The decline and fall of AT&T: a personal recollection.

• Author: Posner, Richard A.
• Position: The Enduring Lessons of the Breakup of AT&T: A Twenty-Five Year Retrospective

Thank you very much, Chris. I needed a generous introduction because I realized, listening to the very interesting talks this morning, that I hadn't thought about telecommunication policy since 1981. I'm a kind of Rip van Winkle here, invited to give an antiquarian talk.

I was struck by Mr. Weber's very lucid discussion of the history of telecommunications technology. He made a powerful argument that everything that's happened in telecommunications policy has been the result, ultimately, of technological progress, and that the lawyers and the economists and the judges and the legislators and the bureaucrats are corks bobbing on the technological waves. So my talk will be not only antiquated but epiphenomenal. Moreover, it is a talk from memory, and I do not warrant its complete accuracy.

In the fall of 1967 I let the Solicitor General's office to become General Counsel of President Johnson's Task Force on Communications Policy. "General Counsel" was a rather grandiose title for my role--the entire staff of the task force consisted of no more than five or six persons, only one other of whom was a lawyer. The staff was under the direction of a very able young fellow named Alan Novak, a Yale Law School graduate who was a personal assistant to Eugene Rostow. Rostow, the former Dean of the Yale Law School, was the Undersecretary of State for Political Affairs and the chairman of the task force. It was noted at the time that the fact that Rostow had been made chairman of this task force was a testament to his unimportance, because the third-ranking official in the State Department would not be given such a modest and peripheral task if he were really an important official. All I remember of him is his beautiful office in the State Department and that he was the best-tailored man I had ever met. He was elegant and lordly but didn't seem to have anything to say about telecommunications policy. I do remember that his favorite word seemed to be "demarche"--a diplomatic word meaning, actually, just "statement."

A curiosity that didn't strike me until today is that there didn't seem to be anyone between Gene Rostow and Staff Director Novak. You'd think there would be a task force with members and a staff of young people reporting to it. But there was just Rostow, and he took no interest, as far as I could tell at any rate, in the project.

There was a fine economist on our staff whom we called the Director of Research--Leland Johnson--a very good price theorist from Rand who had achieved a measure of academic celebrity for what was called the "Averch-Johnson" effect--the incentive of price-regulated firms to overinvest because their capital costs were not constrained as effectively as their operating costs. Lee Johnson was excellent, and I learned a lot from him about price theory.

The task force had a very broad mandate, and much of what we dealt with had nothing to do with the regulation of AT&T. Cable television was just emerging from its original, very limited role of overcoming topographical obstacles to broadcast transmission, but already dreamers were talking about hundreds of channels and how that plenitude would transform American culture. We also became involved in intense debate over pay television--whether allowing it would erode a sense of community somehow created by free (to the viewer, that is) television. And we spent much time discussing companies that you've probably never heard of called "record carriers," obscure common carriers that handled international telex traffic (telex--another fossil). There were policy issues concerning them and also concerning satellites--communication satellites were just coming on line. But we did talk extensively with and about AT&T, and Bill McGowan, the founder of MCI, came and lobbied us, as of course did AT&T.

We were skeptical about the social value of AT&T's monopoly of telephone service, and about common carrier regulation in general. Even though the 1960s was an era of renewed collectivism--the era of the Great Society programs--the collectivist impulse somehow coexisted with skepticism about public utility and common carrier regulation, which seemed old-fashioned and anticompetitive. That skepticism had arisen in the 1950s, and in the 1960s George Stigler and other distinguished economists published highly critical articles about regulation. This skepticism was magnified when one met the regulators and regulatees. Moreover, hostility toward monopoly was an aspect of the antitrust culture of the 1950s and 1960s, and antitrust was a "liberal" policy that coexisted comfortably with the liberal...