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. Why is the 1982 AT&T breakup considered one of the most successful spinoffs in history?

    AT&T had a history reaching back to 1885 and, as a government-supported monopoly, was a highly profitable company. Colloquially ... Read Answer >>
  2. Are monopolies always bad?

    Learn why governments sanction some monopolies, such as monopolies over public utilities, and why these monopolies are good ... Read Answer >>
  3. 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 >>
  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 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 >>
  6. How does a monopoly contribute to market failure?

    Read a simple overview of the theory of market monopoly, where it originated and some contemporary challenges to the classical ... Read Answer >>
Related Articles
  1. Small Business

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  2. 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?
  3. 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.
  4. 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.
  5. Financial Advisor

    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.
  6. Insights

    A History Of U.S. Monopolies

    These monoliths helped develop the economy and infrastructure at the expense of competition.
  7. Investing

    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.
  8. Insights

    A History Of U.S. Monopolies

    Here are a few of the most notorious monopolies in U.S. history.
  9. 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.
  10. Investing

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

    AT&T could make a media buy sooner rather than later.
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. Legal Monopoly

    A company that is operating as a monopoly under a government ...
  5. C. Michael Armstrong

    A former CEO and chairman of AT&T from 1997 until he resigned ...
  6. Franchised Monopoly

    Monopoly status given by the government to a company. A franchised ...
Hot Definitions
  1. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  4. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
  5. Retained Earnings

    Retained earnings is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested ...
  6. Demand Elasticity

    In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. ...
Trading Center