Long-Term Ramifications of the Ma Research Paper

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Nevertheless, many American consumers remained loyal, at least in the short-term (perhaps due to convenience more than anything else), to their old AT&T provider notwithstanding the growing number of service providers that were available. As Wexler points out, "When MCI and Sprint popped on the scene after the Ma Bell breakup, customers liked the idea of competition and savings and dipped their toes in the water - but it took several years for them to really start to impact AT&T's market share."

In response to the increasingly competitive nature of the marketplace, a number of telephone service providers sought refuge in alternative corporate organizational forms. For instance, Dizard reports that, "Merger mania broke out in the phone industry. In the West, two regional Bell companies, Pacific Telesis and Southwestern Bell, joined forces in 1996. Bell Atlantic and Nynex made the same move in the East."

The overarching purpose of both mergers was to achieve efficiencies of scale and the consolidation of talent and organizational resources in an effort to more effectively compete with MCI, AT&T, and Sprint in the long-distance telephone service markets that were made available to the regional Bells through the legislation. According to Dizard, "GTE, the largest provider of local phone service in the country, with 17 million customers, expanded into long-distance operations. Meanwhile, the three long-distance companies were restructuring themselves to compete in local telephone markets."

In addition, the U.S. Congress introduced new telecommunications legislation in 1996 regarding the Internet and software marketing practices and enacted law in 1997 and 1998 as part of the fallout from the AT&T breakup.

This restructuring would have some long-term ramifications for American consumers and the telephone industry alike, and these issues are discussed further below.

Long-Term Ramifications

One of the more glaring long-term ramifications of the breakup of Ma Bell was the lurching approach and sometimes misguided methods used by AT&T's marketing team. For instance, Wall and Wall cite the example of the long-term impact of AT&T's business decisions immediately following the breakup: "Look at AT&T's 1991 acquisition of NCR. AT&T admitted that it had failed to develop a successful computer business; this was a clearly stated strategy that followed the Ma Bell breakup in 1984."

This failure was further exacerbated by a misguided attempt to impose AT&T's corporate culture on its computer business, an approach that was doomed from the outset. In this regard, Wall and Wall report that, "From the start, AT&T made a pig's ear out of the computer business. They bought NCR to learn the business from them, and then spent the next five years trying to make them just like AT&T. The interesting thing about this failed merger was that the acquiring company, AT&T, had developed what might be considered a more 'enlightened' culture and attempting to impose that culture caused great difficulties."

The financial ramifications of this failed business experiment for AT&T were staggering. According to Wall and Wall, "In 1996, the company that they had paid $7.5 billion for and spent more than $2 billion to integrate (renamed AT&T Global Information Solutions) was again on the block for about $4 billion. It was spun off; NCR's revenues for the first nine months of 1997 were $4.6 billion, and operating losses were $29 billion during that time."

Consequently, the company's major stakeholders -- including its customers -- were stuck with the bill for this corporate misadventure.

Moreover, the increasingly competitive nature of the marketplace created a need for aggressive marketing techniques that have attracted increasing criticism from consumer advocacy groups concerning AT&T's marketing tactics in recent years. For instance, one American consumer loudly complained that, "AT&T piqued her interest recently when it pitched a cell-phone special before Christmas. Unfortunately, the long-distance giant used some snake-oil techniques to try to scare my mother into signing up for all kinds of services she would never use and certainly doesn't need. Shame on you, AT&T, for using such miserable marketing tactics."

This consumer advocate also noted that the AT&T representative engaged in unscrupulous business tactics with her elderly mother: "Most infuriating is that the telemarketer used hard-sell, scare tactics disguised as information that at first my mother trusted because she is a consumer of AT&T's long-distance service (remaining loyal after the mid-1970s Ma Bell breakup)."

In addition, Veigle cites AT&T's questionable methods of persuading potential customers through fake deadlines and pushing unneeded features. In this regard, Veigle emphasizes that the representative "told my mother she 'needed' call waiting and caller ID for her cell phone, features she doesn't have even on her residential service. Slimiest of all was the old 'deadline' bit: Sign up before such-and-such a date or this deal will go away. The company lost a potential customer by trying to sell her more than she needed.'"

Finally, the long-term ramifications of the Ma Bell breakup can be seen in the manner in which the telecommunications industry has been regulated by the federal government in the subsequent years. In this regard, Chandler and Cortada report that this process has been supported by the courts despite the potential constitutional issues that are involved. For instance, Chandler and Cortada emphasize that, "Radio, television, and telephone were particularly subject to regulations, despite cries of foul from First Amendment proponents. The fairly consistent impulse of the regulators always remained the same: to provide a variety of perspectives and to foster competition, not censure expression of thought. And the process continues."

