Office of Telecommunications Policy - AT&T

AT&T

Consistent with OTP’s goal to increase competition and technological innovation within telecommunications industries, OTP worked to loosen AT&T’s hold on U.S. telephone service.

The Nixon Administration launched its first volley against AT&T in January 1970 when it announced its “Open Skies” policy that allowed all qualifying companies to launch commercial satellites. This defeated AT&T’s expectations that the White House would give monopoly control to Comsat, of which AT&T owned 29 percent, the largest share held by any single company.

OTP further weakened AT&T’s monopoly by supporting a Department of Justice antitrust investigation of, and then litigation against, AT&T.

OTP’s chief economist, Bruce Owen, favored breaking up AT&T and persuaded Whitehead that the best way to split the company was the way in which it was finally done, by separating long distance from local service – known as horizontal divestiture.

OTP supported the Department of Justice through testimony before a Senate Antitrust and Monopoly subcommittee hearing concerning a bill that would break up big businesses in industries including communications. Whitehead’s testimony explained that historically, competition was the preferred regulatory tool in the U.S., and that it applied equally in telecommunications as in any other industry. Monopoly in the telephone business, he explained, was not a necessary structure in the nation’s telecommunications industry and, in fact, the existing regulatory scheme had become “a barrier to competition and innovation required for the future direction of communications.” Whitehead stated that, moreover, no special public policy considerations such as national defense necessitated the AT&T monopoly. It was unbecoming for “AT&T to use its legal, political and economic power to seek to extend its monopoly” where monopoly was not warranted, and “the Government cannot let such an effort go unnoticed or unchecked.” He also said that “the anti-trust laws should be enforced to ensure that regulatory mechanisms cannot become a haven for escape from competition.”

Some weeks later, the Department of Justice filed the antitrust case that ultimately led to the break-up of AT&T along the lines that Bruce Owen had suggested, with AT&T retaining its long distance services, Western Electric and Bell Laboratories, and giving up its local telephone companies.