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- [00:00]
Lindsey Graham
Want to get more from business movers? Subscribe to Wondery for early access to new episodes, ad free listening and exclusive content you can't find anywhere else. Join Wondery in the Wondery app or on Apple Podcasts. It's December 30, 1981, at the Department of Justice in Washington, D.C. in a conference room, Howard Treenance, at and t's 57 year old general counsel, reads through a series of documents with a pensive look on his face. A few weeks earlier, Howard approached the Department of Justice with a plan to settle a federal antitrust lawsuit filed against AT&T. The two sides have tried to negotiate similar deals before, but this is the first time that AT and T has put forward a plan that would cause its own breakup. Today is the day that the settlement is supposed to be finalized. Howard pauses, staring at a page he doesn't recognize. What's this? Howard slides the paper over to Department of Justice lawyer Ron Carr. Appendix B. That's just a clause about competitor firms infrastructure parity. We've been over this. No, we haven't. Are you sure? I'm almost positive we have, Ron. I promise you we haven't. I would not have missed this. The new regional operating companies will have to completely change their engineering, build their own network from scratch, and we'll have to reconfigure ours. This is crazy. We're leveling the playing field, Howard. Making sure that AT and T doesn't have a systemic advantage over competition. Given the fact that you already have infrastructure, this won't work, Ron. It's over the top. That's not the way we see it. Who's we? Was this Baxter's idea? Ron avoids eye contact, which tells Howard exactly what he needs to know. Assistant Attorney General William Baxter has added this new detail into the deal. For the last year, Baxter has championed the antitrust case against AT&T. And with this latest intervention, Howard wonders whether Baxter is trying to sabotage the settlement. Talks. Howard drops the papers on the table. Look, Ron, AT&T cannot accept this. Where's Baxter? I need to talk to him. He's not here. Then where is he? He's skiing. Park City, Utah. You're telling me that we're on the verge of dismantling the largest company in the United States and the man in charge of the case is skiing? Ron just shrugs. I heard they just got fresh powder. After leaving the meeting at the Department of Justice, Howard Treenans had a foreboding feeling, but it was one he was getting used to. AT&T had come close to making deals with the Department of Justice before. But on every occasion, the DoJ had backed out at the last minute. And each time talks broke down, AT&T stepped closer to its worst case scenario, a legal verdict that would forcibly break it up. But this time, Howard wasn't going to let the deal collapse. He would force the Department of Justice back to the table by any means necessary. And he'd get this agreement signed. Because for AT&T, the alternative was annihilation.
- [03:11]
Unknown
Why are there ridges on Reese's peanut butter cups? Probably so they never slip from her hands. Could you imagine? I'd lose it. Luckily, Reese has thought about that. Wonder what else they think about? Probably chocolate and peanut butter.
- [03:27]
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- [04:23]
Lindsey Graham
From Wondery. I'm Lindsey Graham and this is Business Movers. By the fall of 1981, AT&T was teetering on the edge of an abyss. For over a century, America's biggest company had enjoyed a monopoly over the nation's telephone system. But over the past seven years, AT&T had been locked in a brutal battle to protect themselves from outside competition. To preserve its dominant market share, AT&T had thrown its billion dollar weight around. It had crushed rivals with its size. It had tied them up in court and lobbied Washington hard to get its monopoly protected by law. But none of it was enough. An antitrust lawsuit filed by the Department of Justice refused to go away, and as the case neared its conclusion, the outlook was grim. All indications were that Judge Harold Green would side with the prosecution, and if he got his way, AT&T would be carved up piece by piece, and nothing would be left. At the end, AT&T had one last shot, though. After the election of President Ronald Reagan, the political winds in D.C. had shifted. Government regulation and federal oversight were no longer the flavor of the month. And suddenly Department of Justice prosecutors were more open to a deal. But AT&T wasn't negotiating from a position of strength. Any agreement would mean significant concessions. Over the last 10 years, AT, AT&T had spent millions trying to hold the century old Bell system together. But now Chairman Charlie Brown and General Counsel Howard Treenens were ready to think the unthinkable. They would voluntarily give up their monopoly. In doing so, AT&T would end a long and illustrious chapter of its history. But if they did it right, AT&T would live on as a leaner, stronger company with its eyes turned to the future rather than the past. This is the fourth episode in our series on the breakup of