Conclusion

The adage that "history repeats itself" appears to be relevant to Ma Bell, and the company continues what appears to be an inexorable march from its existing oligopoly to the complete monopoly the existing prior to the corporation's breakup in 1982. The research showed that the breakup of AT&T spawned seven new regional "Baby Bells" that have since merged into four major telephone service providers. The research also showed that the short-term ramifications of this federal lawsuit included improved international dialing, improved quality of calls, and faster Internet connections. These consumer gains were offset by some significant corresponding costs that were associated with the breakup. Finally, the research showed that the increasingly globalized and competitive environment in which the telephone industry competes will mean further changes to the industry in the future as these major telephone service providers seek to maintain their existing market share and grow their businesses in new markets abroad.

References

Boudreaux, G. & Sloboda, B. (2000). "Broadband: A Primer on Telecommunications

Technology." Management Quarterly, 41(3), 2.

Chandler, J.W. & Cortada, J.W. (2000). A Nation Transformed by Information: How

Information Has Shaped the United States from Colonial Times to the Present. New York: Oxford University Press.

Crawford, S.P. (2007). "Network Rules." Law and Contemporary Problems, 70(2), 51-53.

de Bijl, P. & Pietz, M. (2002). Regulation and Entry into Telecommunications Markets.

Cambridge, England: Cambridge University Press.

Dizard, W. (1997). Meganet: How the Global Communications Network Will Connect Everyone

on Earth. Boulder, CO: Westview Press.

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Geisst, C.R. (2000). Monopolies in America: Empire Builders and Their Enemies, from Jay

Gould to Bill Gates. Oxford: Oxford University Press.

Heim, S.M. (2006). "Creation of the Media." Federal Communications Law Journal, 58(3),

727-730.

McMurrer, M. (2011). "Exclusive Gadget: Apple & At&t Antitrust Litigation and the iPhone

Aftermarkets." Journal of Corporation Law, 36(2), 495-497.

Nolle, T. (2003, "Prospects for the next 'Ma Bell.' Business Communications Review, 33(2), 8-9.

Stone, A. (1997). How America Got Online: Politics, Markets, and the Revolution in Telecommunications. Armonk, NY: M.E. Sharpe.

Veigle, A. (2000, January 18). "Savvy Mom Won't Hear of Cell-Phone Oversell." The

Washington Times, 6.

Wall, S.J. & Wall, S.R. (2000). The Morning After: Making Corporate Mergers Work after the Deal Is Sealed. Cambridge, MA: Perseus Books.

Wexler, J. (1999, September). "Next Generation Telcos: Still Not 'Hip." Business

Communications Review, 29(9), 26-27.

Geisst, C.R. (2000). Monopolies in America: Empire Builders and Their Enemies, from Jay Gould to Bill Gates. Oxford: Oxford University Press, p. 259.

Geisst, p. 259.

Heim, S.M. (2006). "Creation of the Media." Federal Communications Law Journal, 58(3), p. 727

Stone, A. (1997). How America Got Online: Politics, Markets, and the Revolution in Telecommunications. Armonk, NY: M.E. Sharpe, p. 81.

Heim, p. 727.

Heim, p. 727.

McMurrer, M. (2011). "Exclusive Gadget: Apple & At&t Antitrust Litigation and the iPhone Aftermarkets." Journal of Corporation Law, 36(2), p. 495.

McMurrer, p. 495.

McMurrer, p. 495.

Heim, p. 727.

Geisst, p. 274.

Crawford, S.P. (2007). "Network Rules." Law and Contemporary Problems, 70(2), p. 51.

de Bijl, P. & Pietz, M. (2002). Regulation and Entry into Telecommunications Markets. Cambridge, England: Cambridge University Press, p. 23.

Crawford, p. 52.

Boudreaux, G. & Sloboda, B. (2000). "Broadband: A Primer on Telecommunications Technology." Management Quarterly, 41(3), p. 2.

Crawford, p. 52.

Crawford, p. 52.

Dizard, W. (1997). Meganet: How the Global Communications Network Will Connect Everyone on Earth. Boulder, CO: Westview Press, p. 44.

Crawford, p. 51.

Dizard, p. 44.

Geisst, p. 274.

Geisst, p. 274.

Geisst, p. 274.

Wexler, J. (1999, September). "Next Generation Telcos: Still… [END OF PREVIEW]

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