The Bells are Formed
In The Beginning…
For over 100 years, Ma Bell, sometimes called the “Bell System”, sometimes called “AT&T”, controlled almost all telecommunications in the US. Once the largest company in the world with over one million employees, the company consisted of 22 local Bell companies, AT&T Long Lines, (the long distance division) as well as Western Electric, (the subsidiary that manufactured telephone equipment) and Bell Labs, one of the premier research organizations. Then in 1984, because of the exclusive control the company had over phone service, the company was broken-up by the government.
The local Bell phone companies were divvied up among seven, artificially created, very large companies called “Regional Bell Operating Companies” (RBOCs, pronounced “R-BOKS”). The original seven RBOCs were:
- Bell Atlantic
- Bell South
- Southwestern Bell
- New York Telephone
- Pacific Telesis
- US West
Each RBOC now presided over an allocated area of the country and it’s accompanying phone companies. For example, Bell Atlantic was now in charge of Bell New Jersey, Bell of Pennsylvania, Chesapeake and Potomac.
AT+T was also allowed to continue to operate, however it would operate as a long distance company only. (As an interesting side note, AT&T would retain Bell Labs, which in 1997 became a separate company known as “Lucent Technologies”.) The field then became narrower when four of the Bells became two. Nynex and Bell Atlantic joined to become “Bell Atlantic” and South Western Bell and Pacific Telesis merged to become what is known today as “SBC”.
The Regional Bells would initially be restricted to supplying local telephone service and were prohibited from supplying “any product or service that is not a natural monopoly service actually regulated by tariff.” In other words, this translates into not being being allowed to offer:
- Long distance service
- Manufacturing telecommunications products or customer premises equipment
- Information services
- Cable services
These restrictions were created because of the potential that the company could use its monopoly advantage to keep out competitors. Then with the Telecommunications Act of 1996, Long Distance Service was the only restriction left on the Bells at that time.
Removal of Restrictions
According to Judge Greene, restrictions were supposed to be lifted when the RBOCs could no longer use their monopoly powers to block competitors or unfairly leverage their powers unfairly:
“It is probable that over time, the Operating companies will lose the ability to leverage their monopoly power into the competitive markets from which they must now be barred. This change could occur as a result of technological developments which eliminate the Operating Companies’ local exchange monopoly or from changes in the structures of the competitive markets. In either event, the need for the restrictions upheld will disappear, and the decree should therefore contain a mechanism by which they may be removed.”
The legal mechanism that the judge was referring to are “Waivers”. RBOCs could petition the court for Waivers that would allow them into services when they could justify that their behavior would not be anti-competitive.