AT&T. The Deal it's mid October 1981, at the headquarters of AT&T. Two months before settlement talks come close to collapse. Inside a boardroom, Howard Treenans watches as AT&T executive Charles Hugo wheels a chalkboard into the room. Howard can't help but smile. The sprawling mess of drawings and diagrams on it. Oh my God. Looks like the kind of thing an MIT professor would come up with. Hugo holds up his hands. They're covered in white dust. Yeah, I must have gone through three packets of chalk writing this all out. Well, I appreciate your effort, I think. Is everyone here? Howard and Hugo aren't alone. Sitting around the large oak table are other AT and T executives, and all their eyes are fixed on the chalkboard. Howard nods. Yeah, looks like it. So, before we begin, I want to make it perfectly clear that this is our last resort, right? An ace up our sleeve that we will pull out if needed. When do you think that might be? Is there a timeline? No, not yet. But the current settlement talks are going nowhere. There's a reason why we're calling them Quagmire 2. The DOJ says they want to negotiate in good faith, but I just can't help but think they're stalling. So how much longer do we wait? I mean, the trial could be over in a matter of months. Judge Green, I'm aware of the situation and that's why we're here. Let's just go over the backup plan. I want to make sure we're all ready if and when the time comes. Hugo turns to the chalkboard and writes across the top. Howard squints as he reads the words out loud. The inter intra split. Well, that's snappy. Well, I kind of thought it was, but anyways. The inter intra split is the total separation of our regional operating companies from our long distance network. We would cease to control the local exchanges and Divest them into independent companies. AT and T would not share connections or facilities with them. So we're sacrificing the regionals to save the rest of the company, Correct, Yeah. If we can persuade the DOJ to go along with this, we'll get to keep long lines, Western Electric and Bell Laboratories all under AT&T control. Speaking of Bell Labs, I believe we finally figured out a technical way to manage that part of the business while remaining financially reasonable. But we still need to iron out some details. If we take this to DOJ with any loopholes whatsoever, I'm sure they'll tear it apart. Well, how much more time you need? A few weeks, maybe a month. And you're sure that's the last hurdle? Well, conceptually, yeah. But I can only imagine that if we enact this plan, plenty of people are going to be up in arms. We should be ready for a backlash. I'm well aware of that, Charles. But let's hope we just never have to use this plan. God, it's be the end of the Bell system forever. As the meeting in AT&T's boardroom broke up, Howard Treenans reminded all those attending that everything they discussed was confidential. The inter Intra split was a fail safe. It'd only be enacted when every other option had failed. Because the inter Intra split would voluntarily give up a major part of AT and T and it would upend American telecommunications entirely. But Howard Treenans also knew that if things got any more desperate, he'd have no choice but to play this trump card. The inter Intra split plan had been originally conceived a year earlier when ATT had suffered a series of setbacks in Washington and in court. AT&T chairman Charlie Brown and General Counsel Howard Treenans had begun contemplating a nuclear option. An audacious plan to resolve their legal impasse by blowing up the American phone network. They knew that pressing this nuclear button would cause AT and T's own destruction. But they also hoped that the company could rise from the ashes. AT and T Vice President Charles Hugo was asked to head up the secret scheme. And over the next year, Hugo worked quietly in the background until he was ready to unveil his plan to ATT's executive team. Under Hugo's proposal, AT&T's regional and long distance services would be separated from each other. The interexchanges that managed local calls were run by 22 regional subsidiaries, including Cincinnati Bell, Pacific Bell and New England Telephone. In previous negotiations with the Department of Justice, AT&T had considered divesting two or three of these regional subsidiaries. But according to Hugo's plan, all 22 would be offloaded. In return, AT&T would retain control of its Western Electric manufacturing division, it would keep hold of research arm Bell Labs, and it would also retain the intra exchanges that facilitated long distance calls. As a result, Hugo named this plan the Inter Intra Split. It was by any measure a stunning act of corporate self immolation. Chairman Charlie Brown and chief counsel Howard Treenans knew that to get it past the board and other AT&T stakeholders, they needed to get something in return beyond the company's survival. So they thought laterally. The Department of Justice was determined to end AT&T's monopoly on the telecom industry. But that left open the possibility of a sideways move into a different market, something that could spark new growth and replace the lost income. And at the