The Ma Bell Breakup--Good or Bad

[onejayhawk]

In 1982. Bell Telephone Co. agreed to divide itself into eight units, seven regional companies and ATT, which retained the long distance rights. What resulted was a powerful and diversified telecommunication system.
https://en.wikipedia.org/wiki/Breakup_of_the_Bell_System

Here are some points to consider:

1. Bell proposed the format of the actual breakup. This caused political ripples at the time.
2. DoJ was simply proposing divestiture of Western Electric, the manufacturing wing.
3. Bell was a very healthy company at the time.
4. The plan is a business school model. None of the so called Baby Bells failed.
5. South Western Bell, the least impressive on paper, outperformed the rest as an investment.
6. Hardware and software integration techniques were critical to the development of the internet.

After almost 40 years, we have enough perspective to do some analysis.

Was it a good idea to force the breakup?
Japan has a very different approach to such situations. Is theirs better?
Bell's plan was and is a model of how to do a divestiture. Should the government allow more freedom to companies to design a breakup?
Who should be next to sit in Bell's chair? Should anyone? Why?
​

J

 

[uppi]

1. Bell was a very healthy company at the time.
2. The plan is a business school model. None of the so called Baby Bells failed.

If you have an all but guaranteed monopoly on a service, you need to do really badly as a company to fail.

In my opinion, it was a good idea to split Bell, but a bad idea to do it horizontally - by region. They still had their monopoly in their respective region and had no real competition. Instead, Bell should have been split vertically. One heavily regulated company should have been put in charge of the infrastructure (and nothing else) and all the others should have competed for selling services on top of that.

 

[Arwon]

Nationalise the wholesale and infrastructure bits, it's a natural monopoly. Then the private retail bit can do whatever it wants on the same terms as other companies.

 

[Old Hippy]

After almost 40 years, we have enough perspective to do some analysis.

Was it a good idea to force the breakup?
Japan has a very different approach to such situations. Is theirs better?
Bell's plan was and is a model of how to do a divestiture. Should the government allow more freedom to companies to design a breakup?
Who should be next to sit in Bell's chair? Should anyone? Why?
​

J

.'Who should be next to sit in Bell's chair? Should anyone'
very subtle J... I'd say its a toss up between facebook and instagram or google and youtube...

 

[onejayhawk]

If you have an all but guaranteed monopoly on a service, you need to do really badly as a company to fail.

In my opinion, it was a good idea to split Bell, but a bad idea to do it horizontally - by region. They still had their monopoly in their respective region and had no real competition. Instead, Bell should have been split vertically. One heavily regulated company should have been put in charge of the infrastructure (and nothing else) and all the others should have competed for selling services on top of that.

That's a fairly reasonable approach. Saying a monopoly is a guaranteed money maker is too much. Many utilities have proven capable of failing. That said, regulating the physical lines makes good sense. Another approach would be to turn the lines over to power utilities, who already have infrastructure and expertise. Yours is simpler and does not leave consumers at the mercy of one utility for two services.

As a practical matter, the local monopolies did not last the decade. It did not slow them down much.

J

 

[uppi]

Another approach would be to turn the lines over to power utilities, who already have infrastructure and expertise.

This certainly has some merit, because there would be synergies there. For example, they could dig one pit and then lay power cables as well as optical fibers (and many utilities have started doing this). And network outages are often caused by power outages, so it makes sense to treat them together.

But no matter the approach, the tricky part will be getting those utilities to perform, because the pressure of competition is minimal to non-existent.

 

[Birdjaguar]

In 1982. Bell Telephone Co. agreed to divide itself into eight units, seven regional companies and ATT, which retained the long distance rights. What resulted was a powerful and diversified telecommunication system.
https://en.wikipedia.org/wiki/Breakup_of_the_Bell_System

Here are some points to consider:

1. Bell proposed the format of the actual breakup. This caused political ripples at the time.
2. DoJ was simply proposing divestiture of Western Electric, the manufacturing wing.
3. Bell was a very healthy company at the time.
4. The plan is a business school model. None of the so called Baby Bells failed.
5. South Western Bell, the least impressive on paper, outperformed the rest as an investment.
6. Hardware and software integration techniques were critical to the development of the internet.

