Professor Philip Mink

RICHARD: Welcome to the interview series hosted by the Tulip Thesis Blog. Today, my guest is Professor Phillip Mink, assistant term professor at George Mason’s Costello College of Business, director of Pre-Law Advising at the Schar School of Policy and Government, and director of the Patriot Pre-Law Program. Professor Mink contributes heavily to the preparation of students for law school applications, helping them write impactful personal statements, some of which have led to admittance into Harvard, Columbia, and the University of Chicago. Professor Mink has also been a faculty advisor for the University of Delaware’s award-winning Mock Trial Team, where he taught English and Legal Studies. In 2021, he served as president of the Northeast Association of Pre-Law Advisors. Before his career in academia, Professor Mink played a notable role in the 1982 US vs. AT&T case, representing the Baby Bell companies in both the DC Circuit Court of Appeals and the Federal District Court. He also published on their behalf in the Wall Street Journal and Legal Times, as well as writing extensively on international trade in the Journal of Commerce.  

Professor Mink, welcome.  

PHILIP MINK: Thank you very much, Richard. Pleasure to be here.  

RICHARD: My first question is, for someone unaware of the 1982 US vs. AT&T case, what happened, and why was it an important ruling for future anti-trust legislation?   

PHILIP MINK: Well, it's a very unusual case because most antitrust actions deal with monopolies, and we can get to that in a moment. 

AT&T did have a monopoly, but how it differs from many of the cases ongoing now is it was a government-granted monopoly. They operated as a franchise. AT&T owned all the long-distance service, and all the local service, most of it anyway, throughout the entire country. A lot of companies wanted to get into the long-distance business because it was very profitable. 

You can make a lot of money completing long-distance calls, but to complete a long-distance call, say between Chicago and New York, you would have to access AT&T's local networks because they own the local calls. Long distance was separated entirely. It’s not the case now. The technology has advanced so much.  

Back then, if you wanted to make a call to New York City from Chicago, you had to go through both of those local units to get there.  

So the DOJ brought the lawsuits. The first one was back in the ‘40s. They resolved that in ‘56 with a pretty lenient consent decree for AT&T, and then they revived the case later. 

MCI or Microwave Communications Corporation sued, which was an upstart long-distance company. It was an interesting company, but they didn't want to serve all the rural routes that AT&T had to. They just wanted that piece of the long-distance revenue. 

They sued, DOJ sued. They brought their lawsuit again. They revived the ‘56 consent decree. Due to many factors, ultimately, the courts broke up AT&T. They spun off the local operating units; Bell Atlantic, Bell South, Southwestern Bell, and Pacific Bell. 

All those units were spun off as seven separate entities. Those were my clients in the antitrust actions that followed. They spun them off and left AT&T intact. AT&T was later absorbed by Southwest Bell, and it became AT&T, which is a totally different company.  

The goal was to make phone service more competitive. It did not really do that. I’m from the state of Mississippi which is very rural, very underpopulated, lots and lots of areas where you're lucky to get an electrical line. If you wanted to serve that place with a phone, and every state regulatory commission would require that, you have to have a subsidy. 

And the way that the system worked is that the long-distance revenues, which were substantial, would subsidize the local revenues so that they could extend service. Everybody wants to be in the cities because it's high revenues. High margins too. But that was the great fallacy, I think, in the case is it was really a congressional issue to resolve. 

And Congress was trying to get involved around the time of the lawsuit, but for powerplays and so forth in the early Justice Department in the early 1980’s, they went out. The whole system was turned over to a federal judge, Harold Green, who was appointed by Jimmy Carter, I believe in ‘77. Judge Green was very, very anti-monopoly, but again, I think he failed to understand that these were franchises. The way it would work is if in the state of Kansas, a company wanted to operate a phone service, they had to provide universal service. Everybody who wanted a phone could get one. 

That means stringing a telephone wire 30 miles into the middle of nowhere if that's where the nearest house is. And that was the demand that the legislators and public utility regulatory commissions made. Unfortunately, that did not prevail and they went ahead and broke up the companies.  

I think in terms of what it means for antitrust actions today, these are very different kinds of companies; Google, Amazon, Meta. Those companies are not operating under this government framework whereby a local government will grant a monopoly or a franchise to, say Google, to run all searches in the state. That doesn't happen like it did with the phone companies. And that started back in the beginning of the 1900s.  

So we're looking at a lot of money and a lot of power focused in these hands, but the case is very dissimilar from what happened with AT&T. I don't think AT&T holds many lessons at all for what's going on today, just because the technology is so different. 

Back then, if you wanted to own a telephone switch, Bell Atlantic would have to have a switch the size of our house and put it in a building somewhere, and that's what routed all the phone calls. So the phone calls are going to the switch. It was a very rudimentary computer. 

