5 ms·

AT&T also provided an extremely high quality of service, not really seen since that time, and operated a corporate R&D arm that I think could fairly be called t

AT&T also provided an extremely high quality of service, not really seen since that time, and operated a corporate R&D arm that I think could fairly be called the global center of innovation for decades, designing as an almost side-effect of telephone switches a large portion of the computer technology we use today from silicon to operating system. One wonders where the state of the industry would be today had Bell Labs and Western Electric been able to continue with the lavish funding and long-term vision that their monopolistic parents afforded them. And the reverse, would T-Mobile invent the transistor? It's hard to argue that innovation and quality of the telephone system went down under AT&T's monopoly when, during that time period, AT&T played a fundamental role in the invention of the computer and famously took measures as extreme as moving buildings while telephone operators work inside in order to avoid service disruption. It seems that other factors must have been in play as well in the eventual decline of "ma bell". The story of AT&T's monopoly on telephone service and its subsequent breakup at the hands of both court and MCI/Sprint is a complex one that cannot be so simply used as an argument for or against the arrangement. It was a very particular situation in a very particular time, perhaps most significantly because AT&T created an entire market sector which the government had no coherent strategy to manage. So-called competition has also been quite insufficient to revolutionize the landline telephone market, it remains perhaps as consumer-hostile as it has ever been, something forgotten largely only because the cellular industry has replaced it (which, facing stiff competition but the regulatory wild west of the internet, is consumer-hostile in a whole new way).

TheColorYellow 7y ago
This is awesome content. Any chance you have a book you could recommend on this subject?
- jdsnape 7y ago
  It’s mentioned below, but ‘The Idea Factory‘ covers Bell labs and is an excellent read.
- kick 7y ago
  The title is bad enough that I won't mention it, but the alternative title is good (and will find you the book): 'The Criminal Wrecking of the Best Telephone System in the World' by Kraus and Duerig.
- jcrawfordor 7y ago
  Both siblings name the books that I would most likely to recommend. Also, Steve Call's "The Deal of the Century" and "Telephone: The First Hundred Years," John Brooks. The latter is a 1976 book which was commissioned by AT&T as a corporate history. As a result it is both outdated and paints a rather rosy picture[1], but I think that's part of what makes that book rather interesting - it's sort of AT&T's best version of itself at the peak of its dominance. [1] for what it's worth, John Brooks engages right in the introduction with the conflict of a history funded by its subjects, and the book was researched and written independently
fsckboy 7y ago
the argument you are making, from the perspective of microeconomic theory, in short: no. for a monopolist to offer high quality products and service is exactly part of the monopolist's playbook, not any sort of consumer benefit. The overly generous profits they earn allow them to use comparatively smaller quality enhancements as a barrier to entry for competition. The point is that "high quality service that you pay too much for" reduces the overall level of consumption. So, while the smaller market is happy with the service they receive, a larger market is receiving less service than they want because the price is artificially too high. Monopolists absolutely do restrict supply, and economists all agree that monopolists are bad for markets. The part where you suggest "particular situations" is essentially reflective of the other monopolist tactic of "bundling", product mixes designed to price discriminate separate market segments, again, always to the monopolists benefit. The theory of monopoly is quite robust, and your arguments in favor of the benefits of monopoly do not hold any water whatsoever.
- TomMckenny 7y ago
  As you point out, competition is better than monopoly because it provides a surplus that advantages consumers. But some things we do not want a surplus of, for example river dams. Other things can not be competitive even in principle like surface streets. Likewise as was discovered with mass transit and utilities in the last century in a world that did it's absolute best to be laissez faire. So there are some rare cases where there must be monopolies and if you must have a monopoly, it is better to have one controlled by a democratic government than a self interested clique. At least then there is some possibility of working in the public interest on price and innovation. That ISPs must always be a monopoly seems unlikely to me. But if it's politically impossible to break them up, then nationalizing them is still far better than the current situation.
- jcrawfordor 7y ago
  The problem is that AT&T was pretty heavy federally regulated prior to the breakup, Carterfone, etc, and the company achieved most of this work under a regulatory framework that was an early version of what we have today for the industry - and in fact because this was prior to CLECs and RBOCs was actually more similar to a "public utility" regime (e.g. electricity) than what we have today in the telecom industry, with regulated tariffs and the gov't achieving the policy goal of ubiquitous availability through tariff rate rather than the modern surcharge arrangement. The benefits of AT&T's golden era are most attributable not to their monopoly status but to their status as a government-regulated monopoly in a fashion similar to utilities operating under franchise - one which, unlike typical franchise utilities today, was permitted by regulators to maintain a substantial R&D operation. The system was always somewhat haphazard, for example post-WWII AT&T faced 'competition' from rural telephone cooperatives under the REA as a means of speeding up rural development. However, this was initially a bright-line geographical division of duties and REA telephone coops continued to rely on Long Lines for transit. Of course many, many things went wrong, including the regulatory regime being a cause of AT&T's decay even prior to court action against their favor. However, it's hard to say if that would be the outcome of such a regulatory framework today (or outright nationalization), because this was the nascent stage of telecom regulation which both the government and AT&T had equal hands in "making up as they went." This was the era in which regulatory capture was more or less invented, for example, and not necessarily on purpose. My point though is exactly that describing AT&T as "a bad monopoly" or "a good regulated private interest" are not really great arguments in that both of those things were entirely true at the same time, and the particular environment in which The Bell System formed is not one that will likely ever exist again. Newer communications utilities have broadly been shoved into the category of telephony for regulatory purposes or entirely left alone, so it's hard to foresee any future in which we will have a second "telephone era" in which a new debatably-utility emerges to be managed.
basilgohar 7y ago
I can only argue back that the state of AT&T was such that it was such a massively profitable entity that exuded such power in terms of resources that what you are describing would not have been unique to AT&T had a less monopolistic situation arisen. The technologies that AT&T advanced, while notable, are far from impossible to have emerged had other entities had a fair share of the resources that AT&T monopolized. To say AT&T should not have been broken-up due to its achievements is akin to say that Mussolini should have stayed in power because "he made the trains run on time". Yes, maybe, but at what other, hidden costs?

