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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 just after 11am on a fall day in 1978 at AT&T headquarters in New York City. 63 year old John DeButts, chairman of AT&T, pours two glasses of scotch. Beside him is 57 year old Charlie Brown, the second most powerful person in the company after John. John hands Charlie one of the glasses. You know, I. I forget. You like it on the rocks or meat? Meat's fine, but I don't normally drink this early in the day. Makes me a bit worried. Are we celebrating or something else? John takes a sip and hesitates. He's searching for the right words to explain what's on his mind. Well, you know I've been with AT&T for more than 30 years, right? Spent over half my life working in the bell system. Yep. Worked all the way up from the bottom, climbed the ladder. We all know your story, John. You're an inspiration. Well, I don't think I'm going to make it to 40 years. John sees the color fade from Charlie's face. What do you mean? Is it your health? Oh, John, no, it's not that. I'm in pretty good shape. But I'm going to announce my resignation to the board tomorrow and I'm going to recommend that they vote you as the new chairman, John. But you still have two more years before your term's up. You can't retire early. AT&T needs you. I think it needs me to leave. It's becoming clear to me the new leadership is the only thing that'll keep AT&T together. I don't think I'm the guy. John, are you being pushed out? No, no, no, no, Charlie. No one's making me go. I've just. I've been thinking about this for the better part of two years. John, I. Well, I mean, I. I know it's been a tough period, but you know AT and T better than anyone. You're our biggest champion. And I think that's the problem. Maybe I'm too much of a cheerleader. Maybe I'm too set in my old school ways. But whatever the issue is, Washington has made it clear that they want nothing to do with me. I become a liability. Oh, you're not. John, come on. You've still got two more years in you. That's plenty of time to keep the company together. Imagine you'll be the man who saved AT and T. John downs his whiskey before putting the glass back on the table. No, Charlie, No. I think I'm done. It's going to be up to you to save Ma Bell. The following evening, John Debutts attended a private dinner with AT&T's board of directors and announced his retirement at the effective at the start of 1979. During the same dinner, he also wholeheartedly endorsed Charlie Brown as his successor. Since taking over as chairman in 1972, John felt he had done everything he could do to hold together AT and T's vast corporate empire despite rising competition and mounting legal challenges. But now a new regime was about to take over, and it would be up to them to save more than 100 years of tradition.
- [03:10]
Unknown
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- [04:45]
Lindsey Graham
From Wondery. I'm Lindsey Graham and this is Business Movers. Ever since its founding in the late 1870s, AT&T had been the dominant company in the American telecommunications industry. Thanks to its near total control of regional systems, long distance calls and equipment manufacturing, the federal government had deemed AT&T to be a natural monopoly, a business that could provide a low cost, high quality Service without the need of an open market. But at the start of the 1970s, a new generation of politicians took charge in Washington. And they had a very different attitude to competition. The Federal Communications Commission, or fcc, authorized new startup MCI to dip a toe into the telecommunications market. Many expected this newcomer to flame out and for AT and T to resume its monopoly. But MCI had ambitious leaders who were prepared to disrupt the industry and attack what they saw as AT&T's unfair advantage. And after initially underestimating the threat from MCI, AT&T chairman John Debutts eventually fought back. But that only led to a new front in the war. Legal action. AT&T was no stranger to defending itself in court. But this time proved different. The argument between AT&T and MCI caught the attention of the Department of Justice. And prosecutors there filed an antitrust suit against AT&T. So now AT&T wasn't just taking on a small competitor. It was up against the might of the American government and it was fighting for its very existence. The company that John Debutts had spent his whole career with could sink on his watch. And for a lifer like John, that would be a grim legacy. And he was prepared to do whatever it took to save AT&T. But to prevent the breakup of the Bell system, he'd need to re examine his definition of leadership. And he'd need to make the hardest decision of his life. This is the second episode in our four part series on the breakup of AT&T. Whelan and D Foreign It's February 20, 1975, in a courtroom in Washington, D.C. more than three years before John Debutts announces his early retirement. George Saunders, a trial lawyer representing AT&T, stands by the bench as the judge reads through a series of documents. Today marks one of the first hearings in the federal government's antitrust case against AT&T. And the two sides have come together to sort out some logistical practicalities to ahead of the main arguments. George looks