start of the 1980s, one technology was growing faster than any other computing. Over the past few decades, computers had evolved from huge mainframes the size of a room into small electronic devices that fit on a desktop. Businesses were employing computer technology in their everyday systems, and enthusiasts were buying the first home computers for recreational use. Companies like IBM, Microsoft and Apple were making money at the frontier of this new technology, and AT&T didn't want to be left out. But AT&T was legally barred from making money from computers. More than 30 years earlier. Earlier, in 1949, the Department of Justice had made an early attempt to curb AT&T's monopoly of American telecommunications. At that time, prosecutors sued AT&T with the aim of divesting the company of its equipment division, Western Electric. After stalling for seven years, AT&T eventually cut a deal known as the 1956 consent decree. According to the terms of this agreement, AT&T was allowed to keep Western Electric, but in return, it pledged not to enter the computer industry. At the time, the consent decree seemed like a resounding victory for AT and T. They were allowed to retain its monopoly of America's phone system, and all it had to do was give up the opportunity of a theoretical profit in what was then a still embryonic technology. But by 1981, computing was a rapidly growing industry, and the consent decree was a pair of handcuffs that stopped AT and T from taking advantage. So to win over support for the radical inter intra split within AT and T, Charlie Brown and Howard Treenens added an extra element to the plan. In exchange for giving up its entire slate of regional subsidiaries, the 1956 consent decree would be ripped up, freeing the company to compete in computing. The board Approved the inter interest split in theory, but only if all other avenues broke down. So in the fall of 1981, with the Inter intrasplit now a secret backup plan, Howard Treenhans tried to speed up the ongoing settlement talks with the Department of Justice. But those talks had already been named Quagmire 2 by AT&T negotiators. Because of the slow pace, the Department of Justice delayed meetings and offered few compromises. Prosecutors insisted that the complete breakup of AT&T was the only acceptable outcome. So after weeks of gridlock and no movement in the DOJ negotiating position, Howard concluded that Quagmire II was going nowhere. The only way he'd get his talks to move on before the antitrust case finished was to play his strongest card, putting the radical inter interest split on the table. But just as Howard contemplated using this nuclear option, a lifeline emerged from Washington. For the past two years, Congress had been debating the Telecommunications Competition and Deregulation Act. This draft legislation was a political attempt to solve the AT&T impasse by prescribing in federal law exactly what AT and T was allowed to do. The bill came down on AT&T's side, allowing the company to keep operating with only minimal divestiture of a few parts of the business. Most importantly, if the Telecommunications act became law, Judge Harold Green would be compelled to dismiss the federal antitrust case without breaking up AT and T. But ever since it had been introduced, this Telecommunications act had been bogged down in the Senate. That changed though, in October 1981, when the bill finally came up for a vote and it passed through the Senate by an overwhelming margin. And moving on to the House of Representatives, Colorado Congressman Tim Wirth was given the responsibility of navigating the bill through the House. As a Democrat, Worth wasn't a natural ally for big businesses like AT&T. But Howard Tremens hoped that he could persuade Worth to put the prolonged antitrust case to bed. He met with Worth and massaged his ego. He suggested that helping to resolve the AT&T dispute would make Worth a hero in Washington. His profile would be raised. And that could only be a good thing for a 42 year old still at the beginning of his political career. But despite Howard's charm offensive, Congressman Worth was not in the deal making mood. On December 2010, 1981, he published his amended version of the Telecommunications act. And it was substantially different to the version passed by the Senate. Worth had added harsh regulations that would severely impact AT&T's ability to do business. He called for strong rules on equal access to phone infrastructure. And he wanted to guarantee that AT&T would source 30% of its equipment outside of its own Western Electric manufacturing arm. In short, Worth had transformed a bill that favored AT&T into one that sought to crush it. AT&T reacted quickly. On the evening that Congressman Wirth made his Revised Bill Public, AT&T executives met in New York City. There they decided it was time to pull out their fail safe option. They'd held back the inter Intra split for two months in the hope that the Quagmire 2 negotiations or the Telecommunications act paid off. But now there was unanimous agreement that AT& was out of time. And in just 12 hours, AT&T would set the ball rolling on a plan that would end in its own breakup.
