For many years, most
phones in the US carried the Western Electric
name, and a stern warning:
Bell System Property. Not For Sale.
People paid to rent phones, month after month; and a phone could
earn back hundreds of times its cost.
When phones became
consumer products in the late 70s, most people bought the phones they had
been renting, or bought newer models from retail stores or catalogs.
Things got confusing
during the breakup of the Bell System in January, 1984. Lots of bewildered
people turned in phones they had been renting, because they thought they now
had to buy.
It was easy to become
AT&T wanted to sell
phone gear to companies like MCI and Sprint, who competed with AT&T. These
companies were reluctant to spend money that would enrich their enemy, so
AT&T split apart again in 1996.
The phone equipment
manufacturing and sales operation was named "Lucent
Technologies." Lucent was granted the right to use the AT&T brand
name for several years until the Lucent name could be established in the
minds of America's shoppers. The plan was hopeless -- Lucent never became a
consumer brand, so Lucent phones carried both Lucent and AT&T labels.
In the fall of 1997, Lucent joined Dutch
electronics giant Philips (parent of
Norelco, Magnavox, Sylvania and others) in a joint venture to make and
market consumer phones and cellphones.
The partnered companies
had planned to use the Philips brand name. That was another DUMB decision,
because neither "Philips" nor "Lucent" means much on the shelves at Circuit
City and Sears. After a few months, Lucent got permission to keep using the
Regardless of the brand
name, the joint venture was a very bad
idea, and was killed after less than one year.
Motorola bought part of
Lucent's cellular phone facility in Piscataway, N.J., to operate as a design
AT&T had been the
premier telecom label, and commanded a premium price that was not always
justified by what was inside the carton. Identical or nearly-identical
products were often available at lower prices with different brand names.
AT&T once ran an
expensive ad campaign -- possibly the only TV commercials ever broadcast for
consumer phones -- promoting the virtues of "Genuine
Bell." The campaign was a sham because many Bell (and, later,
AT&T) phones were made by others. Sometimes an AT&T-made plastic shell
contained non-AT&T innards. Sometimes a phone was AT&T inside, and the shell
came from someone else. Often, it was all from someone else, but the quality
was usually quite good.
Lucent was in an
ironic situation, as it tried to sell its consumer phone business in 1999.
There's nothing very special about its factories and product designs. Its
biggest asset was the AT&T label, which it twice planned to give up, but
could not live without.
In January 2000, the
Lucent/AT&T package was sold for $113.3 million to
VTech, an Asian company that seems to be
unable to make two properly-functioning phones in the same week. VTech has
previously made cordless phones that carried AT&T labels (and lots of other
labels), and many were just plain awful.
Hong Kong-based VTech
has a place in telecom history for introducing the first 900MHz cordless in
1991. They are capable of producing excellent products, but the company has
been plagued with terrible quality control. Recent concentration has been in
cheapo translucent fruit-colored phones. VTech set up a new division called
Advanced American Telephones to handle the AT&T-branded products, and the
company seems too confused to answer basic product questions. For a while,
VTech made AT&T phones in Mexico, and then moved all production to China to
VTech originally said it
would use the AT&T label on its premium phones, and use the VTech label on
phones of lesser quality and sophistication, but those plans quickly
changed. Many AT&T and VTech phones were identical under the skin. One phone
model was actually labeled as AT&T, VTech, Panasonic and Sony!
In the deal, VTech got
intellectual property, physical facilities, 4800 people, and the right to
use the great AT&T brand name for ten years. If the name appeared on
second-rate phones, the "AT&T" brand may come to mean as little as "Bell,"
and could have become a big problem for the
real AT&T...but the real AT&T is
disappearing, anyway, so who cares?
Lucent's consumer phone
rental business was sold to North Street Consumer
Phone Services, a subsidiary of UBS Principal Finance, in
New York City.
In the mid-1980s, more
than 30 million people were renting phones. Prior to the sale to North
Street, Lucent spokesman Bill Price said that 2.6 million people were
renting 3.5 million telephones. By mid-2004, only about 970,000 households
rented a phone, according to the Associated Press. Most phones now rent for
$5-$10 per month, and some of them have been generating rental revenue for
40 years or more. Some people pay over $20 per month to rent an
old-technology refurbished cordless phone!
Local phone companies
have largely left the phone rental business. AP reported that SBC
Communications inherited a small number of rental customers in Connecticut
when it bought SNET in 1998. The three other remaining Bells (Quest,
BellSouth and Verizon) don't have rental programs. GTE stopped renting
phones in 2001, shortly after its merger with Bell Atlantic to form Verizon.
A lawsuit filed on
behalf of Verizon's California customers in 2000 over the rental program was
still pending as of mid-2004, said Sharon Shaffer, a Verizon spokeswoman.
In 2002, AT&T and Lucent
settled a nationwide class-action lawsuit alleging that they charged
unreasonably high rental payments for decades-old telephones. The lawsuit
required the defendants to set aside up to $300 million to pay damages, but
they wound up paying only $8.4 million to 92,000 customers who filed claims.
Who makes what?
Phones bearing the AT&T
name have been made by several companies, including Panasonic, TT Systems,
Comdial, Northern Telecom, NEC and VTech.