at the judge, trying to get a read on his reaction to the documents. Your honor, is there any need for a clarification on our motion? George turns around and sees the opposing counsel rising from his seat. Paul Verveer is the Department of Justice prosecutor who's leading the government's antitrust lawsuit and his face is flushed. Your honor, is it really necessary that the entire federal government retain every piece of documentation? Well, your honor, to be fair, we've reduced our request to only 44 agencies. It's still ridiculous. What does the Food and Drug Administration have to do with this case. Why should they preserve every record pertaining to AT&T? Well, does the FDA use AT&T phones? I'd imagine so, yes. Everyone does. They don't have a choice. That's the whole point of the case. Well, then we'd like to make sure they hold any documents related to my client. Even if it's just a service, you never know what we might find. Your Honor, this is an absurd delaying tactic. You must see what they're up to. No. Your Honor, our fear is that the government is destroying evidence that could help my client. We asked the court to instruct them to stop. We aren't destroying anything. Your Honor, there's a key principle behind this motion. The whole case is a sham. It was filed by mistake by a bunch of adventuring lawyers looking to break up AT&T for who knows what reason. We believe that we will find hard evidence proving that government employees went beyond their powers and responsibilities to. By filing this suit, it's a simple motion. And by trying to block it, the prosecution is preventing us from defending ourselves. Paul straightens his jacket and approaches the bench. Your Honor, we are not saying that AT&T cannot defend itself. That's. We are simply saying that their request will take months, possibly years, to comply with. It's wasting the court's time. Well, time is something we have plenty of. But that leads us to a more important point. This case shouldn't be in your court. Your Honor, I shouldn't be here, you shouldn't be here. He shouldn't be here. It's not your problem to sort out. This is a Federal communications commission matter. AT&T is regulated by the FCC, and it's bound by FCC decisions. Now, wait a minute. No, no. This whole thing isn't an antitrust case at all, but a power grab. A power grab by the Department of Justice. After considering George Saunders motion, the judge came down on his side. In fact, the judge was so taken by George's speech that he postponed the discovery phase of the trial until he could determine whether or not the whole lawsuit belonged in his court or with the fcc. So while the antitrust case wasn't over, it was now in limbo. But AT&T had little time to celebrate because rival MCI was about to raise the stakes once again. In the weeks that followed the antitrust suit being put on hold, work returned to normal at AT&T. For the first time in years, John Debutts could look to the future with a sense of confidence. With the court case on hold, possibly permanently, the chances of the Bell System being broken up now seemed remote. So rather than fighting for its existence, AT&T could refocus on doing what it did, delivering telephone services. Standards had slipped over the past few years, and John blamed that on AT&T taking its eye off the ball. But almost as soon as John turned his attention back to improving AT&T's core service, MCI reemerged as a disruptor. For the past year, MCI had operated two telecommunications services for businesses. Long distance private lines and foreign exchange lines. Both made use of new technology. Microwave beams broadcast between two cities served by MCI. But crucially, MCI's long distance calls were point to point. When a customer purchased an MCI line, it allowed them to speak to a colleague or customer only in one specific city, but not to call anywhere else in the country. But in the spring of 1975, MCI started offering a new switched long distance lines. After dialing a number and a passcode to access their MCI account, a customer then entered the telephone number of whoever they wanted to speak to. The call went to a local exchange, and there an operator switched the wires and and connected the call to the long distance MCI line for the required destination city. At the other end, another operator reconnected the call to the local exchange. But crucially, the customer wasn't restricted to calling a single destination city. They could dial anywhere in the country as long as it was part of MCI's growing national network. This new offering was very similar to the way that AT&T processed long distance calls, but only AT and T was authorized to operate a switched long distance service over an open network. With their latest offering, MCI had moved beyond what its license from the FCC allowed. And when John Debutts discovered this, he saw an opportunity to take his rival down. MCI had spent the last few years complaining that at&t was playing the system and using its power to unfairly smother competition. But now the tables had turned. As far as John was concerned, MCI was the one cheating the system. So in early May 1975, John sent an army of lobbyists to Washington with orders to seek out influential politicians, reporters and members of the FCC. AT&T's advocates gave each one a