Why AT&T Missed the Next Big Thing

The wonderful thing about the Web is that you can find anything there, whether it's true or not. Case in point: The legend that in 1984, AT&T "decided not to invest in cellular telephony, believing that the market wouldn't support more than a million cellular handsets by 2000." That's repeated in an opinion column on computerworld.com today. (It may also be in the print edition; my copy hasn't arrived yet.)

It makes a great story of corporate blindness, doesn't it? Creaky old AT&T, the giant monopoly in landline telephones, can't see the potential in these newfangled wireless phones, and so cedes the market for the Next Big Thing to upstarts who plow Ma Bell under. I think I've heard a half-dozen different pundits toss off this story in the past year.

Just one problem: It's not true. Not even a little bit.

Oh, and it's also easy to discover that it's not true. Even a little Google-style research turns up the real history from numerous authoritative sources.

Which is that AT&T invested heavily in wireless for decades before that legendary 1984 date -- first in what were then called radio-telephones, then in pre-cellular mobile service. It was AT&T that lobbied the FCC for years to reallocate spectrum so it would be available for mobile phone use -- and for years AT&T's requests were denied, and AT&T kept pushing.

When the FCC finally allocated spectrum specifically for high-volume mobile phone service in 1970, it was AT&T that proposed (in 1971) using the new bandwidth for cellular service. Motorola, which had pioneered cellular technology, was making money from pre-cellular wireless service and lobbied against cellular. Years of lawsuits later, the FCC finally made cellular spectrum widely available in 1982.

In the meantime, AT&T's Illinois Bell subsidiary started making cellular service available to real customers in 1977 on a test basis in Chicago. When the FCC finally started permitting applications for cellular service in 1982, an AT&T subsidiary called AMPS was granted the first cellular licenses.

In other words, AT&T didn't just not miss cellular's potential. AT&T saw the potential, invested in it, fought for years against foot-dragging pre-cell wireless providers before the FCC and in federal court, and was first in line when it was finally possible to implement.

So how did AT&T come to be so far behind in cellular? Yes, that 1984 date is meaningful. That's the year AT&T broke up into Ma Bell and the Baby Bells. According to the consent agreement, cellular service was deemed a local service. So the Baby Bells got cellular, while what remained of AT&T had to wait years before it could (re)enter the business it had fought for and invested in.

Not because AT&T was stupid and blind. But because it was smart, clear-sighted -- and a monopoly facing antitrust action.

OK, so "AT&T is stupid about cellular" is yet another myth that turns out to be wrong. So what?

So this: These easy-to-swallow stories feel good. They feel right. And they lead us down the garden path to simple thinking. When we repeat these swell-sounding legends, we risk taking the wrong lessons from them -- especially since they're based on make-believe, not on reality.

And when analysts and pundits do their deep thinking based on make-believe, we get elaborate, carefully thought-out advice that's based on bunk.

That doesn't guarantee that the advice will be useless. But it sure doesn't help anyone's credibility.