The Return of AT&T - Reborn Without a Soul - Abraham Lincoln - James M. McPherson

The Master Switch: The Rise and Fall of Information Empires - Tim Wu (2010)

Part IV. Reborn Without a Soul

Chapter 18. The Return of AT&T

In 2002 President George W. Bush signed an executive order authorizing the National Security Agency to monitor telephone conversations and Internet transactions of American citizens without a court warrant.1 The order was secret, as was its implementation, and even today the breadth of the domestic spying remains unknown. However, one thing was clear: the NSA could not have fulfilled the order alone. It needed help, most of all from the nation’s telephone companies.

Four years later, in December 2005, the warrantless wiretap order was leaked to The New York Times. Senator Arlen Specter summoned Edward Whitacre, CEO of AT&T, to appear before the Senate Judiciary Committee.2 In the Judiciary Committee’s hearing room, with unusual intensity in his voice, Chairman Specter, a former prosecutor, questioned Whitacre precisely and slowly:

“Does AT&T provide customer information to any law enforcement agency?”

“We follow the law, Senator,” answered Whitacre.

“That is not an answer, Mr. Whitacre. You know that.”

“That’s all I’m going to say, is we follow the law. It is an answer. I’m telling you we don’t violate the law. We follow the law.”

“No, that is a legal conclusion, Mr. Whitacre,” said Specter, with evident rising anger. “You may be right or you may be wrong, but I’m asking you for a factual matter. Does your company provide information to the federal government or any law enforcement agency, information about customers?”

“If it’s legal and we’re requested to do so, of course we do.”

“Have you?”

“Senator, all I’m going to say is we follow the law.”

“That’s not an answer. That’s not an answer. It’s an evasion.”

“It is an answer.”

Whitacre’s testimony in 2006 marked the first major public appearance of the resurrected AT&T. It was a moment that dramatized how much had changed since 1984: twenty-two years after the breakup, the Bell system was, in a word, back, and working closely once again with the U.S. government.

The inheritor of the great mantle of Theodore Vail, Ed Whitacre was a very different sort of man, and though he had ambitions similar to his predecessor’s, his new AT&T was a different kind of company. Vail had been an idealist who believed earnestly in Bell’s obligation to serve the country as a public utility and build the greatest phone system in the world. “We recognize a ‘responsibility’ and ‘accountability’ to the public on our part,” wrote Vail in 1911.3By contrast, Whitacre was the product of a different corporate culture, whose credo was to maximize returns and minimize oversight. When a reporter asked Whitacre his vision for AT&T, he listed his top three priorities as follows: “I like to be the best. I like for our stock price to be the highest. I like for our employees to be the highest paid.”

Whitacre’s AT&T was a beneficiary of federal communications policy in the early twenty-first century, and a powerful reflection of the corporate ethos of that era. In the name of competition, it sought monopoly and power. Under the banner of libertarianism and small government, it manipulated regulatory regimes to eliminate competition. But it would be unfair to say that the benefits of the relationship flowed entirely one way. As Whitacre’s testimony makes devastatingly clear, even while leaving it unspoken, AT&T found ways to be of use to the administration.


Edward Whitacre, Jr., the chief rebuilder of the AT&T system, is a man whose appearance makes a lasting impression. He is enormously tall, with a slow gait, an even slower way of speaking, and a textbook Texan drawl. As a former FCC staffer put it, “he was extremely intimidating, always polite, but you had the feeling that if you messed with him he would kill you.” Whitacre, despite being head of a telecommunications company, cultivated a stubborn Luddite affect. He had no computer in his office and refused to use email. “I’m not computer illiterate,” he once told reporters, “but I’m close.”4

In 1999, BusinessWeek put Ed Whitacre on a cover with the headline “The Last Monopolist.”5 The story sought to determine how Whitacre and his Bell company could survive the coming age of what was assumed would be ruthless competition. “Can Whitacre,” asked BusinessWeek, “a monopolist born and bred, survive without his monopoly?”

