A:

In 1982, AT&T agreed to settle the Justice Department's anti-trust action by breaking itself into seven Regional Bell Operating Companies (RBOCs), also known as Baby Bells. For decades, it had been assumed that AT&T held a natural monopoly over the phone industry because of the insurmountable costs associated with attempting to compete against AT&T's existing infrastructure.

However, in the 60's and 70's, several Supreme Court rulings allowed third-parties to access AT&T's telephone network, eroding the company's natural monopoly. And, by breaking AT&T into smaller parts, the thought process was that the challenge for potential competitors would be even less daunting given a geographic – as opposed to national – focus.

RBOCs focused on local calling, whereas a much smaller AT&T was left to compete in the long-distance phone market against rivals such as Sprint and MCI. Finally, in one of the stock market's greatest ironies, AT&T withered to the point that it was eventually acquired by one of the Baby Bells – SBC – in 2005. (For more on this, read Antitrust Defined and, Monopolies: Corporate Triumph and Treachery.)

RELATED FAQS
  1. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  2. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  5. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  6. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    The 3 Best Investments When Bull Markets Slow Down

    Find out why no bull market lasts forever, and why investors should shift their assets away from growth and toward dividends when stocks slow down.
  2. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  3. Economics

    Economist Guide: 3 Lessons Adam Smith Teaches Us

    Learn three critical lessons about economics from 18th century philosopher Adam Smith, considered by many to be the father of economics.
  4. Fundamental Analysis

    How Globalization Affects Developed Countries

    The increase in communications technology has companies competing in a global market.
  5. Term

    What's the Economy?

    The economy is the production and consumption activities that determine how scarce resources are allocated in an area.
  6. Markets

    What Saudi-Iranian Tensions Mean for Oil Prices

    The recent break in diplomatic relations between Saudi Arabia and Iran adds complications to the already chaotic environment of Middle East geopolitics. 
  7. Economics

    New Mexico's Economy: The 6 Industries Driving GDP Growth

    Discover the four primary industries that are considered to be the most important drivers in the well-being of the economy of New Mexico.
  8. Entrepreneurship

    Economics of Owning a Bar

    Understand what costs go into starting and running a bar, as well as what earnings can be expected. Learn whether or not it is smart to own a bar.
  9. Stock Analysis

    3 Reasons Southwest Is Growing Faster than Its Competitors (LUV)

    Understand how Southwest Airlines operates and what makes it different from competitors. Learn three reasons why it's growing so much.
  10. Entrepreneurship

    Make Sure Your Business Complies with These 3 Environmental Laws

    Discover why 1970 is considered the year of the environment, and learn about several major environmental laws with which businesses must comply.
RELATED TERMS
  1. Environmental Economics

    An area of economics that studies the economic impact of environmental ...
  2. Fair Trade Price

    A minimum price paid for certain agricultural products imported ...
  3. Laissez Faire

    An economic theory from the 18th century that is strongly opposed ...
  4. Social Responsibility

    The idea that companies should embrace its social responsibilities ...
  5. Vertical Integration

    When a company expands its business into areas that are at different ...
  6. Political Economy

    The study and use of how economic theory and methods influences ...
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center