[comp.dcom.telecom] AT&T and Rural Telephony, circa 1935

telecom@eecs.nwu.edu (TELECOM Moderator) (07/25/89)

In Monday's Digest, Kevin McConnaughey raised an interesting point by
asking what might happen to rural (or less populated areas) phone service
over the next few years as the plant began to wear out. He wondered if AT&T
would show the same interest in 'universal service' they have shown in the
past when expenses involved in upgrading and maintainence began getting
heavy.

Interesting he should mention it....

A little known side to the long, and admittedly sometimes sordid history
of the American Telephone and Telegraph Company was its constant grab for
small telcos from the early years of this century until the mid-point,
when the Supreme Court ruled that AT&T was not to acquire any more operating
companies, with a few exceptions; one being if a local operating company
was bankrupt, or otherwise in imminent danger of discontinuing operation,
then AT&T <had> to take it!

AT&T had its own rules where the farmers were concerned, however, and they
found in King Roosevelt II their arch-enemy. He threatened to 'nationalize'
Mother a couple of times, or break her up. Until about twenty years into
this century, electricity was not available to the farmers. No one wanted
to go to the expense of running electrical lines. One depression-era project
of King Roosevelt II was the Rural Electrification Administration. The REA
was charged with the task of getting electrical power to the many rural
areas of America.

When AT&T stalled on supplying phone service, citing the prohibitive costs
of installation and maintainence for just a few people, well, King Roosevelt
decided to make the Rural Electrification Administration do it instead.
With loans guarenteed by the federal government -- a very important part
of the project in depression times -- the REA helped hundreds of tiny little
telephone cooperatives set up shop across America.

The farmers in a given area pooled their money, supplemented with a federally
guarenteed loan, and built the building, bought and installed the switchboard,
and typically, hired their wives and daughters to run the board. Usually
three or four telephone cooperatives in nearby areas would share the services
and employment of a single techician who variously went from house to house
repairing/installing instruments, repairing the switchboard as needed, and
maintaining the outside wiring.

AT&T was 'gracious enough' to let them interconnect for a nice fee, provided
the farmers installed the wire to the nearest AT&T point-of-presence, which
might be twenty miles down the highway or wherever. And of course there
were interconnections to neighboring telephone cooperatives as well as the
exchange in a neighboring town of some size.

The rules and regulations of service, and the prices, were set by the members
of the cooperative, at periodic meetings. One such group, typical of most,
was the River Valley Telephone Cooperative Society, with 26 subscribers.
The officers met monthly to discuss business, and at semi-annual meetings
of the members of the Corporation, rates and policies were discussed.

For years, these cooperatives paid on their mortgages. Almost two decades
later, most of them were finally able to 'burn the mortgage' and own their
building and (by now severely antiquated!) exchange plant free and clear.

And once the mortgage was paid off, who showed up on the scene? Why AT&T
of course! So here sit a bunch of people with twenty year old apparatus,
long since technically obsolete, but at least with the outside plant and
subscriber base in place, and AT&T offers them a few cents on the dollar
to buy them out. By now the switchboard operator is an old lady and she
wants to retire; they can't find any younger people who want to work for
the cooperative at the low wages they were paying their wives and daughters
all these years; the equipment needs almost constant (and costly) repair;
and AT&T steps in as savior.....

I have my doubts about AT&T's motives, frankly. But curiously, almost as
soon as the mortgages were paid, the Mother Company was on the scene,
ready to pounce. Or sometimes they would wait until a disaster hit, then
move in. When the Richmond, Indiana central office burned down on Easter
Sunday morning many years ago, before the ashes had cooled, executives
from Indiana Bell and AT&T were on location, tsk-tsking and poking in
the rubble. The little telco there was a family operation; the same family
had owned it for forty years. You can assume the insurance came nowhere close
to covering the fire losses in what had been a losing business for a few
years anyway. AT&T bought them out, midst the rubble, pennies on the dollar.

*That* was the way AT&T did business for years. That was how they acquired
telcos by the hundreds and achieved their monopoly status. When they moved
into Chicago in the early twenties to take over the Chicago Telephone Company
it was far from a gentle takeover. The stockholder fights went on for two
year afterward in the courts.

I cannot fault AT&T's technical standards in any way. I cannot fault their
end results: the finest telephone network in the world, bar none. But it
was very bloody at times, with court battles the norm instead of the exception
to the rule. And there were many small telcos which flatly refused -- and
still do so to this day -- to sell out to Bell. It was the bitter fighting
with AT&T and the need for mutual protection against AT&T which led to the
formation of USITA -- The United States Independent Telephone Association;
a group that today is on the best of terms with AT&T, and frequently has
executives of AT&T as guest speakers at their annual conventions, etc.

Yesterday, Jon Solomon said it was the greed of the AOS people which kept
the drive going for divestiture. Maybe, but AT&T's own image in the early
years of this century has not been forgotten by a few people either; people
who cheered when AT&T finally got its come-uppance.

In defense of Sprint/MCI et al, I must say that for the first forty years
or so of its corporate existence, AT&T was just as bad, or maybe worse
in terms of sheer greed. Remind me to post an article sometime on their
reaction to the companies which manufactured telephones in the early years
of this century after Mother's patent expired. Talk about ruthless!

Patrick Townson