Whitacre had an answer: Why learn to cope with competition when you can eliminate it? Through the late 1990s and into the new millennium, despite or perhaps thanks to an official federal policy promoting “fierce competition,” Whitacre would strangle nearly all of his competitors, largely reconstituting the Bell system that Theodore Vail had founded. By 2006, his resurrected empire would cover the whole country, excluding parts of the West and Northeast, those ruled by another giant born of reconsolidation, Verizon.

Whitacre, aptly termed “a monopolist born and bred,” was certainly the man for the job. Having joined AT&T in 1963, during its pre-breakup heyday, he had stuck with the firm through the first stirrings of competition in the 1970s, and he would continue to rise through the ranks as Bell was dismembered in the 1980s. In the 1990s, still in Texas, Whitacre took charge as CEO and chairman of Southwestern Bell, then the smallest of the eight Baby Bells created by the breakup.

Whitacre, to his credit, was a man willing to take on a challenge. The task before him was immense. The regional Bell companies were, according to federal policy, supposed to lose business to their competitors. The Bell system was the corporate equivalent of a convicted felon, and the Baby Bells all operated under the direct supervision of both the FCC and Judge Harold Greene, who, now as “telecommunications czar,” would oversee enforcement of the former monopoly’s consent decree with the Justice Department. The punishment for the mother ship’s mischief in the 1970s was a tight web of court-ordered restrictions and requirements cast over the Baby Bells’ operations. FCC rules now obliged them to furnish all customers with a telephone jack to facilitate the attachment of “foreign” telephones and other devices. At their exchanges, the Bells were required to provide competing long distance carriers (MCI or Sprint) access to local callers. The decree—to which, for mysterious reasons, Bell had voluntarily submitted—also barred the Baby Bells outright from certain markets, including “online services.”

Springing Ma Bell from this regulatory cage would amount to an escape from corporate Alcatraz. For the Baby Bells, survival was the order of the day; a return to monopoly control seemed a fruitless fantasy of those impractical enough to entertain it. If there was any hope of recovering even a bit of that former power, it lay in a painstaking long-term strategy.

But Whitacre and others with revanchist longings would bide their time. They knew that while Bell was officially a public menace, the old regime retained many loyalists and friends in Congress, federal agencies, and most of all, state and local governments. Southwestern Bell in particular had good working relationships with most of the Texas political class, since Whitacre and his company continued to do as they always had, supporting both parties with generous donations.

At a conceptual level, the Bells’ lobbyists and policy strategists—mostly at Verizon (once Bell Atlantic, the East Coast Bell, which had long thought of itself as the most intellectual of the Bells)—began to rethink some of the fallen empire’s long-held positions, particularly its attitude toward competition, which had always been regarded as anathema to the company whose credo was “One System, One Policy, Universal Service.” Vail’s writings of the 1910s are filled with denunciations of “the nuisance of duplication.”6 So close to the corporate core were these convictions that AT&T had upheld them as gospel from its beginnings in the 1880s right through the 1980s, by which time the idea of a regulated monopoly had long gone out of fashion. Like a man in a leisure suit, Bell strutted stubbornly into its last decade clad in its outmoded orthodoxy, refusing to abide even a whiff of “competition.” It was on account of such stiff-necked absolutism that the Justice Department brought the lawsuit that led to the breakup.

But Bell’s brain trust, a shadow cohort who, though scattered, never abandoned the cause of the empire, had an idea. With sympathetic academics, lobbyists, and some of Bell’s best inside and outside lawyers in their ranks, these stalwarts came to understand that Washington’s prevailing enthusiasm for competition and deregulation might actually be made to serve Bell’s contrary interests. Paradoxical as it might seem, the ideology of competition itself could, they imagined, furnish the key for Bell’s prison break. How was this possible for what had become the nation’s most regulated businesses? For an answer, let us examine for a moment the history of competition’s allure in America.

