How did the breakup of AT&T ruin American phone service?

Many people complain that the breakup of AT&T has hurt rather than improved our phone service. For example, in an article by David Coursey:

“...I was sitting with one of the best minds in the wireless industry, a man named Andy Seybold. I've known him for years, but was still surprised when he said something I've been thinking for a long time: It was stupid to break up AT&T. 

I am used to saying that and getting beaten up by people who are more concerned about competition than the quality of service that results. Simply put: We traded the world's best telecommunications system for one that is second class. We have replaced standards with needless competition that doesn't benefit customers. If you don't believe me, travel to Europe or Asia and see how advanced their wireless products are compared with ours.”

Is it because small companies do not have the financial or technical resources that one large company would have? Is it because monopolies are superior in certain areas, such as phone service?
 
 

Is AT&T too small?

If you think that AT&T is too small to provide proper phone service, take a look at some of the small nations of the world, such as Taiwan and Switzerland. Many of their businesses dominate American companies. Switzerland is a tiny nation, and yet its industrial output is nearly the same as America in certain sectors, such as machine tools. Also consider Germany and Japan. General Motors is one of the largest companies on the planet, but Japanese and German companies have been consistently producing higher-quality automobiles. 

The lower labor rate of Japan and Taiwan cannot be used to explain their success, either. The labor rates of Europe are very high, but Germany and Switzerland are successful despite it. 

It is ridiculous to claim that AT&T became a lousy company because it was cut down to too small of a size. If AT&T became a lousy company after the breakup, it would be due to other factors, such as a change in management, a change in the priorities of the company, and/or lousy government regulation. 
 
 

Competition is enforced in professional sports

The people who set up and organize professional sports teams deliberately set the teams up in such a manner that no team can dominate the others. The teams are very nearly equal in abilities. Furthermore, when these teams compete against each other, referees watch the athletes to ensure that they play "fair". 

If our government had as much sense as the people who run professional sports, after they broke up AT&T they would have watched over the companies like referees in an attempt to keep the competition between them "fair". These government referees would encourage the companies to develop better products and services. 
 
 

What happens when the rules are violated?

When a professional athlete behaves in a truly destructive manner, the referees can remove him from the game. The referees do not have to compensate him for his loss of income. 

If our government had as much sense as the referees of professional sports, they would not tolerate business executives who misbehave. If an executive were to make the trivial mistake, the government would apply a trivial penalty merely as a warning. But when an executive commits a more serious crime, the government should remove him from his position without compensating him for his loss of income. 

No society owes any business executive anything. Operating a business should be considered a privilege, just as becoming a professional athlete is a privilege. People who cannot follow the rules should not be allowed to have this privilege. Society does not owe people any compensation if they cannot follow the rules. 
 
 

Example: Intel and AMD 

However, it is possible that Intel is lowering prices below a "sensible" value. This would hurt Intel after a certain period of time, but it would hurt AMD more because AMD is a smaller company with less money to survive such low prices. In other words, Intel may be behaving in a self-destructive manner in an attempt to destroy their competition. 

Our government should be looking into the reason that Intel is lowering its prices. Intel should not be allowed to destroy its competition. The marketplace, not Intel, should decide whether AMD remains in business or not. Businesses should not be allowed to destroy each other. Businesses should compete with each other, and their fate should depend entirely upon their performance. 

Professional sports teams follow this concept without any of them thinking that it is some sort of incredibly intelligent concept. Teams are not allowed to destroy each other, nor are athletes allowed to sabotage one another. Rather, the referees try to ensure that a team wins or loses based solely upon their performance. 
 
 

Your fate should depend on your performance, not on sabatoge or cheating by your competitors

The pressure on business executives should be to provide better products and services, and to find ways to make their business operate more efficiently. They should never be concerned with whether their competitors are trying to drive them out of business. They should concentrate only on themselves. The government should stop businesses from fighting with each other. 

There should never be meetings at AMD in which the executives discuss how to fight back at Intel. Likewise, the Intel executives should never have meetings to discuss how to destroy AMD. The Intel executives should only be concerned with making better products and services. 

