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The Breaking of the Bells


American Telephone and Telegraph (AT&T) was the target of a suit filed under the Sherman Antitrust Act and faced charges of operating a nationwide monopoly on telephone services. By 1939, Ma Bell was responsible for 98% of America's long distance phone service, and manufactured 83% of its telephones and 90% of its telephone equipment. The Justice Department fought for seven years to break up the monopoly, settling for a consent decree in 1956 in which AT&T agreed to limit its monopolistic practices but was allowed to retain all its current corporate holdings.

By the 1970s, AT&T had grown to be the largest corporation in the world, its assets eclipsing even those of General Motors and Standard Oil's successors, Exxon, and Mobil. In 1974, the Justice Department again filed suit and spent another eight years in court, but this time emerged victorious. In 1982, AT&T was ordered to divest itself of its local telephone services (though the reorganization didn't take effect for another two years), thereby creating what became known as the "Baby Bells." These seven regional phone companies were responsible for providing local phone service while AT&T retained the long distance portion of the business. Ironically, in recent years, many of the former Baby Bells have merged—with the approval of the Justice Department—strengthening their monopolistic grip on local services.


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