- [16:54]
Mindy Thomas
Hey, Grown ups. I'm Mindy Thomas.
- [16:56]
Guy Raz
And I'm Guy Raz.
- [16:57]
Mindy Thomas
And we're the host of the number one podcast for curious kids wow in the World.
- [17:02]
Guy Raz
Ah, Mindy. Can you believe we have our very own wow in the World stem toys?
- [17:08]
Mindy Thomas
I totally can't believe it. Guy Raz. Eight years ago, when we started making wow in the World, we were on a mission to spread the latest WoW discoveries in science and technology and innovation. And now we get to help kids discover these wows right at home.
- [17:24]
Guy Raz
That's right. From the ultimate high flying air rocket to the light up terrarium, there's something for every wowzer in your world to play and tinker with.
- [17:34]
Mindy Thomas
Grown Ups. You can find wow in the World stem toys available now at select Walmart locations or or online@walmart.com Shop the Wow. Now.
- [17:47]
Unknown
Behind the closed doors of government offices and military compounds, there are hidden stories and buried secrets from the darkest corners of history. From COVID experiments pushing the boundaries of science to operations so secretive they were barely whispered about, each week on Redacted Declassified Mysteries, we pull back the curtain on these hidden histories. 100% true and verifiable stories that expose the shadowy underbelly of power. Consider Operation Paperclip, where former Nazi scientists were brought to America after World War II not as prisoners, but as assets to advance US intelligence during the Cold War. These aren't just old conspiracy theories. They're thoroughly investigated accounts that reveal the uncomfortable truths still shaping our world today. The stories are real. The secrets are shocking. Follow Redacted Declassified Mysteries on the Wondery app or wherever you get your podcasts. You can listen to redacted early and ad free right now on Wondery Plus.
- [19:00]
Lindsey Graham
It's December 11, 1981, at the Madison Hotel in Washington, D.C. one day after the heavily revised Telecommunications act debuted in the House of Representatives. Inside one of the hotel's suites at AND T. General Counsel Howard Treenans enters a side room with two plates of food. Howard sets him on a table and takes a seat opposite the adversary he's been up against for the last year. Assistant Attorney General William Baxter. Howard pushes one of the plates over to Baxter. All right, here you go. Two of Madison Hotel's finest turkey clubs. I gotta say, meeting here is a nice change of pace. But exactly why are we meeting today? I presume the telecom bill as he spooked. Well, I admit it doesn't help our cause, but it won't matter what Congress decides if we come to an agreement ourselves. You're still willing to make a deal, right, Bill? Baxter ignores the question and pulls off the pickle speared to his sandwich. Howard presses on. You know we've been calling these negotiations quagmire too, right? Because they just don't seem to be going anywhere. Well, it's a complex issue, Howard. Then let me make it simple for you. Baxter looks up, intrigued. Yeah, yeah. What if I were to tell you that AT&T is prepared to divest its regional operating companies? Well, we've talked about that before. No, no, not all. 22 of them, we haven't. Baxter's eyebrows shoot up. You'd give up your entire local operation? We would, but we want something in return. Alright, what's that? AT&T retains its long distance service, Bell Labs and Western Electric. And we want to change the consent decree so we can enter the computer industry. Baxter leans back in his chair. Well, I'll admit you've got my attention. I'm not opposed to the computer thing, truth be told. Seems like a pretty good idea given the way things are moving in that sector. But how would we make this happen in reality? Well, we'd need to modify the consent decree. Yeah, where was it filed? New Jersey. Baxter inhales sharply and Howard nods. Yeah, Yep. I know. I know what you're thinking. That's out of Judge Green's jurisdiction and he's made clear that he doesn't want outside interference. But we can ask the New Jersey judge to transfer control of the consent decree to Greene. And then Green gets to sign off on the deal and dismiss the federal case at the same time. I thought you said you were going to make this simple, Howard. Sounds like quite the tangled web you're spinning, isn't it? No, no, no. Webs are designed to trap things, Bill. This proposal is the opposite. It's a way to break free. This meeting between Howard Treenhans and Assistant Attorney General