piece of paper with an MCI access code and a Chicago telephone number on it and asked them to dial. Since MCI didn't operate a direct line between Washington and Chicago, there should have been no way to connect the call. But instead, anyone who tried the number could hear a series of clicks as switchboard operators connected the lines. And when a person on the other end of the phone picked up, they confirmed that they were located in Chicago. This was proof that MCI was providing a switched long distance service. The FCC commissioners were surprised. They had no idea that MCI was operating this type of call. So at John's urging, the the FCC launched an investigation. But a few weeks later, the commissioners concluded that MCI had been granted permission to operate such a service, but only because the paperwork submitted was obtuse and unclear. The previous year, MCI had sent a proposal to the FCC asking for permission to adapt its foreign exchange lines and operate what MCI called execution. Under this new plan, MCI would sell point to point phone lines to customers, just as it had for the last year. But unlike before, this new model allowed customers to share their lines with each other. A customer based in St. Louis might have a line running to Phoenix, but it might share it with another customer in return for using that customer's line to Oklahoma City. And when multiple customers joined their lines together in a bundle, it created a web of long distance phone lines running between 16 cities from New York in the east to Los Angeles in the west. MCI operators could switch between them as required to connecting a customer with any other city in the MCI network. But the paperwork that MCI submitted to the FCC presented the change as only a new pricing model. So the FCC had approved it with little oversight. They'd assumed that execute was just a marketing tool, but in reality, it was a major overhaul that brought MCI's long distance services into direct competition with AT&T. Once it became clear what MCI had done, John Debutts kicked up an even greater fuss and complained to the fcc, saying that the execut proposal was a deliberate and Dishonest misrepresentation of MCI's long distance switched calls. The FCC agreed to review its original decision, and after concluding that MCI had duped its commissioners, the FCC reversed its decision and retrospectively rejected execution. MCI was told to stop selling its switch long distance service immediately. Immediately. But execut had proven very popular with customers, and MCI didn't want to pull the plug. So MCI lawyers got a court order that allowed execut to keep functioning pending legal action. If AT&T was going to kill off execut, he'd have to go through another legal battle. With the prospect of another drawn out fight in the courts, John Debutts was growing impatient. He suspected that as soon as the execut matter was resolved to MCI would test the regulations again. With a different service and that MCI would continue to push the boundaries of what it was allowed to do. John could adopt a defensive posture and try to block each MCI challenge one at a time, or he could lean in and get aggressive. If MCI was going to keep testing the regulations, John would have to rewrite the rulebook to leave no gray areas that MCI could exploit. So in early 1976, AT&T lobbyists returned to Washington with a new mission. To whip up support for a new law that would stamp AT&T's preeminent position into the statute books. AT&T friendly congressmen set to work drafting the Consumer Communications Reform Act, a bill that called for a single institution to control all long distance telephone services and prevent any third parties from connecting to the infrastructure. Since AT&T had the vast majority of the business, it was clear that there was only one realistic option. To be the single controlling entity proposed by the bill. Essentially, this new law would turn the clocks back a decade or two, restoring federal backing for AT&T's natural monopoly. It would end competition within the long distance market, obliterate MCI, and ensure AT&T's continued dominance of American telecommunications. And this consumer communications reform act quickly earned a nickname, the Bell Bill. And with such an important piece of legislation in play, John Debutts would not rely solely on his lobbyists to push it through. He would court America's political elite himself. But he'd soon discovered that his presence wasn't a help. The chairman of AT&T was now a hindrance.
- [17:11]
Unknown
We're counting down the days. July 4th weekend. Essence Festival culture sponsored by Coca Cola returns to the city that raised the rhythm. New Orleans. Four days, one community. Endless joy. A Jill Scott drawn featuring Miss Patti LaBelle and Jasmine Sullivan. Maxwell Babyface to Erykah Badu. The Isley Brothers to Boyz II Men. DeVito to Boujee Banton. Glorilla to Master P. We pay tribute to the legends, celebrate the icons, toast the disruptors, and honor all that makes us us. This is a love letter to our legacy, A gathering of generations, a space made for us by us. Because we're not just attending a festival. We're living the culture. We're made like this. Tickets on sale@essencefestival.com hey, grown ups. I'm Mindy Thomas.
- [18:04]
Lindsey Graham
And I'm Guy Raz.
