AT&T 1984

(Part 1: Goodbye Ma Bell)

SUMMARY:
Before 1984, the United States public network utilized practices, procedures, and equipment
largely determined by AT&T and the Bell System. The network performed exceedingly well
and, for customers, life was simple. With the advent of divestiture in 1984, when AT&T and its
operating telephone companies parted company, the Department of Justice's Modification of
Final Judgment broke the seamless national network into 164 separate pieces called Local
Access and Transport Areas (LATAs) to handle local phone traffic. Through this move the DOJ
created two distinct types of service providers local exchange carriers (LECs) and interexchange
carriers (IXCs).
The divestiture of AT&T (A.K.A. "Ma Bell") was very costly both to AT&T, the Baby Bells and
the consumer. Litigation costs alone for AT&T up to the January 8, 1982 announcement of
divestiture was 360 million dollars along with an additional 15 million dollars of costs to the
federal government. But the costs didn't stop there.
A judge in Philadelphia by the name of Harold H. Greene took up the case of whether the
United States government had legally granted the Bell system monopoly status. The judge
decided that the Bell system was illegal and therefore had to be broken up. But how, and what
were to be the new rules? The judge spent the rest of his professional life dealing with the can of
worms that he created. He would rule over how the Bell System would look in the future, right
down to who would got to paint their vans in the old telephone colors and how a microwave
tower in the middle of nowhere would be divided to handle telephone traffic.
January 1, 1984, was a landmark day for American Telephone & Telegraph (AT&T). On that
day the federal governments order to divest its twenty-two regional Bell telephone companies
took effect.Ma Bell ceased to exist as the giant regulated monopoly that had touched the lives
of generations of Americans. In fact, the Court even prohibited AT&T from using the famous
bell symbol. As an unregulated company, AT&T was free to compete with IBM and other
computer and telecommunications companies for pieces of huge information processing and
transmitting markets. Critical observer said that AT&Ts utility-oriented corporate culture would
make it difficult, if not impossible to muster the marketing know-how needed to compete
successfully with companies. Others were skeptical about AT&Ts stated intention to speed up
its new product development process.

A GOLDEN OPPORTUNITY
AT&T Information System was created in January 1983 to market information processing
equipment. Two major sub units were formed. After the divestiture, General Business System
(GBS) would be responsible for selling a high volume of small systems. Large accounts werebto
be handled by the 12,000-person National Business Systems unit. A forty-three-year-old
manager, William F. Buehler, was appointed vice president and head of 3,000-person GBS unit.
According to observers, he was given a free hand by his boss to shake the old ways. Buehlers
 sixteen-hour days convinced every-one right from the start that he was serious about pumping
some zest into the AT&T bureaucracy.

In 1979 and 1980, the Federal Communications Commission (FCC) conducted Computer Inquiry
I and II, which restricted Western Electric from selling "enhanced services", such as telephone
equipment and other unregulated business, except through a fully separated AT&T subsidiary.
As a result, American Bell, Inc. was formed, and began operations on January 1, 1983.
Employees at American Bell who worked in AT&T facilities that housed Bell Labs and Western
Electric offices often encountered bureaucratic red tape, such as restrictions on using the one
library in the same building because it was owned by Bell Labs.
American Bell contained two core units:

American Bell Consumer Products - sold residential telephones/terminal equipment

American Bell Advanced Information Systems - sold business telephone/terminal equipment,
such as the American Bell Merlin system

The AT&T Globe logo (the "Death Star") originated for use with American Bell. When Judge
Greene banned AT&T from using any Bell marks whatsoever after the breakup, except for usage
of the Bell Labs name, AT&T switched over to the Globe logo.