After almost 40 years, we have enough perspective to do some analysis.

Was it a good idea to force the breakup?
Japan has a very different approach to such situations. Is theirs better?
Bell's plan was and is a model of how to do a divestiture. Should the government allow more freedom to companies to design a breakup?
Who should be next to sit in Bell's chair? Should anyone? Why?
​

J

Standard Oil was broken up 100 years ago. It was probably a good thing in the short run and the long run. Bell's breakup was good at the time and changed telephone service in the US. Since then with the advent of cell phones, The industry has re-consolidated. I think that is natural within our capitalist culture, but not a good thing. Companies always want monopoly power if they can get it without causing public concern. China takes a different approach and their economic model of government owned companies asserting market power will test the US model in coming years.

I think that the government should break up Facebook, Google, the big banks, and any of the too big to fail entities. Amazon should be left alone for a bit until they have refined some more useful technology then they too should be broken up.

 

[Lexicus]

Standard Oil was broken up 100 years ago. It was probably a good thing in the short run and the long run. Bell's breakup was good at the time and changed telephone service in the US. Since then with the advent of cell phones, The industry has re-consolidated. I think that is natural within our capitalist culture, but not a good thing. Companies always want monopoly power if they can get it without causing public concern. China takes a different approach and their economic model of government owned companies asserting market power will test the US model in coming years.

I think that the government should break up Facebook, Google, the big banks, and any of the too big to fail entities. Amazon should be left alone for a bit until they have refined some more useful technology then they too should be broken up.

It doesn't make any sense to break up Google or Facebook. Search engine and social network are natural monopolies. Breaking up Facebook into a dozen different networks ruins the utility of Facebook. Similar point applies to search engines.

Generally speaking, natural monopolies ought to be socialized rather than broken up. And the banks should be broken up, but not into regional monopolies: banks need to be segmented to that there are no banks that offer the full range of financial services. And the 'holding company' loophole needs to be closed if we ever return to that policy regime. Additionally the 'shadow banks' need to start being treated as banks because it was competition against the shadow banking sector that drove bank deregulation in the US. The banks were not entirely wrong that it was unfair that they were subject to legal restrictions on their activities while the shadow banks were not.

 

[hobbsyoyo]

I'm not super familiar with how entrenched Facebook is in the tech ecosystem. I assume they have their hands in a lot of pockets outside of the social network proper, but I'm not sure any of those efforts are sufficiently distinct from social network functions to be worth breaking up. Google and Amazon, on the other hand, run so much more than search engines and shopping websites. They wield a ton of power in the digital market across many sectors. I think the argument to break them up is much more straightforward and beneficial to society to do so. That the discussion of Huawei's fate seems to revolve around how they will replace Google's non-search platforms and services kind of shows how entrenched and important that company is.

What I'm not sure about is whether or not Google and Amazon have acted in ways that demand an immediate break up. I think they should be broken up but that's mostly on principal and not as much on their monopolistic activities. But then again, I don't follow those companies that closely so maybe they have done atrociously monopolistic things that demand action. In any case, their too-big-too-fail status should be addressed as it should with the big banks.

 

[Lexicus]

Much of the concern I've heard wrt Facebook is that they also own Instagram and What's App and I think a few other services/apps that are supposedly "competitors" of Facebook and Messenger.

 

[hobbsyoyo]

While that's an issue, I think it is far less of an issue than Amazon owning AWS which runs a lot of the web and Google running similar back-bone services on top of the many, many front-end services like Android which collectively control or at least enable a lot of what we do online. I don't think those two companies have yet done much to raise alarms but the fact that they own and control so many critical services is alarming in and of itself.

 

[Lexicus]

While that's an issue, I think it is far less of an issue than Amazon owning AWS which runs a lot of the web and Google running similar back-bone services on top of the many, many front-end services like Android which collectively control or at least enable a lot of what we do online. I don't think those two companies have yet done much to raise alarms but the fact that they own and control so many critical services is alarming in and of itself.

Yeah, I want the physical infrastructure of the web to be socialized entirely. Interesting fact I learned a few days ago: the best-rated ISP in the country for customer satisfaction is the Chattanooga's Electric Power Board which is publicly-owned. The internet itself should be a public utility. I also would like to see a public search engine and perhaps a public Web marketplace. I like the idea of socialized social media but have much less of a handle on what that would look like.

