What the Tech Giants Will Learn from Standard Oil and AT&T

The United States woke up on January 1, 1984 to discover that its telephones worked just as they had the day before. But AT&T started the day a new company. Of the $149.5 billion in assets it had the day before, it retained $34 billion. Of its 1,009,000 employees it retained 373,000. Gone even was the famous Bell logo and name, given under the agreement to the regional telephone companies, excepting only the name’s use in Bell Labs. In its place was a stylized globe and the monogram “AT&T.” – The History of AT&T

Anyone old enough to remember “Ma Bell” and all that it represented was stunned when Judge Harold H. Greene ruled in favor of the U.S. Department of Justice for the divestiture of telecommunications giant American Telephone and Telegraph (AT&T).  What a lot of people may not remember is that AT&T was content with its regulated monopoly status and even “embraced” regulation as a way of keeping a tight hold on the telecommunications industry.

Amidst the District’s Attorney General taking aim at Facebook and a recent article “America’s Tech Giants Opt-Out of Idea of Being Regulated Like Utilities” highlighting the House of Representative Judiciary Committee meeting on Facebook, Twitter, and Google pointed to the need to regulate these tech giants like a utility, the pressure continues to mount. Although these information age behemoths may balk at the idea of being treated like a utility, they would be wise to look back at stodgy industrial-age giants like U.S. Steel, Standard Oil, and American Telephone & Telegraph (AT&T). As the industrial age has given way to the Information age, these new moguls think they are immune to regulation and restrictions.

The early days of the telecommunications industry are very similar to where we are today. The telecom industry was littered with companies vying for position and dominance in a wide-open marketplace. Barriers to entry were dissolving as critical technology patents were ending and geographic power bases started bumping up against one another. AT&T seized power by gobbling up the competition. Sound familiar? It should.

Facebook, Twitter, and Google are following a similar course with over 300 combined acquisitions over the past 10 years. These acquisitions cross a number of social media platforms creating a virtual lock on avenues into the social media landscape. Creating barriers to entry undermine the initial altruistic spirit the Internet was born on, or at least it claims it was born on. The tide always turns on behemoths.

Ask Standard Oil when The Supreme Court ruled against it in 1911. Public sentiment is fickle and what’s initially embraced eventually sours. The combination Cambridge Analytica, daily Twitter storms by our Commander-in-Chief, and the most recent requests by these social media giants to hold on to users’ data, claiming it as its own, is creating the perfect storm.

So, what can the tech giants learn from the divestiture of AT&T? It’s quite simple. First, when you are in the cross-hairs of the government, consider it quicksand, and stop resisting. Secondly, and maybe the biggest lesson learned is that AT&T held its monopoly status longer because it embraced regulation. It even used the fact that it was regulated as a defense for maintaining monopoly status. A third suggestion comes from game theory; first-mover advantage. It works just like it sounds. Be cooperative (another game theory principle) find a sweet spot and place the good citizen card.

The government has hundreds of years of statutes it can call upon when it really wants to bring you down. Don’t be fooled by the 70 plus-year-old doddering congressperson who acts like social media is a new STD. For every one of them is a millennial staffer who knows exactly how the game is played and would like nothing more than make a name at your expense.  The billionaire darlings image has worn off in the midst of data breaches and foreign hacks. Don’t let your smug arrogance write a check that… you know the rest. Find the sweet spot and embrace regulation.