The perceived value of competition has varied considerably in American history. In the late nineteenth and early twentieth centuries, broadly speaking, many business leaders like Vail, as well as labor leaders and economists, thought that competition, particularly in operating utilities or other economic necessities, was wasteful and destructive. In such sectors, government regulation was deemed prudent to protect businesses serving a vital social function from the excesses of competition, assuring them of, if not monopoly, at least a reasonable degree of market share.

Competition hardly grew in favor during the 1930s, given the Depression and the New Deal. Private industry on the whole was suspect, as government began to trust more broadly to regulation as a means of achieving better results. It was only beginning in the 1960s and 1970s that this bias toward government control began to shift, inspired by a new generation of libertarian economists, mostly at the University of Chicago, among them Milton Friedman and George Stigler. Such analysts viewed the performance of government-regulated industries—essentially the New Deal paradigm—as disappointing, and they prescribed a dose of both deregulation and more competition as medicine for an economy by then ailing after its postwar expansion. Some went so far as to suggest that nearly any regulation was unnecessary, given a state of healthy competition.7

While such ideas were considered radical in the 1960s—sometimes dismissed as Goldwater economics—they began in the seventies to be applied experimentally across once regulated industries such as airlines, trucking, and energy. In communications, change began with Nixon, as we saw in the cable chapter, but continued under Jimmy Carter. Under Reagan, deregulation accelerated, and was regarded, along with tax cuts, as the key to economic growth. And so, at the time of the Bell system breakup, nothing could have been quite so anomalous as radically regulating a major industry.

In this ambience, the Bell partisans got thinking. If government regulation was an evil to be suffered only in the absence of competition, it followed that evident competition should render that evil unnecessary. If the most regulated company in the nation could somehow show that competition had indeed taken root in the telecommunications sector, there was a chance the Bells might yet shed most of their shackles.


The election of Bill Clinton did not turn back the deregulatory wave. Clinton would find himself forced to agree that “the era of big government is over,” a sentiment that applied to the federal regulatory regime as well as the welfare state. In few places was this free-market vibe as strongly felt as at the FCC and among those paid to lobby the commission. Al Gore, the administration’s point man on tech policy, believed as deeply in the power of competition as had the figures in Nixon’s administration. For their part, in speech after speech, FCC officials touted a free market as the best means of achieving the social goals of communications policy. Gore’s friend and FCC chairman Reed Hundt was a competition apostle as well. Speaking of a “national commitment to open markets, competition and deregulation” was boilerplate in the 1990s—as Reed explained, “competition in the communications markets will yield lower prices and more choices for consumers, rapid technological innovation and a stronger economy.”8

Promoting competition wasn’t a bad idea by any means. What didn’t necessarily follow, however, was that the existence of competition in the most abstract sense could obviate all need for regulation—particularly regulation designed to prevent anticompetitive behavior! And how do we know when “competition” really is competition? The willingness of some to see an appearance of burgeoning competition as a reasonable substitute for regulation looked like an opportunity to the Bells, and so they changed their religion. Embracing the process of “competition” that was under way, the Bells prepared to make their comeback as a dominant player in a nominally open industry.

It was a perfect wedding of a new government ideology and a new corporate calculus when the Bells, AT&T, and the rest of the industry signed on to the Telecommunications Act of 1996.9 The most sweeping legislative overhaul of the business since the Communications Act of 1934 was founded on the principle of “competition everywhere.” The idea was to remove barriers to entry in all segments of the industry, a goal that the Bell companies (Bell Atlantic, Bell South, Pacific Telesis, Verizon, and the rest), the long distance firms (AT&T as well as MCI), and the cable companies all pledged to uphold. The Act was designed to encourage cable companies to enter the phone business, phone companies to offer TV service, long distance firms to build local networks, and so on. Officially, it was meant to create a Hobbesian struggle of all against all.

The law was hailed in 1996 as a sort of ultimate victory over the Bell monopoly and the dawn of a new age; in retrospect, the measure was hopelessly naïve. Its centerpiece was a complex regime whereby the Bell companies allowed their competitors to lease Bell’s infrastructure to offer the same local telephone service as the regional Bells. Creating competition over the existing facilities might have worked in another industry, and it actually did seem to work in other countries. But somehow forgotten was the Bell company’s hundred-year track record of annihilating or assimilating dependent competitors. The Bells were corporate America’s reigning champs in the rope-a-dope game of keeping up appearances in the front office while quietly pummeling their rivals in the parking lot.