William Baxter marked a significant shift in the antitrust case. For the first, AT&T had proposed a plan in which it would voluntarily give up part of its telecom business. But Howard was not getting his hopes up just yet because he knew from bitter experience that the Department of Justice was an unreliable negotiating partner. In the days that followed, prosecutors at the Department of Justice agreed to work up a two page draft agreement based on AT&T's new proposal. The papers in the Quagmire 2 talks had ballooned to 100 pages and AT and T and the Department of Justice still had not come to an agreement. In contrast, the two page limit imposed on the inter interest split signaled that both sides wanted this new settlement to move forward quickly. But writing a simple agreement to dismantle the world's largest telecom company was easier said than done. Lawyers at the Department of Justice wrote multiple drafts, but each came under stuck over the complicated issue of infrastructure. According to the terms of the inter intra split, AT&T's 22 regional subsidiaries would be separated from AT&T, and that separation was absolute. There would be no sharing of personnel or systems, and the regional subsidiaries would be cut off from the AT and T exchanges that they currently use. AT&T thought that this was an important part of the deal. If they were being forced to give up their local local telephone businesses, they weren't going to accept giving these new regional companies free access to their facilities. So going forward, the newly independent regional companies had a choice. They could build their own telephone lines, exchanges and equipment. But that would come at a huge cost. Or, as AT and T expected, the regional companies could pay fees to access the existing AT and T infrastructure. But that would leave the supposedly independent local companies dependent on AT and T technology. And that scenario did not sit well with the Department of Justice. Eventually, the lawyers came up with a draft that summarized the inter intra split into three pages. It confirmed the core AT and T would give up its local service but retain long distance lines, Western Electric and Bell Labs. It also confirmed that the consent decree of 1956 would be nullified, giving AT and T the green light to enter the computer industry. But in order to resolve their lingering doubts about infrastructure, the Justice Department included two appendices that added another 11 pages to the draft. Assistant Attorney General William Baxter was the driving force behind Appendix B, which set down that the newly independent regional operating companies were compelled to build their own switches, lines and exchanges. They were prohibited from simply paying to access AT&T's existing systems. According to Baxter's thinking, building a new level of infrastructure would ensure that every telecom company would be responsible for its own equipment. It would level the playing field and ensure that AT and T couldn't dictate terms to the local companies. But AT&T general Counsel Howard Treenens and Chairman Charlie Brown had grave reservations over Baxter's intervention. To them, forcing the regional companies to build their own infrastructure was an absurd demand that would place unsustainable financial pressure on these newly independent companies. It also caused huge headaches for AT&T engineers who would need to devise different ways of integrating this brand new infrastructure for long distance calls. But when Howard questioned the content of Appendix B, no one in the Department of Justice was willing to listen. It soon became clear why. Assistant Attorney General Baxter was vacationing on the ski slopes of Park City, Utah, and no one dared to discuss disturb him. So with yet another settlement threatening to fall apart, Howard spent the first few days of 1982 trying to get the Inter Inter split back on track. Howard phoned Utah several times a day to speak to Baxter, asking the Assistant Attorney General to clarify his reasoning. But Baxter was called so many times that he lost his temper and threatened to withdraw from the negotiations completely. But Howard's pestering did reveal an opening in Baxter's seemingly, seemingly intransigent stance. In his conversations with the Assistant Attorney General, Howard discovered that Appendix B arose from a genuine if the newly independent regional companies remain dependent on AT&T infrastructure, Baxter believed that would give AT&T leverage. They might manipulate their terms and conditions for accessing this