What if I told you that one hundred years ago there was a monopoly telephone company that charged extortionate prices to customers for the data that they consumed on their system, forced customers to lease their phones for a cost many times the value of the phones, offered both private and “friends and family” services, and insisted on multi-year contracts? Sounds familiar, doesn’t it? That’s right–the bizarre data plans, phone leasing options, and high overage charges being peddled by AT&T, Verizon, T-Mobile, Sprint, and others are not new, or even particularly original. They are a rehash of old practices by the ancestor of all these quasi-monopoly companies–Ma Bell.
And who was Ma Bell? That was the old American Telephone & Telegraph, of course. No, no, not the rebadged Southwestern Bell that now calls itself AT&T. I’m talking about the granddaddy of them all–the company that was founded by Alexander Graham Bell in 1875 to secure the patented process for making telephone calls and commercially market it. AT&T dominated telephony for one hundred and nine years before the US Department of Justice succeeded in breaking it up into smaller entities. And during this golden period of communication dominance, before it became an obscure subsidiary of one of its former pieces, AT&T invented much of the way communications has been marketed and sold in the US.
Setting up the US phone system was a hideously expensive undertaking, but once the capital was expended on it, the system–with very little in the way of maintenance–paid stupendous dividends to the company and its shareholders. The business of selling long distance–as essentially defined as calling anywhere outside of a ten mile radius of your home or office–was astonishingly profitable. The company charged consumers and businesses alike a meter rate of so many cents or dollars per minute of connection time to route call through its analog equipment. The cost of delivering these connections was essentially zero. It was like minting money, and it was so lucrative that the company subsidized the charge for delivering local telephone service to curry favor with local governments and attract new customers that might buy long distance services.
Those old rotary phones were expensive appliances, so AT&T gave you the option of renting them. The lease payment was usually a significant fraction of the actual cost of the phone, so by the time the customer turned the phone back into the company, they had cumulatively paid enough money to have purchased several dozen of them outright.
In the early days even local phone service was expensive. Many customers opted for something called a “party line”–sort of the “friends and family” plan of its time. The party line was a phone connection that was shared among several households rather than being dedicated to just one customer. So when you picked up the phone you had to make sure that the Joneses down the street weren’t talking to their Aunt Mabel before asking the operator to connect you.
Nowadays Southwestern Bell (sorry, I mean AT&T), Bell Atlantic (er, I mean Verizon), and the rest of their ilk are peddling limited data plans on their digital networks and Internet backbone connections. Their systems were hideously expensive to build, but that expense is behind them, and so their cost to deliver an incremental gigabyte of data is essentially zero. Why the data caps? Yep, you guessed it–Ma Bell. Why give away something that costs you nothing to provide? How un-American is that? Next somebody will be giving away air for free, or sunrises for free, or rummaging around in the trash for free. When would the madness stop?
2/7/2018 update: AT&T has proposed acquiring Time Warner in a move that echoes Comcast’s earlier successful purchase of NBC Universal. The Justice Department has sued to stop the merger, which has been approved by the Time Warner board.