United States v. AT&T (1982)

United States v. AT&T was a significant antitrust lawsuit filed by the United States Department of Justice against the American Telephone and Telegraph Company (AT&T) in 1974. It culminated in a settlement in 1982 that fundamentally restructured the American telecommunications industry.

The government's lawsuit alleged that AT&T, then a regulated monopoly providing virtually all telephone service in the United States, had illegally used its dominance to stifle competition in the telecommunications equipment and long-distance service markets. Specifically, the government argued that AT&T leveraged its control over the local telephone networks to disadvantage competitors, particularly by restricting their access to AT&T's network and by cross-subsidizing its equipment manufacturing arm, Western Electric, using revenue from its regulated monopoly.

After years of litigation, the case was settled through a consent decree known as the Modification of Final Judgment (MFJ). The MFJ required AT&T to divest itself of its local exchange operating companies (LECs), which were grouped into seven independent Regional Bell Operating Companies (RBOCs), often referred to as the "Baby Bells." These RBOCs were responsible for providing local telephone service within their respective geographic regions.

As part of the MFJ, AT&T retained its long-distance service, its manufacturing arm (Western Electric), and its research division (Bell Laboratories). The decree also placed restrictions on the business activities of both AT&T and the RBOCs. The RBOCs were generally prohibited from entering the long-distance or equipment manufacturing markets, while AT&T was restricted from entering the information services market for a period of time.

The settlement of United States v. AT&T had a profound and lasting impact on the telecommunications industry. It fostered competition in long-distance service, telecommunications equipment, and eventually, other areas such as internet services. The breakup of AT&T led to the emergence of new companies, lower prices for consumers, and increased innovation in the telecommunications sector. Over time, some of the restrictions imposed by the MFJ were lifted or modified, leading to further consolidation and convergence in the industry.