If anyone can provide evidence that Intel executives have held meetings and discussed how to destroy AMD, then they have evidence that the Intel executives are violating the rules of free enterprise. Our government should remove those people from their positions without compensating them for their loss of income. Our society does not owe them anything. 
 

AT&T

The stockholders made the situation worse by demanding high profits while never demanding that the profit come from respectable competition. The pressure on executives was to make a profit, but nobody cared how the profit was made. 

If the American government had as much sense as the people who run professional sports, they would be watching over the phone companies and making sure that they compete with each other in a respectable manner. These companies are wasting our time and money on their telemarketing and other fights. The executives who engage in this sort of behavior should be removed. 

To summarize, the phone companies have problems today because of the type of people who dominate them, and the lack of supervision by our government and the stockholders.

With proper government supervision, the phone companies would be competing with each other to improve phone service and technology. They would be impressing us with new products and services, rather than disgusting us with their telemarketing. 

However, Apple Computer executives were so greedy that they set amazingly high prices for their computers. The difference between an Apple and IBM computer was so large that graphic artists were practically the only people willing to buy the Apple computers. Most people reluctantly purchased IBM computers instead. The result is that today the Apple Computer dominates the graphics arts shops, but most of us have IBM-compatible computers. Microsoft grew to an enormous size due mainly to the greed of Apple executives. 

By the early 1990's Microsoft was not experiencing much competition from Apple, or any other company. At that point they began behaving in a manner that could be described as violating the rules of free enterprise. However, I cannot “prove” the accusations, and Microsoft can insist that all the problems I complain about were due to mistakes rather than deliberate attempts to abuse. Rather than try to prove the accusations, let me briefly discuss some of my personal suspicions.
 
 

Windows NT

In 1988 Microsoft began development of Windows NT, which would give Microsoft an operating system that was more competitive with the Apple. The earlier versions of Windows should have been abandoned. Microsoft should have developed a version of Windows NT for home use, and another version for businesses. Most home users did not need networking, password protection, and other features that businesses needed, so it was justifiable for Microsoft to make a variation of Windows NT for home use. 

Microsoft should have also developed a 32 bit version of DOS. By providing the world with a 32 bit version of DOS, they would have provided the world with what many people today are using Linux and FreeBSD for. 

But Microsoft did not abandon the early versions of Windows, nor did they develop a 32 bit version of DOS. Why they made these decisions is anyone's guess, but I think it was due to paranoia and neurotic cravings for money. A 32 bit version of DOS, for example, would allow competitors to develop user interfaces for it, which might cut into the sales of Windows NT. 

A 32-bit version of DOS would be comparable to Linux. Just as Linux can run different user interfaces, so could a 32-bit version of DOS. (Linux is essentially a 32-bit DOS.) By restricting DOS to 640 kilobytes of memory, and by making it nearly impossible to do multitasking, networking, and multimedia, it was very difficult to develop an interface for it that could compete with Windows NT. 

Microsoft gave consumers a choice between a crummy version of DOS, a crummy version of Windows, or Windows NT. But if they had developed a 32-bit version of DOS, they would be providing consumers with the option of buying DOS and a competitor's interface for it. From the point of view of consumers, this would be a better option, but from the point of view of a Microsoft executive, this would be encouraging competition. 

The reaction of some companies to the crummy versions of DOS and Windows was to develop extended memory managers and other techniques to work around the limitations with memory, multitasking, and networking. Borland even spent time developing a memory manager for their compilers so that their customers would be able to get around the memory limitations. 

A lot of time and money was wasted as software developers tried to work around the limitations of DOS and Windows. Consumers also wasted a lot of time and money trying to get all the extended memory managers, networks, and other software to work properly. All of this wasted time and money could have been put into something productive. We could say Microsoft was responsible for this waste.

If our government had been operating like a referee of a professional sports game they would have stopped Microsoft from behaving in this manner. Microsoft was developing products that did not make any sense; Microsoft was developing products that would never have survived a competitive marketplace. The lack of competition was allowing Microsoft to produce idiotic products simply as a way to create sales and stifle competition. 

