ANALYSIS: THE POWER OF PR - Public Affairs - Open lines: how AT&T monopolized phones

Consumer watchdogs argue that the proposed merger between MCI Worldcom and Sprint will lead to a duopoly, with AT&T remaining number one. Dimly remembered in today’s deregulated world of telecommunications is that at one time, AT&T’s ability to offer ’one policy, one system, universal service’ had, thanks to PR, commended itself to the nation.

Consumer watchdogs argue that the proposed merger between MCI Worldcom and Sprint will lead to a duopoly, with AT&T remaining number one. Dimly remembered in today’s deregulated world of telecommunications is that at one time, AT&T’s ability to offer ’one policy, one system, universal service’ had, thanks to PR, commended itself to the nation.

Consumer watchdogs argue that the proposed merger between MCI

Worldcom and Sprint will lead to a duopoly, with AT&T remaining number

one. Dimly remembered in today’s deregulated world of telecommunications

is that at one time, AT&T’s ability to offer ’one policy, one system,

universal service’ had, thanks to PR, commended itself to the

nation.



In 1982, AT&T initiated an agreement with the Justice Department to

divest itself of its local phone systems, creating today’s more

competitive marketplace.



But earlier efforts to break up or permanently nationalize the phone

company did not succeed thanks in part to the intelligent conception of

PR practiced by AT&T.



More than just talk



Chester Burger wrote in The Public Relations Quarterly (1967) that

AT&T’s PR success was its realization that ’good public relations come

by providing good service, not merely by talking about it’ and by

listening closely to the public.



At the turn of the century, however, AT&T’s reputation was sagging.

After the Bell System patents expired in the early 1890s, the telephone

industry suddenly became much more competitive. While Bell had exercised

total control over the nation’s phone service in 1893, it had fallen to

51% in 1907. Author John Brooks in Telephone: The First Hundred Years

notes that there were complaints about poor service and business

tactics. At the time, many reformers were advocating state control of

public utilities, including the phone industry. Concerned about its poor

reputation, AT&T hired The Publicity Bureau. But the PR program didn’t

take off until 1907, when Theodore Vail became president of the

corporation.



As general manager of the American Bell Telephone Company in 1883, Vail

had sent letters to Bell agents inquiring about the reactions of

customers to their service. AT&T PR manager George Griswold wrote in The

Public Relations Quarterly (1967) that upon Vail’s return, an open press

policy was implemented. ’The only policy to govern the publicity is that

whatever is said or told should be absolutely correct, and that no

material fact, even if unfavorable ... should be held back,’ he quotes

Vail as having announced.



Later, Vail would insist, ’If we don’t tell the truth about ourselves,

someone else will.’



The first report Vail issued to shareholders included a section titled

’Public Relations’ that held the most sophisticated view of PR - that it

is concerned with all the company says and does that impacts key

publics, and is not just confined to a publicity program.



Vail argued that competition led to wasteful duplication in providing a

phone service, but also asserted that ’if there is to be no competition,

there should be public control’ provided that the regulators

acknowledged that capital required a ’fair return’ on investment. Later,

some officials in the newly installed Wilson administration were

considering nationalizing the phone system. AT&T, in what is known as

the ’Kingsbury Commitment,’ helped to forestall such moves by agreeing

to allow competitors to use Bell lines and to seek regulatory approval

when it came to takeovers of competitors.



Vail had instituted an institutional ad campaign, but the Bell system

also backed up the advertising with a massive, integrated system of

public relations activities. A federal takeover of the phone system did

occur during World War I but ended quickly. Historian Roland March

writes that Vail and AT&T believed their decade-long PR campaign helped

contribute to the quick return of control.



Former AT&T VP for PR Ed Block notes that the success of Vail and his

publicity manager James Drummond Ellsworth was furthered by Arthur Page,

the first PR director to hold the rank of VP in a corporation. Page,

noted Block in a 1979 lecture at Ball State University, ’was able to

further institutionalize - and broaden - the practice of public

relations within the business.’



Page believed, like Vail, that businesses needed public approval to

operate in a democratic society. Therefore, the corporation’s ability to

provide good service was of the utmost importance. Under Page’s

leadership, Bell started to make regular use of public opinion surveys

to monitor attitudes toward the Bell system. Furthermore, Page stressed

that employees were important because their manner in dealing with

customers would provide the benchmark that would help determine how

consumers judged AT&T. Given the status of AT&T as a virtual monopoly,

Page made sure customers saw Bell not as a lethargic organization, but

committed to innovation and quality service.



’It took a long time for the idea to get into practice that everything

said and done by the Bell System should be considered as to its

acceptability by the public,’ Page would write. But it was important

that the policies be put into practice because Page stressed, ’Public

relations is 90% doing and 10% talking about it.’



In keeping with Vail’s policy of openness, AT&T proved cooperative when

the company came under investigation by the Federal Communications

Commission in 1935. Fortune magazine in March 1939 credited AT&T’s PR

strategies as having helped the corporation avoid serious action by the

government.



PR continued to play an important role at AT&T, but a reaction against

’bigness’ in corporations and other institutions started taking

hold.



In 1974, the Justice Department filed an anti-trust suit against

AT&T.



Mike Keady and Rich Dunshee, authors of the paper ’A Heritage of

Excellence: Public Relations at AT&T,’ fault the company for failing to

heed Vail’s belief that the company ’conform itself to the public’s

wishes.’ The public, they note, wanted competition in telecommunications

but AT&T backed legislation in Congress to restrict competition.



Getting out of the game



In hindsight, says Block, Keady and Dunshee offered fair criticism. The

public and the big customers were not yelling for a breakup by any

means, but clearly desired better cost and pricing options. But Block

thinks the monopoly would have been difficult to sustain anyway because

of changes in technology.



The 1982 agreement forged between AT&T and the Justice Department came

about because AT&T’s management was worried about the shape of

legislation in Congress and the anti-trust case was in trial. If no

settlement was reached, the judge would impose the terms.



The company agreed to divest itself of the local Bells, but remained

active in the long-distance and equipment markets. Now the

telecommunications business is changing once more in the era of the

Internet. AT&T will be tested once again on how well it adheres to the

principles of Vail, Ellsworth and Page in facing these new challenges.

Current VP for PR Dick Martin says the precepts of the three are alive

and well: ’I try to live up to that standard.’



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