Published July 1, 2004

While it brings me no joy to report that this once-great company may soon meet its demise, I will also not be shedding any tears on the day AT&T disappears from our telecom landscape. The company had a chance to be a major player in the digital age, but the firm’s bull-headed reliance on a misguided regulatory regime, and its foolish abandonment of important investments and technologies, meant it largely dug its own grave long ago.

Things didn’t have to turn out this way. AT&T made some very bold moves following the Telecom Act to diversify its product offerings and position itself against competitors. It invested more than $100 billion in cable systems to acquire a competing wire to the home and offer high-speed Internet services to customers; it strung fiber across America to connect those systems; it aggressively deployed a wireless architecture to be a major player in the cell phone market; and it even toyed with a wireless “last mile” solution for those homes that couldn’t be reached with its cable systems.

Certainly it couldn’t mess this up, right? Well, it did. The cable gamble proved to be too expensive. Company officials ultimately sold all of AT&T’s cable systems to Comcast for roughly $50 billion, half of what it paid for them. Its fiber and long-distance networks faced intense competition, and AT&T never was able to be a price leader in the field. The wireless last-mile plan was abandoned before the ink was dry on the blueprints. AT&T Wireless was sold to Cingular for $41 billion. The net result of this shedding of assets is a hollowed-out shell of a once-great company.

But AT&T had one last hope: Coax federal and state regulators to rig telecom regulations in such a way as to handicap the Baby Bells while tossing AT&T a life preserver.

In a last-ditch attempt to save its business, AT&T and others mounted an intense lobbying effort in 2003 to convince the FCC to prop up the “unbundled network element” mandates that forced the Baby Bells to share every component of their local telecom infrastructure with competitors at greatly reduced rates, even as these very rules were being challenged from many quarters.

Amazingly, it worked. Republican Kevin Martin joined the Commission’s two Democrats and brokered a convoluted deal aimed at keeping hope alive for AT&T. But then came a resounding defeat on March 2 as the rules were struck down for a third time by the U.S. District Court of Appeals. In early June, Solicitor General Ted Olson announced the Bush administration would not seek Supreme Court review. And on June 14, the Supreme Court itself declined to review. The game was up for AT&T.

If AT&T’s post-Telecom Act troubles have taught policymakers and telecom companies anything it should be this: Real companies must build real networks if they want to survive. Networks built of paper–which is about all the Telecom Act’s infrastructure-sharing rules produced–have very little chance of surviving in the long run. It’s time to let the big boys get on with the serious business of building the big networks this country needs.

Adam Thierer ([email protected]) is director of telecommunications studies at Cato Institute.