While not keen to share their toys under the Act’s so-called unbundling rules, the Bells immediately understood that the deal was a win for them. What mattered most was one critical fact: the 1996 law superseded the consent decree that had ended the Bell antitrust lawsuit. With that decree abrogated, the Bells were now under the supervision of the FCC, as opposed to the hawk-eyed taskmaster Judge Greene. It was for them the catbird seat: there was no rival they couldn’t handle, except for the federal courts and the Department of Justice.

There is a striking similarity between what followed the 1996 Act and what followed the Kingsbury Commitment of 1913. Both government interventions had sought to introduce permanent competition into the telephone market, and each was hailed at the time as an enormous victory over the Bell system. In fact, each would pave the way for a new age of Bell ascendancy. The difference was this: the old AT&T had pledged to operate as a public trust, and was as good as its word. The new AT&T had no such aspirations.


Eliminating competition is rarely accomplished in a single grand stroke. The would-be monopolist does not round up rivals for a wholesale massacre; there are no corporate killing fields. Instead, the corporation seeking dominance behaves rather like a pest exterminator, setting poison bait traps, killing what he can see, and methodically decimating his foes by making their life a living hell. The monopolist’s tools are lawyers and local statutes; his tactics are delays and court challenges, all deployed with an eye toward unraveling firms with lesser resources.

The 1996 Act enabled the Bells to blow the trumpet of competition while simultaneously eliminating all actual competitors. There were plenty: since the breakup, scores of new “competitive” phone and Internet companies had launched, hoping to take a piece of the Bells’ billions in revenue for themselves. In part they were drawn by the more general tech boom and economic expansion of the 1990s, when it was easy to get funding. But the real rush began in 1996, after which telecommunications would account for an unprecedented share of GDP growth.

Each of the Bells did its bit to eliminate local challengers. Verizon, for its part, handled competitors in the Northeast, and managed to finally silence MCI, Bell’s bête noire, forever. But the undisputed heavyweight champion was Ed Whitacre’s Southwestern Bell, now renamed SBC. As Network World reported as early as 1997, “SBC, more than any other [Bell Company], uses a phalanx of lawyers and millions of dollars in lobbying efforts in a deliberate effort to thwart meaningful competition in its markets.”10 From the late 1990s into the following decade, SBC masterfully waged a war of attrition.

SBC’s ground war was a guerrilla-style campaign devised to nullify concessions made in the 1996 Act. It would ultimately be copied by all the Bells, until in state capitals and in thousands of tiny local jurisdictions across the country, death would be inflicted by a thousand cuts to make the competition regret they’d ever thought of taking on a Bell. But it began in Texas, where, by 2003, SBC had nearly a hundred registered lobbyists working in Austin—as against the 181 members of the legislature.11 Avowedly opposed as they had been to regulation, SBC and the others had long known that pressing for it on the local level was a handy tool against any challengers. When competitors had started cropping up in the early 1990s, SBC persuaded the Texas legislature to add some useful provisions to the Public Utility Regulatory Act of 1995 (PURA 95)—among the tweaks to the final bill, a hefty price on market entry. To offer service to a single customer, a would-be telephone company had to build physical lines reaching 60 percent of homes and businesses in a twenty-seven-mile radius. It was roughly like requiring that one build roads to every house in the area just to open a gas station.

There were other tactics beyond the legislative. To reach customers over SBC’s lines, for instance, would-be competitors often needed to rent space in the local “central office,” where the lines terminated. SBC was required to offer a lease, but the law didn’t specify a rate. So in the late 1990s, when a 10×10 space in upstate New York was going for $10,000 a year, for instance, SBC would charge $500,000 for that much space in Texas. The aim of obtaining a more reasonable rent would oblige a competitor to file a lawsuit, and appeals—again, just to get started.

