How the Baby Bells Grew Up

The Breakup

Ma Bell reigned supreme over the telephone business for over 100 years in the US and Canada. Ma Bell—the nickname given to the Bell Telephone Company, and later, AT&T— cornered the market with an iron fist. Operated as a monopoly, the infrastructure, local and long distance service, and even the phones themselves were owned and controlled by Ma Bell. The US Department of Justice did not side with Ma in the end, and mandated her breakup in 1983.

The result of the breakup was the “Baby Bells”—11 companies with over 30 subsidiaries. Untangling the web of companies and how they intertwined over the next 30-some years would make for a tedious blog post, but the end result is rather interesting.

The dozens of Baby Bells spawned by Ma and the DOJ-mandated divorce, for the most part, have ended up getting back together. Half a dozen companies were split, renamed, remarried, and renamed again to become AT&T. Long distance carriers MCI, GTE, and Alltel along with some Bells got together to form Verizon. And United Telecom became Sprint, which hooked up with Nextel and CenturyTel to become Sprint and CenturyLink. Then a bunch of companies you never heard of became T-Mobile. Confused yet? Me too, so check out this infographic to help clear things up.

Infographic: WSJ Online

Infographic: WSJ Online

Evolution of the Baby Bells

Over the last 20 years, the baby bells have built entirely new businesses and layers of infrastructure around mobile communications. Today, less than 50% of people have land lines. Pay phones are pretty much gone. And telcos were so far ahead of the game that this mass abandonment of old services has left them largely unscathed.

Post-breakup and post-land line, the name of the game is again acquisitions and mergers. Telcos continue to suck up smaller players, vendors, and related service companies. The telcos are still largely communications service providers (CSPs) who make the lion’s share of their revenue from providing connections and infrastructure.

Now, the CSPs are competing not so much with each other, but with digital service providers (DSPs) like Netflix, Google, and Amazon, all of whom piggyback on their networks and poach potential customers and recurring revenue. So the telcos are changing their business models so they look more like these DSPs, providing services first and connections second.

The Next Step for Communications Providers

What does this mean for the CSPs that want to become DSPs? They now have hundreds of millions of subscribers, and they are continually adding new services, creating new bundles, packages and promotions and bringing new businesses. Agility has become an issue for CSPs trying to add all these new services. Their aging BSS/OSS systems are great for handling tons of data very quickly, but it can take months just to change prices, packages, and services. Which customers now demand happens instantly.

To address this, they have a couple options. Invest a massive amount of money, time, and IT resources into building out homegrown solutions. Doing a complete “rip and replace” of their current systems, which could cost billions, take years, and potentially cause unacceptable service interruptions. Or they can add a cloud monetization platform that works as an agility layer, which communicates with all their current systems and allows to quickly add new products and packaging without coding or IT intervention.

See how it works and find out what the future of communications looks like.