Inside Bell during its 1984 breakup

Colin Berkshire has written a fascinating article about the breakup of the Bell system. It’s titled Bell System Breakup and is in two parts:

Bell System 1900 logo
Bell System logo in 1900

He tells the story from the perspective of an insider, and adds insights that I’ve not found elsewhere. For example, did you know that AT&T’s Western Electric Company was lead contractor on NORAD, SAGE, Nike-Hercules, and Nike-Ajax command guidance systems, or that the world’s largest stockpile of binary biotoxins was kept just outside Boulder Colorado by the Western Electric Company?

Western Electric’s profits

Mr. Berkshire points out that the U.S. Department of Justice wanted to end the incestuous relationship between AT&T’s Western Electric subsidiary (manufacturer of telephone equipment) and its captive customers, the Bell operating companies. Why? AT&T kept its operating companies’ profits low to please the state public service commissions (which allowed them to maintain monopolies in exchange for low profits), while keeping its unregulated Western Electric profits high.

Teletype Model 43
Teletype Model 43

I remember seeing a system invoice from Western Electric to Southern Bell c 1979. One item was a Teletype Model 43 terminal, priced at 1400 dollars. (Western Electric owned Teletype.) I had recently purchased a new one for 800 dollars, so it was obvious that AT&T was moving profits from its regulated operating companies (e.g., Southern Bell) to its unregulated manufacturing subsidiary, Western Electric.

Mr. Berkshire tells a hilarious tale about AT&T’s defense against the DOJ’s prosecution. AT&T spent about 10 million dollars tying up 50,000 college economics professors with small grants to produce meaningless studies and reports, which prevented all of them from testifying against AT&T. You can’t fault AT&T for not thinking big.

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© Russ Bellew · Fort Lauderdale, Florida, USA · phone 954 873-4695

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