infrastructure. And through clever and underhanded maneuvering, AT&T might be able to influence how the regional companies operated. Taken to the extreme, AT&T would control the entire Bell system in all but name. And the long antitrust case would have changed nothing in practice. So to assuage Baxter's fears, Howard reached out with a compromise. He offered to write a guarantee into the terms of the inter interest split. AT&T would create a fair pricing formula that would treat every telecom company equally. In return, Baxter dropped his demand that the revolution regional companies must build their own infrastructure. So with the final language of the new Inter intra consent decree in place, all that remained was for AT&T and the Department of Justice to get judicial approval. But that was easier said than done. The agreement had to clear two hurdles. A court in New Jersey had to accept the modified consent deal, and Judge Harold Green had to dismiss the federal antitrust lawsuit in Washington, D.C. if either one of the two judges refused to play ball, then the whole agreement might fall apart. The elaborate maneuver was set into motion on January 8, 1980. Two reporters were called to a joint press conference. In which AT&T and the DOJ announced the new inter intra consent decree. The gathered reporters were stunned that the seemingly endless antitrust case had been wrapped up so quickly. And the sudden agreement was a major story on that evening's television news.
- [27:13]
Guy Raz
For years, lots of people have found great pleasure in taking jabs at Ma Bell. Because of her size, because of her bills. But from now on, we all might want to be a little bit nicer to her. Because Ma Belle just lost her children.
- [27:27]
Lindsey Graham
But simply announcing their plan in the press was not enough to make it legal. The case wasn't over until the judges said it was. So lawyers from AT&T and the Department of Justice went to court in Newark, N.J. and filed their request to amend the consent decree from 1956. A judge there approved the deal and agreed to transfer jurisdiction to Washington, D.C. after that, the lawyers just needed one last domino to fall. In Washington, AT&T. Lead trial lawyer George Saunders. Went to Judge Green's chambers to file the dismissal papers. But when he arrived, George discovered that the assistant Attorney General Baxter. Wasn't the only person who booked a winter vacation. Right at that moment, when the federal antitrust case was supposed to come to an end, Judge Green was enjoying the sun in the Caribbean. Before he'd left, Judge Green had heard rumors that AT&T and the Department of Justice were about to make a deal. But as the judge in charge of the antitrust lawsuit, Greene wasn't willing to let the case finish without having his say. So when George handed over the motion of dismissal to the court, the clerk refused to mark the papers as filed. Instead, the clerk explained that Judge Green had left specific instructions in his absence. Any papers related to the AT&T case could only be marked by the court as lodged rather than filed. Essentially, Judge Green blocked the motion until he returned. But other papers had already been filed in New Jersey. And the new inter intra consent decree had been publicly announced amid plenty of fanfare. So again, the AT&T antitrust case was stuck in limbo. It was closer than it ever had been to a resolution. But whether an end to the case was finally at hand came down to one man. And AT&T would only find out whether Judge Harold Green was on board when his plane landed at Dulles International. We know you want to delve into more stories of legendary leaders and the pivotal moments that define their careers. So now Wondery gives you exclusive episodes of Business Movers. Explore the triumphs of the recent retail revolution with a season about Sam Walton building a Walmart world or what it takes to be named the King of Kicks in the season becoming Nike, or how the golden arches have made it to almost every corner of the world in the McDonald's Invasion season. With Wondery, you get early access to all new episodes, ad free listening, and exclusive access to more true stories of business leaders who risked it all. Wondery members also get exclusive ad free access to hundreds of other chart topping podcasts like American Scandal, History Daily and Business Wars. Elevate your business movers experience with Wondery. Sign up by clicking the link in the episode description or head over to wondery.com plus every big moment starts with a big dream.