By the end of 1993 Windows NT had advanced to the point at which there was absolutely no justification for Microsoft to continue development of the other versions of Windows. But Microsoft continued to work on DOS and Windows. 

Every time Microsoft announced a new version of DOS, I would think to myself that this will be the 32-bit version, and every time I was shocked to find it's still the same DOS with some trivial improvement. I never bothered with any of the extended memory managers because I was certain that soon Microsoft would fix these problems, but I found that I was consistently wrong. I had a tendency to assume that Microsoft management was a group of respectable people who were truly trying to improve the world's software. It took quite a few years of disappointments before I changed my opinion about them. 

In 1995 Microsoft released Windows '95. By 1995 I was doubting the mental qualities of the management of Microsoft, but I was still assuming that they were reasonably respectable people. I assumed Windows 95 was a superior replacement to Windows NT. The reason I assumed this is that all companies improve their products, so a product that is released this year is an improvement over the product that was released in the previous year (except in the cases of serious managment goofs).

Imagine the opposite happening. For example, imagine General Motors announcing a new line of automobiles that is technically inferior to those of the year before. Imagine them going back in time and using the technology of some previous era in their new cars, such as using the inferior electronics of a previous era, or the inferior plastic compounds, or the inferior aluminum alloys. 

Windows 95 should have been an improvement over their existing software. In a sense, Windows95 was an improvement over the earlier versions of Windows. However, Microsoft was maintaining two, separate software divisions. One division was developing Windows NT for businesses, and the other was developing Windows 95 for the home user. The Windows 95 division was not offering the advanced software that the Windows NT group was offering. Instead, they were producing an inferior line of software for home users. All of those people could have been spending their time on productive activities.

Imagine this situation occurring in professional sports. Imagine a football team that has absolutely no competition. Imagine them holding phony games merely to generate sales of tickets. 

When AMD develops the Athlon processor, they are doing so from the point of view of making a processor that is better than what Intel is offering. But when Microsoft developed Windows95, their attitude was not to develop an operating system that was superior to what their competitors were offering. They had no real competition, so they had no pressure to compete. Instead, they were creating software merely to generate sales of software. And they wanted this software to have some irritating features so that people would want to upgrade it. 

Microsoft never would have develop Windows95 if they had competition during the 1990's. Rather, they would have abandoned the 16 bit versions of Windows and put their effort into Windows NT. If there had been a company similar to AMD competing against them, Microsoft would have struggled to produce an operating system that was superior to what the competition was offering. The lack of competition has allowed Microsoft to get away with a lot of abuse. 
 

Windows XP

I can understand the need for copy protection; the point I'd like to bring up is that Microsoft seems paranoid about losing sales. They already make an enormous amount of profit; Microsoft executives are some of the highest-paid people on the planet. How can such weathly people be worried about losing a few sales?

I think their paranoia is because the management is suffering from mental disorders. No matter how much money they have, they never have enough. No matter how many copies of software they sell, they are irritated to think that somebody has a copy that they did not pay for. 

How much money do these people need before they are satisfied? How much money do they need before they can put their effort into developing quality software?
 

Should we follow the law if Microsoft does not have to?

The government should have done something about Microsoft many years ago, but our government does nothing, and the stockholders do nothing, and the employees of Microsoft do nothing. Nobody is doing anything to correct the problems. Therefore, why should a common consumer care whether he takes a copy of Windows legally or not? Why should consumers follow the rules when Microsoft doesn't?

I'm not sure how the situation is in other nations, but here in America businesses are frequently fighting with each other, cheating each other, starting lawsuits to hurt one another, and deceiving consumers. Our government does little to improve the situation. The end result is that many people develop a resentment to government, our legal system, and corporations. Rather than inspire people to become better citizens, Americans spend a lot of time making angry and sarcastic remarks about government, about corporations, and about our court system. It creates a bad social environment.

This same problem would occur with sports if the referees were as incompetent as our government officials. If athletes were allowed to cheat, the spectators would soon be spending most of their time criticizing the referees, complaining about the athletes, and making insulting remarks about the game. 

In order to improve the situation, we need a better government. Unfortunately, the voters in every nation are too incompetent to set up a good government.