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Breaking The Connection
The story of AT&T from its origins in Bell’s first local call to last year’s divestiture. Hail and good-bye.
June/july 1985 | Volume 36, Issue 4
The Justice Department waited eighteen years before it renewed its attack, but when it struck, it struck vigorously. In a suit filed in November 1974 under the Sherman Antitrust Act, it charged AT&T, Western Electric, and Bell Laboratories with conspiracy to monopolize the telecommunications industry. All of the Bell operating companies were named as co-conspirators. As noted earlier, this suit ended in 1982 with a consent decree that freed AT&T from the constraints of the 1956 consent decree and, in exchange for this unshackling, obliged the company to tear itself apart. In what may have been the cruelest blow, AT&T was severed not only from its operating companies but from its heritage—prohibited from using the name Bell and forced to abandon the ubiquitous bell-shaped symbol that has identified it to the public for decades.
What would Theodore Vail have thought of divestiture? It is difficult to believe that he would have felt much enthusiasm. Yet the man who presided over the process, Charles Brown, took pains to argue that he had not betrayed Vail’s vision:
“Clearly [divestiture] represented the most significant discontinuity in the history of this enterprise. However, in my view, it did not represent a significant discontinuity in the basic philosophy that has guided this business for most of its history. That philosophy, first stated by the organizational patriarch of the Bell System, Theodore Newton Vail, is that the major task of management is to conform the business to the desires of the public. As Vail stated it, the qualities that created the Bell System were self-interest subordinated to the public spirit.... It was that philosophy that led Theodore Vail to embrace regulation as a substitute for competition, so as to permit the development of an efficient nationwide communications system. And it was the same philosophy that led me, threequarters of a century later, to embrace competition as a substitute for regulation —this time in response to the public’s desire for diversity in communications services and suppliers.”
Whether or not we accept Brown’s argument, his statement provides striking testimony to the persistence of Vail’s influence. It is as if the chief executive sought Vail’s blessing at the very moment when he dismantled the organization that Vail had built and passed on to his successors. Beyond that, Brown’s statement seemed to suggest that in the eyes of its chief executive the organization itself did not matter as long as it lived up to an ideal—“self-interest subordinated to the public spirit”—that gave it its right to exist and its sense of unique worth. To prove that it deserved to live, the company had to commit suicide.
We began by saying that the history of AT&T is not the history of telephony but the history of the telephone system. Now we must add that the history of the system is the history of an idea—an idea that employees of AT&T refer to simply, but always in capitals, as the “Spirit of Service.”
Out of all the assets of the Bell System —the hundreds of millions of telephones and billions of miles of wire—the Spirit of Service may be the asset hit hardest by divestiture. Though many outsiders have found it difficult to believe, a fair number of Bell employees seem to have accepted the notion that the corporation existed to fulfill a public trust. Some of them—perhaps a majority—seem actually to have found this idea inspiring. If wires and cable were the skeleton of the Bell System, the Spirit of Service was its soul. The suit to break up AT&T struck a blow to the soul because it suggested that the public, as represented by the Justice Department, was willing to dispense with a system that embodied the best efforts of generations of Bell employees. In the special commemorative issue of Bell Telephone Magazine that AT&T published a few months before divestiture, Charles Brown said farewell to the men and women of the Bell System in carefully measured tones, but he gave space to a retired vice-president, Alvin von Auw, for a very different statement.
In flat contradiction to Brown’s assertion that AT&T had consented to divestiture “in response to the public’s desire for diversity in communi! cations services and suppliers,” von Auw contends that “when AT&T at last abdicated its role as the biggest company on earth,” it did so “in the absence of any evidence of urgent public concern about its size.” Moreover, it did so at a time when “populist agitation over ‘undue concentrations of economic power’ ! was at its lowest ebb in decades.”