Baby Bell

(bā'bē)
n.
Any of the regional telephone companies created in 1984 when AT&T was ordered to divest itself of its local telephone service operations.

[From (Ma) Bell, nickname for Bell Telephone Company, after Alexander Graham BELL.]

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The nickname given to the regional Bell operating companies after Divestiture in 1984. See Bell System and RBOC.

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the seven regional telephone companies created when AT&T was broken up in 1984. The original consent decree creating the Baby Bells gave them a monopoly over local phone service but banned them from participating in the long-distance or equipment manufacturing business. AT&T was excluded from the local phone business in return. Over time, these distinctions eroded. According to the Telecommunications Act of 1996, the Baby Bells can offer longdistance service; AT&T and other long-distance providers can offer local service. The original seven Baby Bells were NYNEX in the Northeast; Bell Atlantic in the Mid-Atlantic states; BELLSOUTH in the South; SBC (Southwestern Bell Corp.) in the Southwest; Ameritech in the Midwest; U.S. West in the Rocky Mountain States; and Pacific Telesis in the West. After numerous mergers and name changes, including the 2004 acquisition by SBC Corp. of AT&T itself and the 2006 acquisition of BELLSOUTH by AT&T, there were two Baby Bells left—Qwest and Verizon.

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In response to efforts by the U.S. Department of Justice to split up the company, American Telephone and Telegraph (AT&T) signed a consent decree in 1984 divesting itself of seven regional telecommunications companies. These companies included Bell Atlantic, Bell South, NYNEX, Pacific Telesis, Southwestern Bell, Ameritech, and U.S. West, collectively known as the Baby Bells. The Baby Bells were restricted from offering long distance services, and were required to offer customers equal access to all long distance providers. Passage of the Telecommunications Act of 1996 removed these impediments. Now any company can offer local or long distance service. The breakup of AT&T is credited with reducing long-distance phone rates and fostering more competition on the local level. For the Baby Bells, the transition to long distance carriers was relatively smooth. They managed to provide relatively inexpensive service and maintain both a trained work force and a loyal customer base. Despite the inroads they made into the long distance market, estimated to yield $68 billion in annual profits, the Baby Bells encountered difficulties in the closing years of the 1990s. Through various acquisitions and mergers, four new Baby Bells emerged. Qwest was formed in 1999 by a merger of U.S. West and Qwest Communications. Verizon was formed when Bell Atlantic (which had previously merged with GTE) merged with NYNEX in 1999, a $21 billion merger, the second largest in U.S. history; this merger created the nation's second largest telecommunications company, behind only AT&T itself. SBC Communications was formed from a merger between SBC and Ameritech in 2000. This left Bell South Communications as the only original Baby Bell. Although the Baby Bells operate in a regulated industry, matters were complicated by complaints of price gouging, poor service, and refusal to work with smaller local and long distance companies. The companies have frequently resorted to lawsuits to protect their interests. An analysis of local Bell phone markets published in U.S. News during 1996 showed the consumer-complaint rate had climbed 20 percent since 1991 and reached a five-year high in 1995. Officials in a number of states are responding to the service problems by hitting local phone companies with fines and penalties. At one point, the Baby Bells appeared ready to jump into the long distance and data businesses with little threat to their local residential markets. But competition for customers in local markets was so great, particularly as the Baby Bells found themselves contesting with AT&T and other broadband cable companies such as Comcast and Cox, that business suffered. During the fourth quarter of 2001, for example, the cable industry added nearly 923,000 broadband subscribers, nearly twice as many as the 540,000 customers who opted for the Bells' comparable high-speed digital subscriber line (DSL) Internet service. In addition, the Baby Bells also faced increasing competition from cable companies that now offer local telephone services. Finally, they must come to terms with the problem of wireless communications that are eroding traditional local phone service. According to a study published in 2002, approximately 3 percent of Americans have already disconnected their traditional phone service and rely entirely on cellular phones. The study predicted the use of wireless phones would nearly double by 2005. By contrast, the study forecasts that traditional wireline minutes will drop by 22 percent. The Baby Bells have tried to meet the challenge by forming their own wireless companies such as Verizon Wireless, a joint venture of Verizon and the European mobile phone company Vodafone, and Cingular, which is a partnership between SBC and Bell South.

Bibliography

Elstrom, Peter. "Will the Baby Bells Crack Too?" Business Week (June 18, 2001), p. 112–114.

Kushnick, Bruce A. The Unauthorized Biography of the Baby Bells & Info-Scandal. New York: New Networks Institute, 1998.

Stone, Alan. Wrong Number: The Breakup of AT&T. New York: Basic Books, 1989.

—Meg Greene Malvasi

A common nickname given to the U.S. regional telephone companies that were formed from the breakup of AT&T ("Ma Bell") in 1984. Baby Bells were created in accordance with antitrust legislation, which is designed to create more competition within the industry.

Investopedia Says:
Upon the initial breakup of AT&T, the Baby Bells included Nynex in New York and New England; Bell Atlantic, BellSouth and Ameritech in the Midwest; and Southwestern Bell, U.S. West and Pacific Telesis in California and Nevada. Over time, however, these companies have gone through several more corporate changes, such as acquisitions and mergers. As a result, the industry has been consolidated into a few domestic telephone providers.

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For a list of words related to Baby Bells, see:

• Voice Transmission and Telephony - Baby Bells: Slang. regional telephone companies formed out of breakup of Ma Bell, or AT&T

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