What Were the Baby Bells?
The Baby Bells were the U.S. regional telephone companies that were formed from the breakup of AT&T ("Ma Bell") in 1984. The Baby Bells were created after a U.S. Department of Justice antitrust suit against AT&T's national monopoly on telephone service. The Justice Department initiated the lawsuit to create more competition within the industry.
As a result of a 1982 consent decree, AT&T agreed to relinquish control of its monopoly over phone service in the United States and Canada. That decree gave birth to the seven Baby Bells, which were also known as Regional Bell Operating Companies (RBOCs). There were also two smaller companies held by AT&T that made for a total of nine Baby Bells that were assigned a portion of the Bell trademark.
- The Baby Bells were the regional telephone companies created due to the antitrust breakup of AT&T ("Ma Bell") in 1984.
- Many of these regional telcos were later reincorporated into AT&T as new sources of competition appeared in the telecommunications market.
- The Baby Bells helped consumers at the time as more competition reduced the prices of phones and long-distance service.
Understanding the Baby Bells
The petition to break up AT&T began in 1974 as the United States vs. AT&T. The legal rationale for breaking up the American Telephone & Telegraph Co. (later AT&T Corp.) was based on Section 2 of the Sherman Antitrust Act. The company was the only provider of telephone services in much of the United States at the time. Also, most telephone equipment was produced by AT&T subsidiary Western Electric. This situation gave AT&T nearly complete control over both telephone service and equipment in the United States. The suit against AT&T was not to create the Baby Bell system but to force it to divest Western Electric.
AT&T felt that they were going to lose the case and decided to propose an alternative. Their idea was a self-imposed breakup of one of the largest companies in America. With some modifications, AT&T's proposal was accepted. After the divestiture, the Baby Bell regional holding companies retained the Bell trademark. They also kept about half of Bell Labs, AT&T's research and development subsidiary, and the Yellow Pages directory business.
Who Were the Baby Bells?
AT&T was officially broken up on Jan. 1, 1984. Its 22 member concerns were formed into seven independent Regional Holding Companies, or RBOCs—i.e. the Baby Bells. They were:
- NYNEX: Served most of New York state and five New England states
- Bell Atlantic: Now Verizon Communications (VZ) after 2000 merger with GTE, it has become a global competitor to AT&T.
- BellSouth: Served customers in nine Southeastern states. Bought by AT&T in 2006
- Southwestern Bell Corp. (SBC): Served customers in six Midwestern states, and later SBC Communications It actually bought AT&T in 2005 and adopted the AT&T name.
- U.S. West: Bought by Qwest in 2000 and then by CenturyLink in 2011
- Pacific Telesis: Bought by Southwestern Bell (SBC) in 1995 it is now again part of AT&T
- Ameritech: Bought by SBC in 1999, it is now again part of AT&T
- Cincinnati Bell and Southern New England Telephone (SNET), which were partially owned by AT&T and not techically RBOCs, have since become fully independent.
As the above history of the Baby Bells makes clear, many of them were later reincorporated into AT&T. The rise of cellphones and smartphones introduced more competition from firms like T-Mobile. In this environment, regulators felt comfortable approving mergers and acquisitions involving AT&T and the Baby Bells. In other cases, Baby Bells evolved into direct competitors of AT&T, such as Verizon. As a result, the concept of Baby Bells is less relevant in the 21st century.
The Baby Bells have grown up and changed to the point that the term is no longer used for current events. The idea of Baby Bells remains useful for understanding the late 20th-century telecommunications market, especially when reading primary sources.
Advantages of the Baby Bells
The Baby Bells helped to free consumers from the drawbacks of AT&T's monopoly in the telephone business. Although the Baby Bells had monopolies over local phone service in their respective areas, long-distance phone service was opened up to competition. In the 1980s, AT&T had to compete with Sprint and MCI for long-distance customers. This intense competition drove prices down for consumers.
Another advantage of the Baby Bells is that they did not control telephone equipment the way that AT&T did. The Baby Bells allowed consumers to use phones made by any manufacturer. The prices of phones fell dramatically. Phones with additional features, such as speakerphones, also became more common.