The Deal of the Century: The Breakup of AT&T

by Steve Coll

The state commissioners knew that revenues from AT&T’s long-distance services, which were used mainly by businesses, subsidized the costs of maintaining the nation’s local telephone networks. So when the FCC had authorized long-distance competition by approving MCI’s microwave application in 1969, the state commissioners had rallied to AT&T’s side, arguing that competition in the phone business was not in the public’s interest. If AT&T’s long-distance revenues were eroded, or if AT&T was forced to drop its long-distance prices to compete with companies like MCI, the cost of local phone service would rise dramatically. The state commissioners would have no alternative but to raise local phone rates too, and they would then find themselves in the midst of serious political controversy.