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AT&T’s dominance in the 20th Century

September 6, 2011

AT&T has been in the news lately because of their attempts to purchase T-Mobile.  Ars Technica has posted a series of articles on AT&T,  including an excellent article entitled How AT&T conquered the 20th century  outlining AT&T’s steady rise to dominance.

I’ve been reading about the history of the oil industry, the similarities between the rise (and breakup) of AT&T and that of Standard Oil are striking.

1) They both used vertical integration to try to gain control of every aspect of their industry.  In the case of AT&T it took the form of equipment manufacturing, and establishing both dominant local franchises and pervasive long distance services.  Standard Oil either outright acquired or silently controlled everything from oil fields, to refineries, to transport.

2) They both knew how to play the political system.  AT&T used targeted service removal to punish legislatures for passing rate caps (Indiana is the example cited  in the Ars Technica article).  Standard Oil just bought legislators directly through contributions and bribes.

3) Their policy toward competitors was scorched earth.  AT&T accomplished this largely through their monopoly on long distance.  Standard did it by use of regional price cuts.

4) They were broken up under anti-trust laws.

5) There was at least some reconsolodation after the breakup of both, although neither has achieved their past absolute dominance.  AT&T reacquired BellSouth.  Exxon (Standard of New Jersey), and Mobil (Standard of New York) merged to become Exxon-Mobil.

These parallels are to some extent stating the obvious, since both AT&T and Standard were huge companies in rapidly growing industries, which arose in the era of monopolies and trusts.  But as AT&T attempts to buy T-Mobile, and technology companies have been on an acquisition spree over the past few years, it’s worth examining the historical outcome of any company gaining a monopoly over an industry.

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