Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (A)|Business Strategy|Case Study|Case Studies

Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (A)

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Case Details:

Case Code : BSTR077
Case Length : 15 Pages
Period : 1876 - 2003
Organization : AT&T, Department of Justice (US)
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
Industry : Telecom

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"To the public, the 'Bell System'furnishes facilities, in its 'universality' of service and connection, of infinite value to the business world, a service which could not be furnished by dissociated companies. The strength of the Bell System lies in this 'universality.'" 1

- Theodore N. Vail, former President, AT&T..

"I fear that the breakup of AT&T is potentially the worst thing to happen to our national interests in telecommunications that will ever occur." 2

- Barry Goldwater, US Senator from Arizona.


In 1982, after a long-drawn court battle between AT&T3 and the Department of Justice (US), which had filed antitrust suits against the company, it was decided to break up the 'Bell System.'

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This decision led to the separation of regional Bell operating companies (RBOCs) from the Bell System. The RBOCs were later termed as 'Baby Bells.'

By early 1984, the break-up process was completed, and AT&T was permitted only to operate in the long-distance telecom business. The US-based AT&T had been in the telecom business for more than a century. During this period, the company had undergone many major organizational changes.

Every time, AT&T had successfully reorganized its structure and had reinvented its business by setting new strategic courses.

The 1984 break-up, however, was the biggest reorganization in AT&T's history with several implications for the company. The Bell System allowed AT&T a monopoly status and kept it largely insulated from market pressures and competition.

The company took its own time to deliver what customers wanted After the break-up, analysts commented that AT&T would be facing the harsh realities of market competition. The company would need to change its conventional, laid-back attitude and understand customers' needs and preferences, and deliver exactly what they wanted on time. The break-up of AT&T was an issue of heated debate. A few analysts felt that it was necessary for the growth of the telecom industry in the US. Jeffrey Kagan, an Atlanta-based telecom analyst commented later, "When the break up of AT&T was being debated, it was very scary. But it turned out to be the best thing in the world for AT&T, the industry, and the economy. It created an unprecedented growth engine in telecom."4

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1] As quoted in the article titled "AT&T Split-up Rumors Are True: Lucent Ousts Its Chairman," by Seth Schiesel and Andrew Ross Sorkin, posted on, October 24, 2000.

2] From the book The Rape of Ma Bell, by Constantine Raymond Kraus and Alfred W. Duerig, Lyle Stuart Inc., page numbers 69-109, 1988.

3] With revenues of $37.83 billion in fiscal 2002, AT&T is the leading global voice and data communication company. It has nearly 40 million household customers and four million corporate customers.

4] As quoted in the article titled "Government Plan for Microsoft Sparks Reaction," by Mary Mosquera, TechWeb News, April 28, 2000.


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