- [30:12]
Misha Brown
But what happens when that big dream turns out to be a big flop? From Wondery and Ill Media, I'm Misha Brown and this is the Big Flop. Every week, comedians join me to chronicle the biggest flubs, fails and blunders of all time. Like Quibi.
- [30:31]
Lindsey Graham
It's kind of like when you give yourself your own nickname and you try to like get other people to do it.
- [30:35]
Misha Brown
And the 2019 movie adaptation of Cats.
- [30:38]
H
Like if I'm watching the dancing and I'm noticing the feet aren't touching the.
- [30:41]
Lindsey Graham
Ground, there's something wrong with the movie.
- [30:44]
Misha Brown
Find out what happens when massive hype turns into major fiasco. Enjoy the Big Flop on the Wondery app or wherever you get your podcasts. You can listen to the Big Flop early and ad free on Wondery. Plus get started with your free trial@wondery.com plus.
- [31:17]
Lindsey Graham
It'S January 12, 1982, in Judge Harold Green's chambers in Washington, D.C. four days after AT&T publicly announced its deal with the Department of Justice. As a sun tanned but visibly annoyed Judge Green rifles through papers, AT&T lead trial lawyer George Saunders taps his feet and tries his best to hide his own frustration. George is determined to keep things amicable in front of the testy judge, but the two have already knocked heads more than once during the trial. George clears his throat. Your Honor, if I may, did it not occur to you that this is a highly inappropriate way to proceed? Well, you, Honor, this was an unusual circumstance. Unusual? Well, you're not wrong there. You went behind the court's back. That is entirely inaccurate. Your Honor, we went to a different court. The consent decree of 1956 was filed in New Jersey. The modification of the consent decree plays an important role in resolving the current dispute between the Department of Justice and at And t before you. It seems only right that the New Jersey court is involved, which just so happens to take the case right out of my hands. Your Honor, the New Jersey judge has signed over jurisdiction to you. But not before he approved your deal. Judge Green slams a paper down on his desk. Couldn't you have waited until I was back? To be fair, your Honor, we did not know you were gone until we arrived on Friday morning. Have you even heard of the Tunney Act? Yes, I. Of course I've heard of it. Then please tell me what it says. According to the terms of the Tunney act, any antitrust settlement proposed by the Department of Justice must be reviewed by a judge. Correct? Gold star for you. It ensures that no inappropriate deals are pushed through without appropriate oversight. And that's exactly what's happening here. I won't have it. With respect, you, Honor, the settlement was approved in New Jersey, and the case was dismissed on Friday. Judge Green leans forward. No. The case is dismissed only when the papers are properly filed with the court. And you did not do that. George feels his temper getting the better of him. That's right. They were only lodged. So let me tell you what we'll do. You need to get Judge Buno to rescind his approval, and then we'll resume the hearings and consider the consent decree in. In my court and my court alone. You have one week. Your Honor, this was a great case, and you handle it magnificently. But it is over. It is history. You must see that. No, Mr. Saunders, it's history when I say. Not you. Judge Harold Green was adamant he would be the one to determine if the modified consent decree was acceptable to the court. But that left George Saunders with a problem. He needed to get the New Jersey judge to rescind his earlier approval and sign over total control of the case to Judge Green. Otherwise, Greene would refuse to dismiss the antitrust lawsuit. During the frenzied negotiations over the inter intra split, AT&T found itself constantly chasing down elusive decision makers. First, Assistant Attorney General William Baxter disappeared to go sky skiing in Utah. Then Judge Harold Green flew to the Caribbean. And now the New Jersey judge who approved the consent decree modification vanished as well. George Saunders eventually tracked down Judge Vincent Buno to a hospital bed. A few days after Judge Buno had signed off on the amended consent decree, he'd signed in to a hospital for minor surgery. He was now recuperating. And after running a gauntlet of Nurses who wanted to keep George out of Judge Buno's hospital room room. George managed to persuade Buno to rescind his earlier approval and hand over complete control of the case to Judge Greene. Buno wrote an order from his bed that officially transferred responsibility for the 1956 consent decree and the new Inter Intra consent decree to the Washington District Court. The fate of AT&T was now back in the hands of Judge Green. And he quickly declared that he was going to conduct a full scale review of the settlement in accordance