The industry trade magazines were full of similar stories of dirty pool in the late 1990s. By one account, SBC lawyers were dispatched to threaten an elementary school for choosing a rival phone company. In another case, SBC left the windows open in a space they operated where a competitor’s switching equipment was housed; pigeons came in to roost, until eventually their excrement caused system failure. On other occasions, Bell simply flouted interconnect agreements until the competitors were forced to sue—just like the good old days! In such cases, the FCC would sometimes fine SBC and the other Bells, but to little effect. Over time the government would file a series of lawsuits under the Sherman Act, petitions superficially similar to MCI’s case against AT&T in the 1970s, charging them with violating the spirit of FCC regulations by using its monopoly powers to destroy newly created competitors. The Baby Bell apples had not fallen far from the tree.

If the late 1990s and early 2000s departed from the 1970s in invigorating the promotion of competition, they also marked a different mood in the federal courts regarding assertiveness in enforcing the antitrust laws. Once competition, however nominal, was supposed to exist, there was little appetite on the bench for acts of interference in a “free market.” Verizon Communications v. Trinko is the most instructive example. Broadly and on good evidence, Verizon was accused of interfering with competitors, and the matter went all the way to the Supreme Court. Justice Antonin Scalia, writing for the majority, held that violations of the Telecommunications Act did not create an antitrust problem; a conclusion opposite the one the courts reached in the 1970s, when AT&T was tormenting MCI. The decision reaffirmed that moving the Bells out of the line of antitrust fire was by far the most decisive result of the 1996 law.12

As Whitacre and the other Bells prosecuted the ground war by frustrating and sabotaging competitors, their lobbyists and lawyers launched an air campaign against the new Telecommunications Act itself. The Bells challenged nearly every aspect of the line sharing provisions in federal court. The Bells won some and lost some, but that wasn’t the point, really. What mattered was tying up would-be competitors in years of complex and expensive federal litigation, thrusting their business model into a permanent state of uncertainty. At some level, the lawsuits were an end in themselves.

Engaging in complex litigation did not distract the Bells from their accustomed pursuit of influence. In 2000, Verizon appointed as its general counsel William Barr, the former U.S. attorney general and onetime CIA operative; his style was distinctive. On one occasion, angered by an anti-Bell vote cast by a FCC commissioner, Barr cooly allowed “I want his balls in a jar.”

In 2000, George W. Bush became president, and within a few years most of the Bells’ wishes came true. Unlike the Nixon and Reagan administrations, which had been serious about competition in communications, the Bush administration tended to agree that competition didn’t necessarily require that there be any extant competitors. Within two years, a new FCC gutted the sharing rules,* and a market that since 1996 had been competitive in name only was now rushing headlong toward monopoly once more.13 Indeed, with the sharing provisions gone, most of the firms that hadn’t already entered bankruptcy were effectively doomed.

In the next few years, one after another of the Bells’ would-be rivals withered and died, and all the while Bell representatives murmured about the challenges of surviving in a competitive industry. Indeed, the only companies that would manage to survive as challengers in telephony were the cable firms, who had wires of their own running into every home, and whom the Act of 1996 had freed to become an intermodal competitor, the only kind the Bells couldn’t destroy. Nevertheless, within a decade after the Telecommunications Act of 1996, history had repeated itself, and the Bells once again ruled the telephone system unperturbed. The idea of inducing “fierce” competition over Bell’s proprietary wires, like the fledgling companies that had taken the bait, was utterly dead.

Wiping out the competition was only half the dream, however, and during this time the Bells were reaching, none too discreetly, for something even bigger than collective control: the reconstitution of the great Bell system itself. In this, too, Whitacre was the ringleader. In 1990, he had controlled only Southwestern Bell, the smallest of the eight fragments of Bell’s breakup. In 1997, he bought the regional Bell companies that served California, Nevada, and the states of the Midwest: the Pacific Telesis Group. Finally, in 2006 he added Bell South. And so, after a decade of consolidation, his new Bell system covered most of the country.

