the Modified Final Judgment in 1982. AT&T was a franchised monopoly through most of their corporate history. It was allowed to be the nation’s only telephone company if it submitted to regulatory control by Congress which kept it responsive to the nation’s needs.

Once AT&T was deregulated, effective January 1, 1984, AT&T retained the lucrative long distance service, and created the RBOC (Regional Bell Operating Companies) to service the problematic local markets. It was in AT&T’s best interest to be released from 50 different sets of tariffs and regulations. During the years which followed, deregulation became a popular cause, and the tariffs and regulation became less and less burdensome. Through this process the RBOCs consolidated. On December 29, 2006, SBC bought AT&T for $86 billion dollars, and AT&T once again became the telephone company for the United States of America. In no more than 22 years, Corporate America circumvented the courts and made a good profit in the process. This was predicted by Professor Al Payette, the chair of the Telecommunication Management department at DeVry Institute of Technology in Industry, California in 1990.

The impact once again is the probability for diminishing quality of service (it is still to early to verify this) and even more critical to the economy – though often overlooked, dismissed, or forgotten– diminished employment opportunity for those who are trained and capable within the local community.

Corporations are not, and probably should not be, required to be social agencies. When they work well, they do generate revenue for the owners, when they do not work well, they can be a bane to the citizens who must endure them.

The survival of AT&T should be an important parable for any government official. While the anti-trust laws can be brought against the corporations, the force of the corporations will manifest and become tangible.

AT&T’s reunification occurred because it was simpler, and easier for the facilities management to negotiate with one vendor who could provide all the services necessary. Again, referring back to Adam Smith’s 1776 observations, people chose to work in such a way as it is less taxing on them. A giant AT&T providing a full bundle of services was simply easier to work with than a dozen smaller firms offering separate services, or overlapping services which were redundant and expensive.

The solution is not in the hands of the government. It resides in the hands of the corporations. Socialism may be dead, but social responsibility is not. Social Responsibility evidently cannot be forced by law, but it should be mandated by economic factors.