with the Tunney Act. How long this would take was anyone's guess. Under the Tunney act, anyone with a stake in AT&T was allowed to testify in hearings about the settlement. So AT&T faced the prospect of competitors and disgruntled employees trying to derail the deal. But more than anything, AT&T feared the outcry from the American people. As news of the Inter Intra split spread, concerns were were raised. The customers would be hit with soaring bills. For decades, AT&T had argued against being broken up by claiming that local services were expensive to provide and that its long distance call revenues subsidized the regional subsidiaries. And since the regional companies were now on their own, they were likely to raise prices to stay afloat. And customers worst fears were confirmed when the boss of New York Telephone indicated that prices would probably, probably double after it became independent. To battle this narrative, AT&T went on a public relations blitz, arguing that price increases were not inevitable. According to the terms of the Inter Inter split, many of the regional companies would be consolidated into larger entities, meaning that they benefit from economies of scale. And even if prices did go up for local calls, ATT promised to lower the cost of long distance calls, canceling out the price increase for many customers. But the court of public opinion was not the venue that would decide the fate of the antitrust case. Seven months after he began in August of 1982, Judge Green announced that his Tunney review was at an end and that it was Good news for AT&T. He approved the deal with only minor modifications. The Inter Intra split was going ahead. And after more than a year of preparation, American Telecommunications underwent an Official reorganization on January 1, 1984. The Bell system had been a fixture of America for more than a century. But now it was no more. Going forward, customers would receive two bills from separate companies. Long distance calls would be charged to AT&T. Regional calls would be charged to one of seven consolidated regional companies. This breakup brought an end to America's biggest and longest lasting man. Monopoly for more than a decade, AT and T leaders had fought tooth and nail to maintain their stranglehold on telecommunications. But the times had changed and there was no longer political support for a state sponsored monopoly. Only when AT and T realized that the tide was against them did they accept that change was going to occur whether they liked it or not. And ultimately, AT and T secured its long term survival by ensuring the breakup happened on its own terms. Terms since the monopoly came to an end, the telecommunications industry has continued to evolve. In the years since the breakup, wireless technology has revolutionized the way we communicate. New legislation has removed geographical and service restrictions, giving regional companies the ability to offer long distance calls and compete on a truly level playing field. AT and T itself was sold to a competitor in 2005 and in a twist of fate, the buyer was one of its former regional subsidiaries. 150 years after Alexander Graham Bell invented the telephone and set in motion the company that would become AT and T, the name lives on. But now it takes a very different form, one that was forged in the aftermath of the biggest corporate breakup in American history. From Wondery this is episode four of Breaking Bell from Business Boomers. On the next episode, journalist and author John Gertner explores the impact of @&t's monopoly and breakup and evaluates Bell Laboratory's spectacular contribution to technological innovation. If you like business movers, you can unlock exclusive episodes found nowhere else on Wonder plus and access new episodes early and ad free. Join Wonder plus in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. And before you go, tell us about your yourself by filling out a survey@wondery.com survey if you'd like to learn more about the breakup of AT and T, we recommend the Deal of the the Breakup of AT and T by Steve Kohl the Fall of the Bell System by Peter Temmin with Lewis Kalambos and End of the the Rise and Fall of AT and T by Leslie Cawley A quick note about our dramatizations. In most cases we can't know everything that happened, but all our reenactments are based on historical research. Business Movers is hosted, edited and executive produced by me, Lindsey Graham for Airship Audio editing by Mohamed Shazi sound design by Molly Bach. Our supervising sound designer is Matthew Filler. Music by Thrum. This episode is written and researched by Joe Guerra, senior Producer Scott Reeves. Executive producers are William Simpson for Airship and Aaron o', Flaherty, Jenny Lauer Beckman and Marshall Luke Louis for Wondering.
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Mindy Thomas
Thanks.
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