 

[civvver]

One issue with facebook's level of power is that zuckerberg basically controls everything as he owns a majority of voting share. Google did the same thing and spun of voting shares from non voting shares so these founders can get their massive ipo money yet still retain full control over the company, which is completely ridiculous. Normally you'd have checks and balances like a board who could make decisions or even replace a non performing ceo. See like how apple ousted jobs back in the day.

As an example, when facebook was being used in myanmar, and one group started discussion killing another group and using facebook to communicate the locations of gatherings and stuff so Zuckerberg shut it down. Probably the right call but the point is, what if something less nefarious is going on and he decides to censor? Totally within his power. We treat facebook a lot like a free press but it's not at all. The news feeds, all the info curated to you is all basically controlled by one guy.

I also read somewhere that there has not been a single social media platform developed in the past 5 years. Facebook just buys out the good ones like whatsapp or crushes them by denying plugin access to facebook data and no one can compete. So innovation is stifled.

I don't know if we need to actively breakup facebook and google but they do need regulation to ensure non biased searches and stuff, although that's like literally impossible, so at least no glaring blatant biases.

 

[TheMeInTeam]

.'Who should be next to sit in Bell's chair? Should anyone'
very subtle J... I'd say its a toss up between facebook and instagram or google and youtube...

Facebook is bleeding members and can probably just die out. I don't see how it's different from say Myspace in that regard, aside from that it won that particular social media battle. It probably holds on with its other social media options. So I'd say Google between those two, for several reasons. For the purposes of this thread though the monopoly/information control is most relevant. Should it be Google before big banks though? I'm not so sure on that one. Google is annoying but there are alternatives to using it. Breaking up banks takes a step further away from denial of service similar to China's social credit garbage.

It's worth a look at how multiple supposedly independent organizations could coordinate to drop someone like Alex Jones in short order too. Never was a fan of the guy, but the timings of that stuff was fishy and I don't like the idea that things people rely on for day to day living can be pulled simply because a couple companies don't like you or your message. The reason Google is still worth considering alongside a few others is how payment processing/interaction with competitors has been interfered with/cut, often in tandem.

 

[Lexicus]

Breaking up banks takes a step further away from denial of service similar to China's social credit garbage.

I have a question, if you think that China's social credit system is garbage, what do you think of credit ratings and ratings agencies in the US?

 

[TheMeInTeam]

I have a question, if you think that China's social credit system is garbage, what do you think of credit ratings and ratings agencies in the US?

Significantly less garbage, because they're not designed to prevent you from traveling or incentivize friends and loved ones to avoid you. Nor do they prevent you purchasing things with your own cash outright.

You could have no credit or even an abysmal credit history, and car dealerships/vendors will still accept immediate payment in full, as will most any halfway honest vendor in the US. Your friends won't be slightly more likely to be denied train tickets because they associate with you. Subtle differences and what not.

 

[rah]

But indirectly credit rating can be more damaging by placing people in perpetual indebtedness.
And it really doesn't matter if vendors/dealerships will take cash, if you are so far in debt that you don't have it. Which can limit your ability to ever get out of debt.

Your credit is so bad you can only live in the worst neighborhood that has no jobs available unless you can drive someone less bad.

 

[TheMeInTeam]

But indirectly credit rating can be more damaging by placing people in perpetual indebtedness.

The *credit rating* causes this directly? Explain the steps.

And it really doesn't matter if vendors/dealerships will take cash, if you are so far in debt that you don't have it. Which can limit your ability to ever get out of debt.

"If you don't have money you can't repay debt" is not particularly insightful. You do need money to pay money. What does this have to do with a failed comparison to social credit?

 

[rah]

A bad credit rating leads to higher interest on credit making debt more expensive.
It can lead to a downward spiral that many find it difficult to ever recover from which is it's own form of slavery. Which to me is just as bad as social credit.
AT least some of the social demerits are caused by bad actions and not based on your race. But both are bad in my opinion.

 

[Lexicus]

they're not designed to prevent you from traveling or incentivize friends and loved ones to avoid you.

Highly debatable