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With sales of some $7 billion, Western Electric ranks twelfth on FORTUNE'S list of the 500 largest industrial corporations. Partly because of economies of scale, Western Electric is able to supply equipment to Bell at a relatively low cost —one reason that AT&T operates profitably despite regulation. The trustbusters, however, would not only split off Western Electric from AT&T but also carve it up into two or three smaller, independent companies, on the theory that others would then be better able to compete for Bell's business.
The Government's second goal is somehow to separate Bell's regional phone companies from its highly profitable Long Lines Division, which generates a big part of A T & T's $24 billion revenues. The trustbusters contend that other companies trying to provide cheaper long-distance service to corporate customers have been blocked by the reluctance of regional Bell companies to let them link up with their local phone networks. If Long Lines were split off, Justice says, other carriers using newer technology, notably microwave transmission, would find it easier to expand. Although they do not explain why, the trustbusters say that they might also ask the courts to force AT&T to give up Bell Laboratories, the company's research facility. .
Barring an out-of-court settlement —and AT&T Chairman John D. deButts vows that Bell "will fight to the end"—it could be ten years before the case is finally decided in the courts. It is unlikely that the trustbusters will get all they want, but if they did, the consequences would be enormous.
Stockholders would probably see their AT&T shares replaced by stock in new companies created out of Bell's regional operating companies, its longdistance operations and Western Electric. Many Wall Streeters would not be surprised if the markets put a higher value on Bell's reorganized parts than they did on the whole. Best postdivestiture bet: Western Electric. Once out from under Bell's regulated umbrella, it could capitalize on its expertise in some areas —computers, for instance—in which the Government now forbids it to compete because of A T & T's special status.
The telecommunications industry would erupt in a flurry of competitive activity, at least theoretically. A number of small firms with big ideas about innovations in the fast-growing fields of computer-data-transmission hardware and microwave relay reckon that they would have more room to grow if Bell were broken up. But the firms that would be likely to profit most from any dismemberment of A T & T are industry giants: ITT, General Telephone & Electronics, Hughes Aircraft, IBM and other computer makers, as well as some big European and Japanese suppliers.