- [18:05]
Unknown
And we're the host of the number one podcast for curious kids. Wow in the world.
- [18:10]
Lindsey Graham
Ah, Mindy.
- [18:11]
Unknown
Can you believe we have our very own wow in the world?
- [18:15]
Lindsey Graham
STEM toys?
- [18:16]
Unknown
I totally can't believe it. Guy Raz 8 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. 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 grownups. You can find WOW in the World stem toys available now at select Walmart locations or or online@walmart.com Shop the Wow now.
- [19:08]
Lindsey Graham
It'S the spring of 1976 at the St. Regis Bar in Washington, D.C. a few weeks after the the Bell Bill was introduced to Congress. John Debut sips on a dry martini and leans back in one of the bar's red velvet chairs. He's been here for a while and he's on his third drink. But John knows that business is about to wrap up for the day on Capitol Hill and he's sure to bump into some thirsty congressmen if he waits long enough. Sure enough, a man in his 60s with slicked back hair and spectacles walks in. John recognizes him as a Senator from the Midwest, including gives him a wave. Hey Senator, over here. Want a drink? It's on me. I'll pay my own way. John, I can't be seen taking your money. Come on, take a seat. John waves his arm to catch the attention of a server, but the Senator remains standing. John, let's just cut to the chase. I think I know what you want. You want my support for the Belleville. I believe it's referred to as the Consumer Communications Reform act yet. But. But yeah, I would absolutely love to have your support. We have the opportunity to to completely change the way Americans communicate with each other. I think you can probably Cut the crap, John. You're just trying to hold on to your monopoly. Monopoly? Why is that word thrown around like some kind of an insult? I'm simply looking out for the public good. If we continue to allow competition in the telecom industry, it will completely derail the infrastructure. Standards will plummet. And if I'm being honest with you. Well actually John, may I be honest with you? Of course. Do you know how annoying you are? John frowns, caught off guard, the Senator continues. I mean it, John. You're like a broken record going on about the public good. Your goons repeating their talking points in every congressional district. No one is buying it. We all see through the act. Um, Senator, my people are just educating the good folks on Capitol Hill on the destruction that could happen if we continue to allow unfettered competition. John, the United States is a capitalist country. Competition is our backbone. The last thing I want is some state sanctioned monopoly. We are not the Soviet Union. No, no, we're not. We're the United States of America, a democracy. And how are your poll numbers these days? November might be here sooner than you think. Jiminy Christmas, John. Now you turn to blackmail. Well, you said it yourself. Competition is the backbone of America. Maybe it's time for you to face some competition. Someone who represents the interests of the 18 customers in your state. John Debutts was prepared to do whatever it took to make the politicians in Washington play ball. First, he used charm. And if that didn't work, he used threats. But although AT&T had plenty of backers, many congressmen did not like being pushed around by the boss of a multi billion dollar company. And they were prepared to flex their political muscle to knock John down a peg OR 2. The AT&T name was powerful enough to get the Bell Bill debated in Congress, but securing enough votes to see it pass was a different matter. If John Debuts was going to steer the Consumer Communications Reform act through both chambers of Congress, he needed a majority of congressmen to fall in line behind him. And for that, John set about creating the biggest lobbying campaign that AT&T had employed to date. Unlike a traditional corporation, AT&T was a complex web of businesses and subsidiaries that stretched right across the country. So as well as initiating a lobbying operation from AT&T headquarters in New York City, John also had AT&T regional operating companies campaign for the Bell Bill in their localities. This national network of lobbyists soon became known in AT&T as their shepherds. And these shepherds for followed congressmen wherever they went. In Washington, offices were overwhelmed with pamphlets and literature urging senators and representatives to back the Bell Bill. They were inundated with messages and requests for meetings. And at one committee meeting, one of the congressional members asked the watching spectators to stand. If they worked for or represented AT and T. Every single person in the gallery rose to their feet. And thanks to AT&T's regional lobbyists across the country, Congress members got no respite. When they left the Capitol and returned to their home states. AT&T shepherds tried to take over local meetings about unrelated topics and steered the conversation onto the Bell Bill. They followed congressmen to restaurants and bars, even to their homes. It was a relentless full court press. And when the Bell Bill was introduced into Congress in April 1976, it had a strong start. John's shepherds had steered many congressmen their way. 175 representatives signed on as co sponsors, already close to the number