AT&T

Type:	Public
Industry:	Telecommunications
Founded:	1876
Founder(s):	Alexander Graham Bell
Headquarters:	Whiteacre Tower Dallas, Texas
Country:	USA
Employees:	258,870 Employees as of July 2011
Revenue:	$ 113,239.0 billion as of 2010
Website:	ATT.com
LinkedIn:	AT&T
Key People
Randall L. Stephenson, Chairman, CEO & Pres. John Stankey, CEO of AT&T Business Solution Ralph de la Vega, CEO of AT&T Mobility & Co. D. Wayne Watts, Senior Executive VP and General Counsel James W. Cicconi, Senior Executive VP of External and Legislative Affairs

AT&T is an American multinational telecommunications company. It is considered the 7th largest non-oil corporation in the United States in terms of revenue in 2010, 14th largest in market value and it was ranked by Fortune Magazine as one of the 50 most admired companies. The company's headquarter is located in Whiteacre Tower Dallas, Texas.

History

Invention of the Telephone

The history of AT&T can be traced back during the time when Alexander Graham Bell invented the telephone. In 1875, Gardiner Hubbard and Thomas Sanders financially supported Alexander Graham Bell's in inventing the first telephone. On July 1, 1875, Bell was able to transmit speech sounds through electricity however, the words can't be understood. Bell drafted a patent application and specification for his invention and labeled it as "improvement in telegraphy." He delayed his patent application because of a promise made to another investor named George Brown that he will not file a U.S. patent until a patent is applied in Britain. However, Gardiner Hubbard filed the patent application to the United States Patent Office without Bell’s knowledge on February 14, 1876. Bell received his first patent no. 174, 465 on March 10 on that same year. Bell continued experimenting on his device. On March 10, 1876, he used his latest design, a liquid transmitter hooked to an electric circuit in transmitting the first spoken words to his assistant Thomas Watson. At his end, Watson heard clearly Bell’s statement, “Mr. Watson, come here, I want you.” The first telephone was invented and subsequently on January 30, 1877 Bell’s second patent no. 186, 787 was issued to him by the U.S. Patent Office.

American Bell Telephone Company

On July 9, 1877, Bell, Hubbard and Sanders established the Bell Telephone Company. The management of the company was primarily handled by Hubbard because Bell was not interested in becoming a businessman. Bell Telephone Company acquired its first license to operate a telephone exchange in New Haven, Connecticut in 1878. Hubbard hired Theodore Vail as the new General Manager of the Bell Telephone Company in the midst of 1878. Vail was responsible in creating the Bell System, the world's biggest telecommunications monopoly. In 1880, Bell Telephone Company was incorporated in Massachusetts as American Bell Telephone Company. In 1882, American Bell Telephone Company purchased majority shares of the Western Electric Company which became its primary supplier for telephone equipment.

The Establishment of American Telephone and Telegraphic (AT&T) Company

On March 3, 1885, American Bell Telephone Company incorporated its fully-owned subsidiary, the American Telephone and Telegraphic Company known today as AT&T to operate long distance communication in New York. This allowed AT&T to get financial backing to an unlimited amount and the power to to purchase, develop, own, license, lease telephone lines and to achieve the companys primary objective of AT&T to connect every town or city in the State of New York as well as every town and city from Canada, Mexico and all other countries around the world. Theodore Vail became the President of AT&T. In 1892, AT&T opened its first long distance telecommunication service between Chicago to New York. The rate was $ 9 for 5 minutes. In 1894, Bells second patent expired and the competition in telephone communication business began. In 1899, AT&T became the parent company of the Bell System after acquiring all the assets of the American Bell Telephone Company. In 1915, the San Francisco long distance communication line became operational.

The Bell System: The Largest Telecommunications Monopoly

The Bell System was composed of the American Telephone & Telegraph (AT&T) Long Lines also known as (Ma Bell), 22 regional operating companies known as Baby Bells, which provide telephone exchange services and equipment within the United States, the Bell Laboratories, research and development subsidiary of AT&T and the Western Electric Company, its manufacturing arm. The companies within the Bell System embraced the spirit of united service to the public, the biggest employer in America where employees felt secured in their job.

Foundations & Guiding Principle of the Bell System

The two patents issued to Alexander Graham Bell on his improvement to the telegraphy became the technological foundation in the development of the telephone while the Bell Patent Association served as the organization foundation of the Bell System.

The founders and the entire management of the Bell System operated on the principle that research and development is a better approach to achieve better communications leading to the success of the company.

