A:

AT&T had a history reaching back to 1885 and, as a government-supported monopoly, was a highly profitable company. Colloquially known as Ma Bell, the communications giant lost its government backing in the 1980s when charges were filed against it under the Sherman Antitrust Act. This was the second time that AT&T found itself in an antitrust suit. In 1949, AT&T was excused from antitrust laws because it was believed that a single company providing nationwide service was a vital part of national security and any deregulation might interrupt service. The second time under Sherman's hammer AT&T was not so lucky.

The case began in 1974, was decided against AT&T on January 8, 1982, and the breakup plan was formalized throughout 1983. Ma Bell was ordered to give up local calling services to smaller regional spinoffs dubbed the Baby Bells. The parent company would hold on to its long distance business and be allowed to move into computer and Internet businesses. Brought into existence on January 1, 1984, the Baby Bells were some of the most successful spinoffs in history as AT&T had already paid the infrastructure layouts and their businesses were established and producing cash from day one.

AT&T had troubles finding its feet after the split and, other than spinning off AT&T Wireless in 2001, languished while Baby Bells outperformed their Ma. The government loosened telecommunications restrictions and the Baby Bells began to merge and buy out each other to increase their service areas. In 2005, one of the Baby Bells bought out Ma Bell, renaming itself AT&T and bringing about at least a partial family reunion after two decades apart.

To learn more, check out Antitrust Defined.

This question was answered by Andrew Beattie.

RELATED FAQS
  1. What is a baby bell?

    In 1982, AT&T agreed to settle the Justice Department's anti-trust action by breaking itself into seven Regional Bell Operating ... Read Answer >>
  2. What companies have been targeted for anti-trust action in the 21st century?

    Several companies have been targeted for antitrust action in the past decade. These companies range from food service to ... Read Answer >>
  3. What is the history behind the opening and closing bells on the NYSE?

    Similar to the school bells that most of us heard during our school days, the New York Stock Exchange's (NYSE) opening and ... Read Answer >>
  4. Are there regulations against monopolies?

    A monopoly occurs when a single company or group owns all or nearly all of the market for a particular type of product or ... Read Answer >>
  5. What does "after the bell" mean?

    "After the bell" is financial slang for activity occurring after the close of the stock market, including after-hours trading, ... Read Answer >>
  6. What are the most famous monopolies?

    Learn about famous monopolies from Carnegie Steel to Comcast that challenge free-market competition and encourage government ... Read Answer >>
Related Articles
  1. Markets

    A Closer Look at AT&T

    AT&T has come a long way since 1885. We look at its strategic direction, challenges and recent performance.
  2. Insights

    If You Had Invested Right After AT&T's IPO (T)

    Analyze how AT&T stock has performed after the company's 1984 IPO, and learn how you would have fared had you been an early investor.
  3. Markets

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  4. Markets

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  5. Markets

    AT&T Price Target Raised at Jefferies (T)

    AT&T, which has seen its share price rise 12% year to date, still offers some appeal for value seekers even with this outperformance.
  6. Investing

    AT&T Stock to Trade Ex-Dividend (T)

    AT&T will send its dividend payment on May 2 to shareholders of record as of April 8.
  7. Investing

    AT&T Stock Trades Ex-Dividend Wednesday (T)

    AT&T will send its dividend payment on August 1 to shareholders of record as of July 8.
  8. Investing

    What to Expect When AT&T Report Q2 Earnings?

    AT&T has strategically bundled various services and has offered its TV customers promotions, including unlimited wireless data on their phone plans.
  9. Markets

    AT&T Nears 52-Week High on DirecTV Streaming Plan (T)

    The company is targeting cord-cutters, or people who have become dissatisfied with cable and tired of the paying for bloated set of channels they don't watch.
  10. Markets

    AT&T's 3 Key Financial Ratios

    Understand how operating cash flow and debt usage are closely related to A&T's business, and why cash efficiency matters the most for debt leverage.
RELATED TERMS
  1. Baby Bells

    A common nickname given to the U.S. regional telephone companies ...
  2. Opening Bell

    A bell that is rung to signify the start of the day's trading ...
  3. Closing Bell

    A bell that rings to signify the end of a trading session. The ...
  4. Sherman Antitrust Act

    The Sherman Anti-Trust Act is landmark 1890 U.S. legislation ...
  5. After The Bell

    A phrase used to describe news, earnings reports and other activities ...
  6. Clayton Antitrust Act

    An amendment passed by the U.S. Congress in 1914 that provides ...
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center