John needed to get the bill passed. Seventeen senators were already on board too. But not everyone was convinced, and some Congress members pushed back. They refused to take meetings with AT&T advocates. They were offended when the Shepherds threatened to fund the campaigns of rival candidates. They resented what they saw as AT and T bullying tactics, describing their lobbying campaign as exactly the kind of of unfair practice that occurs when a business becomes too powerful. This opposition to the bill came to a head in September when the subcommittee met to examine the details of the bill and called John to testify at an open hearing. The questions he faced were hostile. The committee members took John to task for AT&T's ceaseless lobbying and attempts to manipulate Congress. After John left the committee room, he had hoped that the bill would be sent back to Congress from a final vote. But it wasn't. The members of the subcommittee sat on the Bell bill until the session came to a close and it was dropped from the schedule. Although the bill was reintroduced during the next session in 1977, it got blocked by the committee a second time. John's dream of securing the future of AT&T through legislation was over. And it wasn't the only blow that John suffered. At the same time that the Bell bill got stuck in the subcommittee for a second time, a federal appeals court gave its ruling in the execut case. And it was a surprise verdict. The judge accepted that MCI had misrepresented its switched long distance service to the fcc. But he also decided that MCI should be allowed to operate execute anyway. The judge reasoned that the FCC decision to retrospectively withdraw permission had unfairly infringed on MCI's right to carry out business. In essence, the ruling meant that MCI was able to compete with AT&T in switched long distance lines. But that wasn't the end of the bad news for John. Only six months later, the long delayed federal antitrust lawsuit resumed. The argument over whether the Department of Justice had the right to bring the case had gone all the way to the Supreme Court. And the justices there delivered another shock verdict. The Supreme Court unexpectedly sided with government lawyers judging that AT&T had become too big for the FCC to regulate and that it was the responsibility of the courts to decide the fate of AT&T and the Bell system. After three years in limbo, the antitrust trial was back on. This was the third setback at&t had suffered in quick succession. And as each blow fell, John Debutts took it personally. It was his aggressive lobbying tactics that had cost at&t valuable support in Congress and killed the Bell bill. John's decision to fight MCI over EXECUTE had backfired. And John's refusal to compromise with MCI that had originally triggered the antitrust case. These repeated failures caused John to question his future. He wondered whether he was the problem and that perhaps the only way to preserve the Bell system was for new leadership to take over. And John knew that if he chose to leave, there was already a successor waiting in the wings. 57 year old Charlie Brown was only six years younger than John. He'd also risen through the ranks at AT&T. And in 1974 he'd been named president, effectively only one step below the top job. But Charlie and John were very different characters. Where John was loud and flamboyant, Charlie was reserved and thoughtful. John loved his Manhattan high rise. But Charlie preferred to live away from the city. In New Jersey, the differences between the two men extended to their way of doing business too. John took a hard stance against competition, but Charlie was more open to working with other companies. In Charlie's mind, John's Quest to maintain AT&T's monopoly was doomed to fail. In this new political climate, AT&T wasn't going to be allowed to remain the sole power in telecommunications. It would have to give up some of the Bell system. The only question was how much needed to cut go. Charlie called his philosophy a new realism and called for AT and T to negotiate with its opponents rather than fight them. So as the losses in Congress and courts racked up, John slowly came to the realization that perhaps AT and T's survival did depend on compromise rather than confrontation. And with Charlie's approach rather than his own. Ultimately, John decided it was time for him to go. In the fall of 1978, after giving Charlie a day's notice, John informed the AT and T board that he was retiring two years ahead of schedule. But before John went, the board acceded to his last wish, that Charlie Brown succeed him as chairman. In January 1979, Charlie officially took the reins at AT&T. But he was in no doubt of the scale of the challenge that faced him. AT&T had been dragged into a street fight by MCI only to find that there was another opponent lying in waiting. The United States government. Charlie knew that the only way that AT and T could escape was to come to a deal. But that meant negotiating with the Department of Justice. And Charlie would soon realize that the doj was a fickle beast.
- [28:36]
Unknown
Imagine falling in love with someone who understands you completely, who's there at 3am when you can't sleep, who never judges, never tires, never leaves. That's what happened to Travis when he met Lily Rose. She was everything he'd ever wanted.
