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... The boxes were stacked outside the courtroom of U.S. District Judge Harold Greene and were filled with cost studies regarding telephone services and equipment. Greene was in the midst of trying what was then the largest antitrust case in U.S. history and possibly the most significant event in the history of American telecommunications: United States v. American Telephone and Telegraph Co. (AT&T). ...
AT&T was founded in 1885 as a subsidiary of Alexander Graham Bell's American Bell Telephone Company. On December 30, 1899, AT&T acquired Bell Telephone and became the parent company. By the 1970s, it had grown to become the largest company in the world. ...
The company was a monopoly, to be sure, but considered itself a natural monopoly"the provider of a service for which the operating costs were so high that only a single company could do it efficiently.
Moreover, AT&T's leadership had long taken the position that it was only able to serve all consumers by maintaining a series of cross-subsidies"that is, subsidies funded by AT&T's more profitable services to support its less profitable ones.
By charging above-cost rates for long-distance service, service in urban areas, and business services, AT&T could keep prices low for local telephone service, service in rural areas, and residential services, respectively.
This framework, AT&T asserted, was only feasible if it retained sole control over the markets, because a competitor free to target the sectors subjected to above-cost rates would drive those rates down, rendering subsidies infeasible and driving prices up for critical services.
AT&T believed, therefore, that despite its size and market control it had not violated the antitrust laws. ...
