Sunday, January 01, 2017

1984 :: Jan. 1 :: Breakup of Ma Bell

MCI was an innovative long distance company that radicalized the telecommunications market. Started in the 1960s, the business plan was to use radio licenses to provide long distance service between Chicago and St. Louis. MCI's application to provide service was approved by the FCC in 1969. But AT&T and the BOCs didn't like this much, and refused to interconnect with MCI. MCI had difficulty negotiating interconnection with AT&T, hired special counsel skilled in negotiations, and brought the issue before the FCC. In 1973, AT&T threw a curveball by filing interconnection tarriffs in 49 state PUCs, transforming MCI's transaction costs from one interconnection agreement, to 49 different agreements in each jurisdiction. In 1974, AT&T disconnected MCI. Finally, frustrated, in 1974, MCI, along with the Department of Justice, filed an antitrust suit against AT&T. On June 13th, 1980, the Court ruled in favor of MCI, awarding MCI $1.8 billion in damages. Two years later, AT&T would negotiate with DOJ the resolution of their antitrust lawsuit, agreeing to the breakup of the Bell System. The terms of Consent Decree, breaking AT&T up into AT&T long distance and seven Regional Bell Operating Companies, went into effect Jan. 1, 1984.

Scholars have noted that the legal battle with AT&T cost $10m, whereas construction of the network cost $2m. Sterling, Bernt, Weiss, Shaping American Telecommunications, p.133 (2006) According to lore, MCI had more lawyers than land lines. It became known as "a law firm with an antenna on the roof."  In 2005, one of the Regional Bell Operating Companies, SBC, would acquire AT&T Long Distance, and emerge from the ashes as a reborn AT&T.

MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983) recounts the history of the conflict between the two telecommunications services.
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