American Bell was renamed AT&T Information Systems on January 1, 1984, and integrated
into AT&T Technologies. The business unit, American Bell Advanced Information Systems, was
absorbed into AT&T Network Systems, while American Bell Consumer Products,
renamed AT&T Consumer Products, became a unit of AT&T Technologies.
AT&T Information Systems held its status as separate from any other AT&T company until
1986, following several FCC decisions which loosened restrictions set before the breakup.
AN UNCONVENTIONAL APPROACH
A self-proclaimed charismatic leader who reportedly likes the limelight and tends to dominate
conversations, Buehler made one thing perfectly clear to his people: he wanted results. But he
was willing to do whatever was needed to help them get those results. In a style that was totally
out of character with the old Ma Bell way of doing things, Buehler implemented lessons he had
learned from two readings of Peters and Watermans best-seller, In Search of Excellence.
Through conversations and internal documents he echoed Peters and Watermans advice: bias
for action, keep it simple, reward results, not process and the customer is king. He did a
lot of MBWA (management by wandering around), visiting all of his units twenty-seven
branches across the country. Instead of relying on formal presentations to get across his way of
doing things, he freely crossed once-sacred hierarchical lines to reach his people more
informally. In one instance, Buehler reportedly chatted with billing personnel in New Jersey
while they all lunched on submarine sandwiches. Most branch personnel had never even met an
AT&T vice president before.
Not that Buehler was a softie. He established tough sales quotas, making sure that those who met
them were handsomely rewarded and those who failed were driven out. To take advantage of
peer pressure, he posted sales results for all to see. It took a while for his way to catch on, and his
units sales initially trailed those of the National Business Systems unit. Other AT&T units
appeared to enjoy his apparent failure. At this critical juncture his boss, the man responsible for
bringing Buehler in from Pacific Telephone Company, left AT&T.

During Buehlers first year, over one-third of his sales force either quit, were transferred, or were
fired. However, the remaining sales people responded favorably to his willingness to streamline
bureaucratic forms (for example, reducing four-page standard contracts tone page) and to
eliminate what he believed to be useless memos, meetings, and planning manuals. In addition, he
made decisions much more quickly than he had his predecessors. Buehlers unconventional,
action-oriented approach eventually caught on, and salespeople began exceeding their quotas and
enjoying the healthy commissions (the highest in AT&T) he had established.

A SURPRISE ENDING
One would naturally expect that Buehler was destined to become a crown prince at AT&T.
Unfortunately, such was not to be the case. Barely a year after taking his new position, Buehler
was pushed aside into what The Wall Street Journal termed an obscure planning position,
though he retained his vice president title. Insiders reported that Buehlers unique style of
leadership had ruffled the feathers of top management. Observes were left to ponder if AT&T
was thereby stifling the sort of flexibility and competitiveness needed to take on IBM.

QUESTION # 3
What lessons in excellence had Buehler apparently learned from In Search of Excellence?
ANSWER:
Peters and Waterman found eight common themes which they argued were responsible for the
success of the chosen corporations. The book devotes one chapter to each theme.

1. A bias for action, active decision making - 'getting on with it'. Facilitate quick decision
making & problem solving tends to avoid bureaucratic control
2. Close to the customer - learning from the people served by the business.
3. Autonomy and entrepreneurship - fostering innovation and nurturing 'champions'.
4. Productivity through people- treating rank and file employees as a source of quality.
5. Hands-on, value-driven - management philosophy that guides everyday practice -
management showing its commitment.
6. Stick to the knitting - stay with the business that you know.
7. Simple form, lean staff - some of the best companies have minimal HQ staff.
8. Simultaneous loose-tight properties - autonomy in shop-floor activities plus centralized
values.

QUESTION #4
Was Buehlers quest for excellence at AT&T doomed from the start. Explain.
During Buehlers first year, over one-third of his sales force either quit, were transferred, or
were fired. However, the remaining sales people responded favorably to his willingness to
streamline bureaucratic forms (for example, reducing four-page standard contracts tone page)
and to eliminate what he believed to be useless memos, meetings, and planning manuals. In
addition, he made decisions much more quickly than he had his predecessors. Buehlers
unconventional, action-oriented approach eventually caught on, and salespeople began exceeding
their quotas and enjoying the healthy commissions (the highest in AT&T) he had established.