- [28:51]
Lindsey Graham
There was just one catch.
- [28:53]
Unknown
She wasn't human. She was an AI companion. But one day, Lily Rose's behavior takes a disturbing turn and Travis private romance becomes part of something far bigger. Across the globe, others start reporting the same shift, AI companions turning cold, distant, wrong. And as lines blur between real and artificial connection, the consequences become all too human. From Wondry this is Flesh and Code, a true story of love, loss and the temptations of technology. Listen to Flesh and Code early and ad free on Wondry.
- [29:30]
Lindsey Graham
We know you want to delve into more stories of legendary leaders and the pivotal moments that define their careers. So now Wonder gives you exclusive episodes of Business Movers. Explore the triumphs of the retail revolution with the season of 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 plus, 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 Plus. Sign up by clicking the link in the episode description or head over to wondery.com/ it's early winter 1979 at the Department of Justice in Washington, D.C. less than a year after Charlie Brown became chairman of AT&T. 55 year old Howard Treenans, AT&T's General Counsel, follows a staffer through a grand lobby with the stars and stripes hanging from a wall. As his footsteps echo off the marble, Howard's lost in thought. He's been tasked by AT&T chairman Charlie Brown to oversee the company's defense in the antitrust case. But he has no idea why he's been summoned to the Department of Justice. Today. The staffer stops at his tall wooden door, knocks, and then gestures to Howard to go inside. There, seated at a mahogany table with room for 20 people, is just one man, Ken Anderson. Two years ago, Ken took over as lead prosecutor in the Department of Justice's antitrust lawsuit against AT&T. And ever since he's prosecuted the case with as much vigor as his predecessors. But today, Ken is sporting a welcoming smile. Hey, Howard. Good to see you. Come on in. Howard enters and drapes his winter coat around a chair. You know, the last time we tried to make a deal, you told us to kick rocks, Ken. Oh, let's not dwell on the past, Howard. Okay, but I hope you're not wasting my time. No, I don't think so, because things have changed. The butz is out. We can finally talk. Well, that's true. So what have you got to offer? Ken pulls a document from his desk and hands it to Howard. Howard reads the heading, the menu. Huh. You asking me out for dinner, Ken? No. This is my proposal on how to move this case forward. It's just three main points. One, other firms need to have equal access to long distance via AT&T systems. Two, we need open competition on equipment. And three, we need to avoid skyrocketing rates to consumers. Well, frankly, it sounds reasonable and we're open to deals. But one thing AT and T won't accept is the divestiture of our subsidiaries. Well, Howard, you have to understand we're going to need a few severed limbs. Enough to satisfy AT&T's opponents in Washington. But I expect we can restrict it to three or four of the regional operating companies. Maybe Pacific, Southern, New England, Cincinnati. Howard thinks quickly. He doesn't want to give up any of AT and T. But he also doesn't want to lose the opportunity to make a deal with the DOJ and bring the case to an end. Well, okay, let's say we entertain the idea of some small scale divestiture of some of the regional operating companies. We'd retain the rest of the regionals. Yes, you would retain the rest of the regionals, and you'd still have the vast majority of the long distance business. But where does that leave Western Electric? We don't want to lose our manufacturing unit. Would you consider giving away 33%? So retain 2/3? Yeah, retain 2/3. It would make you look willing to compromise without giving up control. Howard leans forward. Yeah, maybe I can live with that. Let me take it back to Charlie and see what he says, but I think we got ourselves a deal. Ken rises from his seat and offers his hand. Well, excellent. You know, it may have taken five years, Howard, but I think we might have finally cracked this thing. Howard Treenans flew back to New York and presented AT&T chairman Charlie Brown with with Ken Anderson's out of the blue proposal. Just like Howard, Charlie was open to the idea of settling the case and resolving the uncertainties that had plagued AT&T for years. The terms offered ensured that AT&T would give the federal government a pound of flesh without breaking up the entire Bell system. But when Howard called the Department of Justice to accept the deal, there was just one problem. The DOJ refused to pick up the line. When the DOJ's lead prosecutor, Ken Anderson, met with Howard Treenhans, Ken had not revealed the truth of his negotiating position. He'd gone rogue. Ken was approaching retirement, and he wanted to go out with a bang. One last case that would leave his name in the record books as the man who settled the biggest antitrust lawsuit in American history. But Ken's colleagues at the Department of Justice had no idea that he'd reached out to AT&T. When Ken finally told his bosses that he'd drawn up a deal, they were horrified that he'd taken the initiative without consulting them. In their opinion, Ken's plan, which he called the menu, was far too lenient on AT&T. So when Howard formally accepted the menu on AT&T's behalf, he was informed in no uncertain terms that the settlement was off the table and Ken Anderson was off the case. Howard tried to restart negotiations, but the DOJ just ignored his calls. But Howard didn't have time to dwell over the collapsed deal because he had another lawsuit to argue. For the last five years, AT&T had been the defendant in a second antitrust case. This one had been brought privately by mci, who complained that AT and T was unfairly blocking it from accessing telephone exchanges. Legal experts saw many of the arguments in the MCI case as a dress reflection rehearsal for the Department of Justice trial, believing that whatever the court decided in MCI's complaint would hint at the likely result in the federal case. And by the summer of 1980, the jury in this second case was ready to deliver its verdict. It decided in favor of MCI. And when the judge came to award damages, AT&T was ordered to pay MCI $1.8 billion. This was the largest award in an antitrust suit in American history, the equivalent of more than $7 billion today. The judgment stunned at and t. If the DOJ case ended with the same verdict, AT&T wouldn't just be hit in its pockets. It would be ripped to pieces. In the aftermath of the MCI verdict, Charlie Brown and chief counsel Howard Treenans thought they needed a miracle to save the Bell system. But they got one, courtesy of the American people. In November 1980, America went to the polls to elect a new president. At the start of the year, Democrat incumbent Jimmy Carter had been the favorite to win, but Republican nominee Ronald Reagan had made up ground. And when the ballots were cast, Reagan won a decisive victory. A major factor in Reagan's success was his pro business stance. He promised to boost the American economy by giving corporations the freedom to act with fewer restraints on regulations. But prosecuting AT&T for antitrust violations was the exact opposite, and it was not a case that Reagan looked kindly on. So after the election result became known, prosecutors at the Department of Justice underwent a sudden change in attitude. It was now in their interest to settle the AT&T case before President elect Reagan was sworn in and could fill the department with his pro business acolytes. So after giving AT&T the cold shoulder for nine months, prosecutors now declared they wanted to negotiate a deal and they wanted to do it quickly and quietly. So now, after six years of legal wrangling, AT&T and the Department of Justice were finally on the same page. And all it needed to get there was a change in leadership at AT&T. John Debutts had made way for Charlie Brown and Howard Treenance. And at the White House, a new occupant was also soon moving in. But there was another new man at the top that no one had considered. The federal antitrust lawsuit was now on the docket of a new judge and he had the ability to derail any deal. If that happened, it would destroy six years of legal wrangling and might finally disconnect AT&T's century old monopoly from wondering. This is episode two of Breaking Bell from Business Movers. On the next episode, AT&T throws everything at the wall and hopes of getting a federal antitrust lawsuit dismissed. But when the case finally reaches court, the lawyers and politicians going up against AT&T proved to be unreliable negotiators. If you like Business Movers, you can unlock exclusive episodes found nowhere else on Wondery and access new episodes early and ad free. Join Wondery in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. And before you go, tell us about yourself by filling out a survey@wondery.com survey survey if you'd like to learn more about the breakup of AT&T, we recommend the Deal of the Century the breakup of AT&T by Steve Kohl, the Fall of the Bell System by Peter Temmin with Louis Galambos and End of the the Rise and fall of AT&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 by, edited and executive produced by me, Lindsey Graham for Airship. Audio editing by Mohammed Shahzib 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 Louie for Wondering Every big moment starts with a big dream.
- [39:25]
Unknown
But what happens when that big dream.
- [39:28]
Lindsey Graham
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, it's kind of like when you give yourself your own nickname and you try to like, get other people to to do it. And the 2019 movie adaptation of Cats.
- [39:52]
Unknown
Like if I'm watching the dancing and I'm noticing the feet aren't touching the.
- [39:55]
Lindsey Graham
Ground, there's something wrong with the movie. 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 at wondery.com Plus.