Now all that happens on top of a desktop if that. You've got so much more power. It's a very different world technologically.  

But we still have the subsidies. We still have the system set up so that if you want to install a phone service in Possum Flat, Mississippi, you're going to have to do that if you want to get into Jackson, Mississippi, which is the urban area, and make a lot of money there. But you've got to serve everybody. That's still the rule of law in every state. You have to have that service and that's very, very, very different from Google. Google is free, Amazon membership is free, Meta's free, and Facebook's free. Those are very different sorts of operations.  

RICHARD: Microwave Communications, a telecommunications company, was given permission by the FCC to estabish a private line between St. Louis and Chicago, using the AT&T local exchange. Later, MCI also requested the ability to provide long-distance service, which the FCC rejected. This was later reversed by the US Court of Appeals DC Circuit, along with a ruling that AT&T “could not refuse to connect” it’s lines with MCI’s systems. How important of a role does a competing company like MCI (Microwave Communications) play in antitrust cases and their eventual rulings, and what could’ve been the result if MCI did not want to expand into long-distance? 

PHILIP MINK: MCI would not have existed had it not been able to expand its long distance. Their very existence depended on that ruling. Again, I think it was a fundamental misunderstanding of the way the system, the phone system, and the telecommunications system worked.  

You can sure say MCI can have a chunk of this service, and it would be a little bit more competitive. 

But long-distance rates were regulated very carefully by the Federal Communications Commission, which is why they turned down the initial application because it wanted those subsidies for local phone service. That was always such a crucial part of the system. AT&T did have a monopoly, but it's not the kind of monopoly that is usually recognized under the Sherman Act. 

Their monopolies were granted by states so that they could provide that universal service. MCI did start the ball rolling. That's what ignited the Justice Department to reopen the case in 1980. That's when Ronald Reagan was elected President. 

He installed a guy named William French Smith as the Attorney General. The problem was, at that very time the lawsuit was revived, Congress was trying to write a bill that would have reconfigured the system. It was really essentially a political decision. It should have been a political decision because they could take into account; we have rural representatives from rural areas who look at the system and say “this is what our constituents need”.  

The 11th Circuit didn't look at that. They're not going to care about that. Neither did Judge Green when he was ruling on all these applications for the Bell Companies to get into more competitive operations. I can understand why somebody would think it was important to change the system, but I've never heard anybody say that and at the same time address the universal service component of the phone system. 

That's something that still exists, but I think MCI did start this whole ball rolling. I think they've now been absorbed by another company, so it's constantly changing landscape, but they were very important. Their lawsuit was huge.  

RICHARD: Due to the 1949 complaint’s ruling, one could predict another antitrust case in the future due to the blowback of the decision. In an article by the Federal Judicial Center, “The relative ease with which the company settled the 1949 lawsuit via the 1956 consent decree had caused a firestorm of public criticism”. How much of a role does public sentiment play in anti-trust cases, and in what circumstances would regulators weight it less in their decision-making process?  

PHILIP MINK: I don't think public sentiment played much of a role in that ‘56 consent decree. I think the ‘56 consent decree was considered lenient toward the company, and I can understand that. But that leniency was, in part, to preserve the subsidy system. Without those subsidies a lot of people wouldn't have had phone service. So those kinds of comments, and I get it, antitrust enforcers are always going to go to that, but they're looking at a very narrow part of the whole situation.  

I actually testified on the Hill a couple of times before the antitrust committee and one of the primary questions was: why should the Bell companies, the local telephone companies, own all of these markets?  

I was testifying on a panel with a public service commissioner from the state of New York. Howard Metzenbaum was the chair of the committee at the time. I said: “Mr. Chairman, nobody else would try to get into these services because if you provide universal service for the state of New York, you've got to string wires way up into the Adirondack Mountains, all west of the state, upper part of the state”. Of course, everybody wants that New York City revenue, but they've got to have at the same time, all these other networks covered, areas covered, and the Public Service Commissioner did agree with me. He said:  “Yes, Mr. Mink is right.”  

They would not accept that offer to compete with the Bell Companies because they didn't want that obligation, that service obligation. And again, the National Association of Public Utility Commissions was against the consent decree in ‘82. I don't think the ‘56 decree meant that much necessarily. 

I think it really became an issue again because of MCI. Keep in mind too, the way AT&T operated its system, you couldn't buy another piece of equipment from another company. You had to have an AT&T-approved telephone to get into the system. I can see why that would be unfair, but again, it's all geared around subsidies. And a lot of subsidy went to Bell Labs, which was in New Jersey at the time. Unbelievably competent organization with several Nobel Prize winners. My uncle was actually an engineer patent lawyer for that company for many years. He spent his entire career there. It was a really fine company. But again, that was a subsidy operation. They weren't making money necessarily from their research, but they had enough money at their disposal to create this really incredible unit devoted to pure research. And they did a lot of great stuff.  

