The Rise and Fall of Telephone Competition: 1982-2011
So much for quiet Sundays. AT&T announced today that it's agreed to acquire T-Mobile US from Deutsche Telekom, a merger which, if completed, will make it by far the country's biggest wireless phone company. It'll also leave us with three national carriers: AT&T, archrival Verizon Wireless, and the much smaller Sprint.
I'm not an expert on the dynamics of the telecommunications industry, but Om Malik's thoughts-that this is bad news for everybody except AT&T and T-Mobile shareholders-do a good job of summarizing the pessimistic view I'm instinctively inclined to tak. In the US, T-Mobile was a scrappy underdog that did shocking things like reduce monthly bills once a customer had completed a contract for a subsidized phone. It's tough to imagine that T-Mobile's personality will rub off on AT&T rather than the other way around.
Of course, AT&T does its best to make the case that this is good news: If the merger goes through, it will have more wireless spectrum to work with, and says it will bring LTE to former T-Mobile customers. And the company argues both that (A) there's still plenty of competition, between national and regional wireless companies, and (B) past mergers have been good for consumers. Which is, I guess, the argument you'd expect from a company named AT&T.
Now that it looks like the US will be left with only three national wireless phone carriers, my mind wandered back to the early 1980s, when the original AT&T monopoly was broken up by the Department of Justice. It was a different era-one in which nobody owned a cellular phone and everybody paid through the nose for long-distance service. (Fast forward to 2011: Almost everybody has a cell phone, and long distance is a freebie.) But the theory back then was that more phone companies would be better for consumers than fewer phone companies.
I knew what happened in the years since: New phone companies did spring up, but an endless parade of mergers led to much of the original AT&T merger being reconstructed into two behemoths: AT&T (which is really the descendant of Southwestern Bell) and Verizon (once Bell Atlantic). I'd forgotten about almost all the details, though, and today's news prompted me to go back and remember what happened when. It seemed worth recording here.
You can quibble with my accounting of things, and probably will-and that's fine. I don't even mention MCI or WorldCom until 1997, for instance, and some of the logos aren't the correct ones for the years in question. There are a bunch of companies I don't mention at all, such as Alltel and Omnipoint. And I don't cover "Mobile Virtual Network Operators" such as Virgin Wireless (acquired by Sprint in 2009) or regional players such as Cricket and MetroPCS. Come to think of it, what I'm really interested in is the history of what became the wireless industry, which is why I don't mention Comcast or Vonage or Skype or numerous other companies that offer phone service of one sort or another. And even then, if I covered every merger, acquisition, and other business transaction of the past three decades, I'd never finish writing this post.
So here we go...
In January, AT&T ends a long-running antitrust suit by the US Department of Justice by agreeing to break itself up into a national long-distance carrier and seven "Baby Bells." The breakup is scheduled to happen in 1984.
The breakup takes place. AT&T's old local phone companies become Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell, and US West.
GTE, an independent phone company with roots going back to 1918, spins off its GTE Sprint division and merges it with US Telecom, which has roots going back to 1899. The merged company begins offering long-distance service in competition with AT&T under the name Sprint (which, incidentally, stands for "Southern Pacific Railroad Intelligent Network of Telecommunications").
Wireless phone company Fleet Call is founded. It changes its name to Nextel in 1993.
SBC acquires Cellular One, the cellular business of Metromedia.
Pacific Northwest Cellular is founded. It later changes its name to VoiceStream.
AT&T acquires wireless pioneer McCaw Cellular, joint owner with Southwestern Bell of the Cellular One brand name, and begins using the AT&T name rather than Cellular One (but Southwestern Bell continues to use the Cellular One name) .
Pacific Telesis spins off its wireless services into AirTouch.
Southwestern Bell changes its name to SBC.
In the first major reversal of the Bell breakup, Bell Atlantic acquires NYNEX.
SBC acquires Pacific Telesis.
WorldCom, a long-distance company with roots dating to 1983, acquires MCI, which goes back to 1963, to form MCI WorldCom.
SBC acquires Ameritech.
AirTouch merges with Vodfone of the UK to form Vodafone Airtouch.
QWEST (founded in 1996) acquires US West.
Vodafone Airtouch and Bell Atlantic form a joint venture called Verizon Wireless.
Bell Atlantic merges with GTE to form Verizon.
SBC and BellSouth combine their wireless businesses into a company called Cingular.
AT&T (which has been trying to turn itself into a long-distance/wireless/cable megaconglomerate) spins off its wireless business to form AT&T Wireless Services.
German telecommunication giant Deutsche Telekom, which had acquired VoiceStream in 2001, changes the U.S. operations' name to T-Mobile.
WiMAX provider Clearwire is founded.
After a massive accounting scandal, WorldCom changes its name to MCI.
Cingular acquires AT&T Wireless.
Qwest, which had offered its own wireless service, sells off its assets and becomes a reseller for Sprint (in 2008, it switches to Verizon Wireless). (It continues to offer landline service, but I'm removing it at this point from this accounting.)
Sprint buys Nextel to form Sprint Nextel.
SBC acquires AT&T and adopts its name.
Verizon acquires MCI.
AT&T acquires BellSouth and renames the latter's Cingular wireless service to AT&T.
Sprint Nextel's wireless broadband unit XOHM merges with Clearwire, giving Sprint 54% ownership of the combined company. (Clearwire is still in business, but I'm removing it from this accounting since it's majority-owned by Sprint.)
AT&T agrees to buy T-Mobile US from Deutsche Telekom, in a deal expected to close next year.
Whew. At this point, there aren't many theoretical mergers left to happen, although Sprint (which was supposedly angling to buy T-Mobile before AT&T stepped in) could end up being bought by somebody.
And hey, if the Department of Justice feels like stepping in and imposing competition before we end up with one phone company again, there's a handy template. We could just go back to this: