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 is a monopoly?

    Monopoly is a fun family game, but in real life, a monopoly can be dangerous to a country's economy. A monopoly occurs when ... Read Answer >>
  2. 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 >>
  3. What are common examples of monopolistic markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ... Read Answer >>
  4. What does it mean when a utility company has a natural monopoly on a market?

    Learn what it means when a utility company has a natural monopoly on a market and why natural monopolies are heavily regulated ... Read Answer >>
  5. 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 >>
  6. Which segments of the telecommunications sector have the toughest competition?

    Read about competition in the telecommunications sector and how the monopolies of old have crumbled around new technology ... Read Answer >>
Related Articles
  1. Financial Advisor

    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?
  2. Investing

    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. Investing

    3 Groups of Companies that are almost a Monopoly

    A look at companies that have a monopolistic place in the marketplace, and whether or not it's a good idea to invest in them.
  4. Investing

    AT&T to Gain Unfair Advantage With Time Warner (T, TWX)

    Several AT&T competitors have already complained about the company's tactics that exempt its own video services from affecting its users' data plans.
  5. Investing

    AT&T Q3: TW Deal to Increase Debt Load (T, TWX)

    In conjunction with its deal to buy Time Warner, AT&T announced third-quarter earnings. A byproduct of the deal: a lot more debt.
  6. Insights

    How & Why Companies Become Monopolies

    Without competition, monopolies can raise prices and lower quality leaving consumers little choice. But monopolies can benefit consumers as well.
  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. Small Business

    How Monopoly Antitrust Laws Affect Consumers

    Monopolies often receive a negative reception, but sometimes they can benefit consumers.
  9. Investing

    Report: AT&T's Next Media Buy Could Come Soon (T)

    AT&T could make a media buy sooner rather than later.
  10. Investing

    AT&T's Q4 Earnings Touch on Several Key Areas

    All eyes are on AT&T as it prepares to report earnings after the close of trading Wednesday.
RELATED TERMS
  1. Baby Bells

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

    A situation in which a single company or group owns all or nearly ...
  3. Natural Monopoly

    A type of monopoly that exists as a result of the high fixed ...
  4. Franchised Monopoly

    Monopoly status given by the government to a company. A franchised ...
  5. David W. Dorman

    A former president, CEO and chairman of AT&T. He entered the ...
  6. Opening Bell

    A bell that is rung to signify the start of the day's trading ...
Hot Definitions
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  2. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  3. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  4. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  6. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
Trading Center