RICHARD: According to the same Federal Judicial Center article, “Above all else, AT&T’s management did not want to risk losing Western Electric, which it saw as a crucial part of the company’s future, together with Bell Labs.” Throughout the antitrust legislation process, there are decisions that takes place within the company about what specific parts of it’s business it is willing to restrict or divest and what it would like to keep. What sort of things do companies consider when making these decisions?   

PHILIP MINK: It's all going to revolve around revenue. These are private companies. They've got to survive. They have their shareholders they have to please.  

They wanted to keep Western Electric because it was very profitable. They wanted to keep long distance because it was very profitable and they did that when they agreed to the breakup in ‘82 and then implemented the breakup in ‘84. 

Western Electric was a key component of it. I think the company still exists, but it's very different now. Western Electric was, at that time, a manufacturer of telephone equipment. You can get phones anywhere now. Everybody makes phones. You can all hook into the system. So I think AT&T's issue was quality; we have to maintain the quality of these telephones that connect to our service. The FCC did implement a rule that, if the device met FCC standards, they could connect it to the network and it wouldn't cause a problem. 

 But ultimately it was all around revenue. And again, the revenues were all connected to the subsidies to rural. If you go to a state like Wyoming or North Dakota, you have miles and miles and miles of nothing except for nature. 

But that means, back at the time, you had to string wire to do that. You could probably reach some of those locales now by microwave or GPS's. But you didn't have that option back then. So, who's going to serve a rural county in Wyoming with say, a thousand people? Covers a huge area. Who's going to serve that area if you don't have a subsidy from long distance and from manufacturing? That was always the issue. 

RICHARD: After separating it’s local companies into “Baby Bells”, each offering services to their local regions, the Baby Bell companies thrived and eventually became Verizon, the AT&T we know today, and Lumen Technologies. After the decision, what effect did the regional companies independent success have on regulatory and public opinion of the ruling?  

PHILIP MINK: I think the ruling is generally, at the time, was meaningful to a lot of people. That population is much older now. When you broke it up in ‘82, a lot of the World War II generation was still around, still working. Many of them are gone now. But in terms of public impression, I don't think it made that much of a difference because it didn't really affect phone service at all. 

You still had the option of making local phone calls, as you always did. You still had the option of making long-distance calls. This was actually a very famous time when you would get these cold calls from long distance providers saying you need phone service and they would offer competitive services for long distance rates. 

Judge Green actually drew a map with 150 LATAs, local access transport areas. He divided the country up into these local systems, and if your phone call crossed over one of those lines, that was a long-distance call. It had nothing to do with the reality of making the call. 

His regulation of the industry was so stiff and backward-looking that he decided to go that route. Again, most people didn't care because it didn't really interfere with their phone service at all. They could get another provider. They did become more competitive on rates. The local phone companies did do quite well after that but, part of the reason for that, was that when the FCC came out with cellular rules, they gave automatically to the seven Baby Bells, guaranteed phone service. So you could get a cellular service. 

So they had all these cell options open. That's a money-making operation. Cell became a huge industry. And lots of people turn to that. I'm doing the same thing myself. I don't really use a landline at all anymore, just cell. And a lot of people criticized that at the time, but the reason the FCC did that is that they wanted those companies to have the revenue so they could subsidize service in rural areas. That was the sole reason for that. They wanted to preserve the company because companies provided a very central service. It was also a highly politicized service. If you start losing your phone service, you're going to have a whole lot of members of the House of Representatives or your Senators raising cane with regulators about what's happening to these people who can't get phone service. 

I think the AT&T case was huge in its time because of the size of the corporation. It's hard to convey how big AT&T was. By far the largest corporation in the world. I'm not sure there's anything now that could come close to that. They were just massive. But for a reason. That's what we needed in those days to have universal service, and I actually did a lot of historical research for the lawsuit. If you went back to the original days, different companies were trying to string wires for phone service, and you would see these huge networks of wires covering city streets. You'd have old photographs of main streets in the state capitals with wires going everywhere because of different phone services, and I think local regulators wanted to eliminate that, like they do with Cable TV now. 

Cable TV is exactly what phone service was back then, except that now cable will allow a couple of providers, maybe three. Back then there was just one phone service and they were stringing above ground. So you had them on poles, not underground. So that's one of the main things that they wanted to change. 

But after that system was implemented, after AT&T came into power, not many people noticed the lawsuit. It was a big deal in D. C. Huge deal in D. C. and in the court system. But ultimately, I think the public went right along their merry way and got exactly what they needed from the new system. 

RICHARD: Professor Mink, thank you so much for your time.