Whitacre’s greatest symbolic victory, however, had actually come two years earlier, in 2005, when he bought AT&T, beating out Verizon, his only rival in becoming the Bell of Bells. The main stated purpose of the 1984 breakup had, after all, been to segregate the long distance company AT&T from the local carriers. With SBC’s acquisition of the former flagship, a deal quickly approved by all levels of relevant parties in the Bush administration, the centerpiece of the breakup was no more. “The existence of separate local and long distance companies,” wrote AT&T to the FCC in 2005, “no longer benefits consumers.”14 That was about the same time that Verizon bought out MCI, and like late Rome, the Bell system now existed as an eastern and a western empire—Verizon and AT&T (whose 24-karat name and logo Whitacre’s company assumed)—but that was the only division; the vertical disintegration was abolished, and with it the second major era of openness and competition in telephony was over. That second era had lasted from 1984 to 2005, not even as long as the first age of competition, from 1894 to 1920.

The Empire, long divided, must unite

Under the name that had signified unified telephony for more than a century, Whitacre’s company became the largest communications firm in the world, just as its namesake had been. It had spent twenty-one years in the wilderness. But in name and in fact, AT&T was back.


“I flipped out,” he said. “They’re copying the whole Internet. There’s no selection going on here. Maybe they select out later, but at the point of handoff to the government, they get everything.”15

Mark Klein began his career as a young engineer at AT&T in 1982. Twenty-one years later, Klein was still at AT&T, working in the San Francisco offices, when he began to notice something odd. His fellow AT&T engineers were installing a raft of expensive hardware in little-used Room 641A, and access to that room was restricted.

Klein watched carefully and began to take notes. He noticed that the restricted room was connected to a larger one containing the high-speed fiber optic lines that went in and out of the building, the ones carrying Internet traffic to and from San Francisco, and the “peering links” to other major telecom providers. At some point—details are sketchy—Klein managed to get inside Room 641A. There he found an array of sophisticated networking equipment—crucially and in particular a semantic traffic analyzer, a special machine designed for intensive data mining and content analysis. After more than two years, Klein came to a most upsetting conclusion: AT&T had built a secret room to help the federal government spy on the Internet, and not just AT&T’s customers but everyone’s.

You might have wondered whether there had been any practical consequences to the return of AT&T, which, considering the drama of its dissolution, had been allowed rather quietly to regroup. It may seem that the average person, assuming he saw no spikes in his monthly phone bill, could afford to remain fairly indifferent to who runs the telephone system. But as Klein’s story suggests, it can be a matter of very serious importance. It may be impossible to say for certain that the reconsolidation of AT&T fundamentally enabled the National Security Agency’s surveillance program, but the need to involve so few companies in the conspiracy undoubtedly made things much easier. Suffice it to say, as the Cold War made clearest, the federal government has usually found an integrated telephone system more malleable to its needs than a fragmentary one.

In the early 2000s, when the spying began, SBC and the rest of the Bells had various merger deals pending before the Justice Department and the FCC. Again, while a direct causal link, much less a quid pro quo, is impossible to prove, this was obviously a very prudent time to be helping out the government.

Here is how Klein described the situation:

In 2003 AT&T built “secret rooms” hidden deep in the bowels of its central offices in various cities, housing computer gear for a government spy operation which taps into the company’s popular WorldNet service and the entire internet. These installations enable the government to look at every individual message on the internet and analyze exactly what people are doing.16

He described, in particular, the setup at his own place of work:

In San Francisco the “secret room” is Room 641A at 611 Folsom Street.… High-speed fiber-optic circuits come in on the 8th floor and run down to the 7th floor where they connect to routers for AT&T’s WorldNet service, part of the latter’s vital “Common Backbone.” In order to snoop on these circuits, a special cabinet was installed and cabled to the “secret room” on the 6th floor to monitor the information going through the circuits.17