TheColorYellow 7y ago

This is awesome content. Any chance you have a book you could recommend on this subject?

jdsnape 7y ago
It’s mentioned below, but ‘The Idea Factory‘ covers Bell labs and is an excellent read.
kick 7y ago
The title is bad enough that I won't mention it, but the alternative title is good (and will find you the book): 'The Criminal Wrecking of the Best Telephone System in the World' by Kraus and Duerig.
jcrawfordor 7y ago
Both siblings name the books that I would most likely to recommend. Also, Steve Call's "The Deal of the Century" and "Telephone: The First Hundred Years," John Brooks. The latter is a 1976 book which was commissioned by AT&T as a corporate history. As a result it is both outdated and paints a rather rosy picture[1], but I think that's part of what makes that book rather interesting - it's sort of AT&T's best version of itself at the peak of its dominance. [1] for what it's worth, John Brooks engages right in the introduction with the conflict of a history funded by its subjects, and the book was researched and written independently

fsckboy 7y ago

the argument you are making, from the perspective of microeconomic theory, in short: no. for a monopolist to offer high quality products and service is exactly part of the monopolist's playbook, not any sort of consumer benefit. The overly generous profits they earn allow them to use comparatively smaller quality enhancements as a barrier to entry for competition. The point is that "high quality service that you pay too much for" reduces the overall level of consumption. So, while the smaller market is happy with the service they receive, a larger market is receiving less service than they want because the price is artificially too high. Monopolists absolutely do restrict supply, and economists all agree that monopolists are bad for markets. The part where you suggest "particular situations" is essentially reflective of the other monopolist tactic of "bundling", product mixes designed to price discriminate separate market segments, again, always to the monopolists benefit. The theory of monopoly is quite robust, and your arguments in favor of the benefits of monopoly do not hold any water whatsoever.

TomMckenny 7y ago
As you point out, competition is better than monopoly because it provides a surplus that advantages consumers. But some things we do not want a surplus of, for example river dams. Other things can not be competitive even in principle like surface streets. Likewise as was discovered with mass transit and utilities in the last century in a world that did it's absolute best to be laissez faire. So there are some rare cases where there must be monopolies and if you must have a monopoly, it is better to have one controlled by a democratic government than a self interested clique. At least then there is some possibility of working in the public interest on price and innovation. That ISPs must always be a monopoly seems unlikely to me. But if it's politically impossible to break them up, then nationalizing them is still far better than the current situation.
jcrawfordor 7y ago
The problem is that AT&T was pretty heavy federally regulated prior to the breakup, Carterfone, etc, and the company achieved most of this work under a regulatory framework that was an early version of what we have today for the industry - and in fact because this was prior to CLECs and RBOCs was actually more similar to a "public utility" regime (e.g. electricity) than what we have today in the telecom industry, with regulated tariffs and the gov't achieving the policy goal of ubiquitous availability through tariff rate rather than the modern surcharge arrangement. The benefits of AT&T's golden era are most attributable not to their monopoly status but to their status as a government-regulated monopoly in a fashion similar to utilities operating under franchise - one which, unlike typical franchise utilities today, was permitted by regulators to maintain a substantial R&D operation. The system was always somewhat haphazard, for example post-WWII AT&T faced 'competition' from rural telephone cooperatives under the REA as a means of speeding up rural development. However, this was initially a bright-line geographical division of duties and REA telephone coops continued to rely on Long Lines for transit. Of course many, many things went wrong, including the regulatory regime being a cause of AT&T's decay even prior to court action against their favor. However, it's hard to say if that would be the outcome of such a regulatory framework today (or outright nationalization), because this was the nascent stage of telecom regulation which both the government and AT&T had equal hands in "making up as they went." This was the era in which regulatory capture was more or less invented, for example, and not necessarily on purpose. My point though is exactly that describing AT&T as "a bad monopoly" or "a good regulated private interest" are not really great arguments in that both of those things were entirely true at the same time, and the particular environment in which The Bell System formed is not one that will likely ever exist again. Newer communications utilities have broadly been shoved into the category of telephony for regulatory purposes or entirely left alone, so it's hard to foresee any future in which we will have a second "telephone era" in which a new debatably-utility emerges to be managed.

basilgohar 7y ago

I can only argue back that the state of AT&T was such that it was such a massively profitable entity that exuded such power in terms of resources that what you are describing would not have been unique to AT&T had a less monopolistic situation arisen. The technologies that AT&T advanced, while notable, are far from impossible to have emerged had other entities had a fair share of the resources that AT&T monopolized. To say AT&T should not have been broken-up due to its achievements is akin to say that Mussolini should have stayed in power because "he made the trains run on time". Yes, maybe, but at what other, hidden costs?