At&t Case Study

Founded in 1983 and based in San Antonio, Texas, AT&T is the largest provider of local and long distance telephone service, wireless service, and broadband internet service in the United States. Solely based on revenue, AT&T Inc is the largest communications holding company in the world (http://www.att.com/gen/investor-relations?pid=5711). The company employees over 300,000 people worldwide and is among the 2007 Fortune 500. In fact the combined company would place ninth on the full U.S. list and 18th on the full global list. AT&T Inc. common stock is listed on the New York Stock Exchange and is one of the 30 stocks that make up the Dow Jones Industrial Average. It is traded under the stock symbol “T” which stands for telephone. In 2006, AT&T reported revenue of $63.055 billion and net income of $7.356 billion.

AT&T is the nation's largest U.S. wireless carrier based on subscribers, with 62.2 million, and provides service in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The company serves millions of customers, with a concentration in 22 states: Alabama, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin. AT&T delivers the widest international coverage of any U.S.-based wireless carrier, giving customers the ability to use an internationally enabled phone on six continents and 190 countries, with wireless data-roaming in 120 countries for laptops, hand-held devices and other data services.

AT&T is the nation's largest directory publisher, delivering 178 million directories a year and publishing more than 1,250 different directories in 22 states. In addition, through YELLOWPAGES.COM, AT&T operates a leading Internet Yellow Pages network that received more than 1 billion local searches in 2006.

The birth of AT&T can be traced back to the day Alexander Graham Bell invented the telephone in 1876. In 1877, Bell and his partners founded the Bell Telephone Company and a year later, founded the New England Telephone Company in an effort to license telephone exchanges in Boston. Soon after forming, both Bell Telephone and the New England Telephone Company became involved in a patent dispute with Western Union Telegraph Company. During this time, the two companies were consolidated into one, and named the National Bell Telephone Company. In November 1879, the patent suit was settled out of court. Western Union left the telephone business and sold its system of 56,000 telephones in 55 cities to Bell. Bell agreed to stay out of the telegraph business and paid Western Union a 20 percent royalty on telephone equipment leases for the next 17 years.

In an effort to promote the telephone, Bell licensed numerous local operating companies. The companies signed five- to ten-year contracts, under which Bell got $20 per telephone per year and the right to buy the licensee's property when the contract expired. National Bell became the American Bell Telephone Company in 1880. Starting in 1881, Bell negotiated to make the contracts permanent, rescinding Bell's right to buy the respective properties but giving Bell between 30 to 50 percent ownership of the operating companies. The companies could build long-distance lines to connect exchanges in their territories, but they were prohibited from connecting them with those of other operating companies or independent phone companies.

To construct, finance, and operate its long-distance system, Bell established the American Telephone and Telegraph Company (AT&T) in 1885 to operate as its long-distance subsidiary and get a long-distance network in place before Bell's basic patents expired in 1894. Once the patent expired, Bell no longer held its monopoly. Rather than compete by providing better and less expensive service, Bell often took the growing independent phone companies to court, claiming patent infringements. The independents were particularly successful in rural areas in the West and Midwest where Bell did not provide service. By 1898, some cities had two unconnected phone systems, one Bell and one independent. This competition forced Bell to expand faster than it otherwise would have. It jumped from 240,000 phones in 1892 to 800,000 in 1899.

By the beginning of the 20th century, the telephone was having a dramatic impact on the United States, where large numbers of people still lived in rural areas such as farms or small towns. The telephone reduced their isolation significantly. The number of rural telephones shot from 267,000 in 1902 to 1.4 million in 1907.

As competition from independents increased, AT&T was forced to expand and grow. On January 25, 1915, Alexander Graham Bell, in New York, and former collaborator, Thomas