Mark Klein passed these declarations, along with pictures of one of the secret rooms, to the Electronic Frontier Foundation, a digital civil liberties group based in San Francisco. After holding a press conference, the EFF sued AT&T, alleging, on the basis of Klein’s documents, violations of the Foreign Intelligence Surveillance Act (FISA), which at the time made it illegal for a private party to engage in electronic surveillance not authorized by statute.*The EFF declared, “We want to make it clear to AT&T that it is not in their legal or economic interests to violate the law whenever the president asks them to.”18

When Klein made his startling allegations, however, it wasn’t exactly clear that they were true. In its filings, AT&T was unresponsive, and the federal government wasn’t about to admit it was spying on Americans. No one knew then about the secret order Bush had signed in 2002 authorizing domestic surveillance without a warrant, a contravention of FISA and of the administration’s repeated claims that the NSA was spying only on foreigners. But by April 2006, the administration had entered the lawsuit, asking for its dismissal.19 It was now clear that something was going on.

The resolution of this matter has little to commend it. In July 2008, during the presidential campaign, Congress passed a law granting AT&T and Verizon full and retroactive immunity for any violations of the laws against spying on Americans.20 (That same measure, incidentally, also expanded the period that the FBI could spy on Americans without a warrant, now up to one week.) Tying the immunity provisions to a national security bill was crucial, for doing so terrified any congress-member, Republican or Democrat, who might have opposed the broad grant of immunity, lest he be accused of being weak on national security. Presidential candidate Senator Barack Obama, for example, while on record as opposing the immunity, nonetheless voted for the bill in order to defend his national security credentials; he described the bill as “improved but imperfect.”

With the bill’s passage, the matter mostly faded from public view, like much else of questionable legality undertaken during these years in the name of national security. Just as surely as the iron fist of government had been the only power equal to dismembering the mighty Bell monopoly, the flameproof hand had again intervened, this time to pluck its sometime corporate adversary, but now, as in the good old days, its strategic partner, from the fires of legal jeopardy.

Thanks to the immunity grant, there is a good chance that the extent of government spying, past and present, will never be known. But the moral of the story is obvious. In an age more reliant than ever on telecommunications media, the more concentrated the power over information and communications, the easier it is for government to indulge its temptation to play Big Brother. With everyone in the country now connected, the fewer the parties that need to be persuaded to cooperate, the greater the risk. With the convergence of all communications by virtue of interconnected networks (aka intermodality), the reconstituted giants of telephony are closer to possessing a master switch than Vail himself could have dreamed. Those are the unremarked costs of the return of the empire.


By 2007, Ed Whitacre had fulfilled his mission, and his destiny. Most of the Bell system was back in place in the world’s largest communications firm, with him at the helm. At age sixty-five, with nothing left to prove, he announced his retirement.21 In accordance with the custom of the early twenty-first century, it would be the occasion for a very sizable payout, over $200 million, making it clear that even if money isn’t the only motivation for building an information empire, it is certainly among the rewards.

In one way, more than any other phenomenon we have considered, the return of AT&T—that perennial phoenix—would seem to prove the irrevocability of the Cycle of information empires, their eternal return to consolidated order however great the disruptive forces of creative destruction. After all, despite the explicit wishes and mighty efforts of the FCC and Congress to maintain an open and competitive telephone market, within twenty years the national phone system was once again ruled by just a few companies, most of them parts of the old Bell system. Though such a view of inevitability perhaps makes for a tidier argument, no theory of history operates in isolation from the particularities of the times and the actors. Every consolidated entity may well have only until the next turn of the Cycle before being scattered, and everything scattered may await only its eventual imperial visionary.

* Pursuant to a suggestion by the D.C. circuit court of appeals, the commission decided to eliminate the requirement that the Bells share the entire “platform” (the line plus switch and other necessary equipment), obliging them thereafter to share only the “line.” That put on competitors, in all instances, the added burden of installing their own switching equipment within the Bell facilities.

* The law, 50 U.S.C. §1809, makes it an offense if a person “discloses or uses information obtained under color of law by electronic surveillance, knowing or having reason to know that the information was obtained through electronic surveillance not authorized by statute.”