Theodore Vail: The Leader Behind the Bell System

Theodore Vail instituted the Bell System. He was hired by Gardiner Hubbard to become the General Manager of the Bell Telephone Company in 1878. During that time the company is experiencing difficulties to raise capital because most politicians and financiers believe that the telephone is not a profitable business. Despite the negative impression regarding the telephone business and discouragements from family and friends, Vail accepted the job giving up his position as General Superintendent of the Railway Mail Service. He initiated management and organizational strategies which resulted to the company's remarkable growth such as the issuance of formal contracts and systematic accounting control over licensees and delegated travelling agents to monitor the licensing business. Vail also succeeded in negotiating an out of court settlement in connection with the company's patent infringement case against Western Union in 1879. Western Union recognized Alexander Graham Bell as the inventor of the telephone and agreed that it will stay out of the telephone business. In addition, Western Union also transferred all of its patent rights on Elisha Gray and Thomas Edison's telephone inventions. All entities who have interests in the telephone business will be licensed under the Bell patents. Furthermore, Western Union also agreed to pay 20% of the total costs of every new developed telephone patents. In return Bell Telephone Company agreed that it will not engage in the telegraph business and Western Union will be given a license to use the telephone to transmit telegraphic message and it will be given a 20% of the Bell telephone rentals and royalties. The settlement agreement gave Bell Telephone Company the full control over the telephone technology and monopoly over the telecommunications industry. It also gave the company the leverage to develop a well-founded national system--the Bell System.

Vail also initiated the establishment of the long distance telephone service, the use of copper wire in telephone and telegraph lines, and created the company standard for service and technological development. policy. In 1887, Vail resigned as General Manager of the AT&T because of conflict in management style with his superiors. He didn't want to compromise his management principle. He believed that the company needs to expand its service to attain growth but his superiors believe otherwise, for them dividend is more important.

AT&T continued to grow but the company incurred a large financial debt. In 1907, JP Morgan gain control of the AT&T debt financing and decided to convinced Theodore Vail to serve as President of the company. Vail accepted the position on May 1, 1907. Under his leadership, Vail implemented the One Policy, One System, One Universal Service. He also implemented good public relations and acknowledge that the Bell System is natural monopoly cooperating with state regulation. He instituted standard operating procedures within the company and regained the national control in telephone service. Vail retired in 1919 and during that period AT&T's structure and operation was already well established and modernized.

Early International Expansion

AT&T started to expand internationally by supplying equipment to other telephone companies through its manufacturing subsidiary, the Western Electric Company and its affiliates around the world. By 1914, AT&T's manufacturing subsidiary established locations in Antwerp, London, Berlin, Milan, Paris, Vienna, St. Petersburg, Budapest, Tokyo, Montreal, Buenos Aires, and Sydney. The new AT&T president Walter Gifford gave up the company's manufacturing business including its international locations except Canada and pursued the company's objective to provide a universal telephone service in the United States beginning in 1925. The company also established its research and development subsidiary, Bell Telephone Laboratories, Inc. By 1927, AT&T successfully launched its first trans-atlantic telephone service from US to London using radio which cost $75 while the trans-pacific telephone service between US to Japan was realized in 1934 at $39 for the first three minutes respectively. Both international telephone services can only accommodate one call at a time. The company's TAT-1, the first trans-atlantic telephone cable was launched in 1956. It has the capacity to accommodate 12 calls at a time and price was set at $12 for the first three minutes and subsequently in 1964, the first submarine telephone cable TPC-1 was inaugurated. In 1965, the world's first electronic switch was installed. The national emergency call number 911 was also introduced during that year. During the 1970s, the international long distance call customer dialing was introduced to the public, AT&T's network became computerized and had the initial capacity to handle a high volume of calls to as much as 350,000 per hour.Since then, AT&T continued to expand its telecommunications service globally.

The Bell System Divestiture

In 1974, the United States Department of Justice (DOJ) filed an anti-trust lawsuit against AT&T alleging the company with monopoly and conspiracy to monopolize the entire telecommunications industry both equipment and services. At&T denied the allegations and fought the case for five years in court and lobbied the Congress to conduct hearings and amend the 1934 Communications Act which created the Federal Communications Commission (FCC), an independent regulatory body which conducted a full scale investigation of the telephone industry. The agency also implemented regulations to increase competition. In 1979, Charles L. Brown then Chairman of AT&T admitted that the company is prosperous in terms of revenue and and it has developed new technologies, but the company is facing difficulties in pursuing its business operations and implementing its new technologies because of the legal battles and regulations particularly the U.S. antitrust lawsuit. In 1982, Brown initiated a settlement agreement with the Department of Justice through U.S. Attorney General William Baxter. Both parties reached a settlement agreement January 8, 1982. AT&T agreed to divest the 22 Bell operating companies. In return, the DOJ dissolved the 1956 Consent Decree which limited the business operations of AT&T to common-carrier communications service, to license its inventions to all interested parties and its manufacturing subsidiary, the Western Electric will only manufacture equipment for the use of Bell operating companies. The Divestiture which took effect on January 1, 1984 dissolved the Bell System.