When the communications giant AT&T broke up in 1984, the company maintained use of the iconic logo of the "Bell System."
Photograph by Mercurywoodrose, courtesy Wikimedia. (CC BY-SA 3.0)

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  • On January 1, 1984, the world’s biggest company at the time, AT&T, broke up its “Bell System” of operating companies into seven “Baby Bells.”
     
    The divestiture was a result of a decade-long federal antitrust lawsuit against the company. AT&T was a “regulated monopoly,” meaning it had no serious competitors in providing telephone service in the United States. AT&T’s monopoly was achieved through vertical integration—the control of both supply and distribution of a product (in this case, telephone service).
     
    The supply was provided largely through a subsidiary of AT&T, Western Electric. Western Electric developed communications equipment, such as the telephones themselves as well as cables and microchips. 
     
    The distribution was provided by 22 organizations called “regional Bell Operating Companies”  (RBOCs). These companies provided infrastructure that allowed people to make local telephone calls.
     
    The lawsuit wanted AT&T to divest itself from Western Electric. Instead, AT&T divested itself from the Bell Operating Companies. The 22 RBOCs became seven regional, independent “Baby Bells”: Ameritech (which served the Midwestern region and was later acquired by AT&T); Bell Atlantic (now Verizon): Bell South (later acquired by AT&T); NYNEX (which served New York and New England, now Verizon); Pacific Telesis (later acquired by AT&T); Southwestern Bell (later acquired by AT&T); and US West (which served the western Midwest and is now CenturyLink).
     
    In divesting itself from the Baby Bells, AT&T redefined itself as a communications company not limited to the “telephone and telegraph” originally indicated by its acronym. In addition to maintaining control over long-distance telephone operations, AT&T gained two important victories in the breakup. First, it kept control of Bell Labs, which developed sophisticated communications equipment. (Bell Labs continues to do groundbreaking research, although AT&T sold it in 1996.) The second victory was more far-reaching. Although AT&T lost millions of dollars in the breakup, the company looked to the future—it secured permission from the government to develop and sell technology in what was then a much smaller industry: computers.
  • Term Part of Speech Definition Encyclopedic Entry
    acquire Verb

    to get or take possession of.

    acronym Noun

    word formed from the first letters of each of the words in a phrase.

    antitrust Adjective

    opposing monopolies and supporting competition in business.

    cable Noun

    strong set of cords or wire ropes.

    computer Noun

    device designed to access data, perform prescribed tasks at high speed, and display the results.

    distribution Noun

    the way something is spread out over an area.

    Encyclopedic Entry: distribution
    divest Verb

    to get rid of or sell off.

    equipment Noun

    tools and materials to perform a task or function.

    federal Adjective

    having to do with a nation's government (as opposed to local or regional government).

    government Noun

    system or order of a nation, state, or other political unit.

    groundbreaking Adjective

    innovative or pioneering.

    indicate Verb

    to display or show.

    industry Noun

    activity that produces goods and services.

    infrastructure Noun

    structures and facilities necessary for the functioning of a society, such as roads.

    lawsuit Noun

    legal action brought by one person or organization against another.

    microchip Noun

    small semiconductor with electrical circuits that carry information.

    monopoly Noun

    exclusive control of a good or service.

    permission Noun

    authorization to do something.

    region Noun

    any area on Earth with one or more common characteristics. Regions are the basic units of geography.

    Encyclopedic Entry: region
    secure Verb

    to guarantee, or make safe and certain.

    sophisticated Adjective

    knowledgeable or complex.

    subsidiary Noun

    company owned or controlled by another company.

    technology Noun

    the science of using tools and complex machines to make human life easier or more profitable.

    telegraph Noun

    system of communication involving devices connected through electrical wires.

    telephone Noun

    electronic tool and system for communication by sound or speech.

    vertical integration Noun

    ownership or control of different points of production, such as manufacturing and distribution.