HISTORY OF SOUTHERN PACIFIC COMMUNICATIONS COMPANY (SPRINT)
In the span of 13 years, Southern Pacific Company formed Southern Pacific Communications Company (SPCC) and became a leading a nationwide telecommunications company. SPCC was a quintessential start-up. It grew rapidly from a notion to compete with AT&T in long- distance telecommunications in the United States to become the third largest telecommunications company providing a variety of telecommunications services. By the time of its sale to General Telephone and Telegraph Company (GTE) in 1983, SPCC became known as SPRINT. The sale of SPRINT to GTE generated sales proceeds of $1.2 billion, which was estimated to be roughly equivalent in value to all of Southern Pacific Company’s other assets.
Until 1969, AT&T had a monopoly on long distance telecommunications in the United States. AT&T also had a monopoly in local exchange service in approximately 80% of the population centers in the United States. GTE provided local service in secondary markets, with “independent” telephone serving rural communities.
In August 1969, a new company Microwave Communications, Inc. (MCI) received approval from the Federal Communications Commission (FCC) to compete with AT&T by being a “specialized service common carrier” providing communications service (voice and data) over dedicated private lines using microwave radio technology. The term “specialized common carrier” represents those types of communications companies authorized by the FCC to compete with AT&T for the provision of intercity communications services. These services include transmission for voice, video, telemetry, and data. Specialized common carrier services accounted for only two percent of AT&T’s total revenues, most of which came from public switched telephone service. Nevertheless, AT&T ferociously fought MCI at every turn, even denying connections in local exchanges. By the mid-1970s MCI was facing insolvency, but in a last-ditch effort it filed a tariff with the FCC to the full panoply of switched public telephone services. The FCC accepted the tariff and MCI began proving switched public telephone service, often referred to as POTS “plain old telephone service.” AT&T filed legal action in the federal court in Washington, D.C. to stop MCI, but the court permitted MCI to proceed providing switched public communications service, both voice and data.
Southern Pacific Railroad Involvement in Communications
Southern Pacific traces its involvement in communications back to the construction of the transcontinental railroad by its predecessor Central Pacific Railroad. Congressional legislation in 1862 and 1864 directed that the railroad companies shall operate not only a railroad facility for the transportation of passengers and freight but also telegraph facilities for communications. In fact, telegraph became a significant source of revenue for the railroads, principally from Western Union.
In 1959, Southern Pacific commenced construction of a private microwave radio system to serve its internal communications needs. The first segment was completed in 1962 between Fresno and Los Angeles, California. Construction continued over the next few years covering the entirety of Southern Pacific’s railroad system. At the same time Southern Pacific built its state-of-the-art Total Operations Processing Systems computer system, which used the newly completed microwave radio system for operational control of the railroad, including train dispatching, automatic car identification, and centralized operational control.
Formation of SPCC
Following the FCC’s decision allowing limited competition in long-distance communications, Southern Pacific recognized that it was well positioned to enter the nascent specialized common carrier business. It had the expertise necessary to construct and operate a system for specialized common carrier service and could provide the financial capital required to support such a venture. At that point Southern Pacific had the largest private microwave radio system in the United States. Southern Pacific’s private communication system had towers and buildings in place that could accommodate additional equipment for specialized common carrier service. Southern Pacific’s extensive microwave radio infrastructure coupled with the vast experience gained in microwave engineering, transmission design, and communication facility operation were important factors in Southern Pacific’s decision to enter the specialize common carrier field.
In December 1969, B.F. Biaggini approved using existing microwave radio sites located along Southern Pacific railroad right-of way and acquiring additional sites for potential specialized common carrier service. Biaggini also authorized the formation a new wholly owned subsidiary named Southern Pacific Communications Company. SPCC was incorporated on January 23, 1970, to “engage primarily in the business of developing, planning and constructing a communications system for providing communication services to the business community, industry, public or other governmental bodies or agencies and other persons or entities desiring to avail themselves of communications services to be provided by this corporation.”
A short time later, SPCC filed an application with the FCC to become a specialized common carrier. The FCC granted that application in 1971, and construction of SPCC’s microwave radio system began. The first segment of construction was San Francisco/Oakland – Los Angeles – Phoenix. Operations along that segment began in December 1973. At that time only interstate operations were authorized. Over the next several years SPCC obtained approval for intrastate communication services from state public utility commissions (despite opposition from AT&T). SPCC continued construction of its communications systems eastward along the railroad right of way until it reached East St. Louis, Illinois. Through a series of acquisitions of other communications systems in the East, SPCC extended its system to serve all major population centers in the East.
For a period of approximately two years after incorporation SPCC was managed by existing railroad personnel. Its first directors were J.N. Albertson (General Superintendent of Communications), W.M. Jaekle (Vice President – Engineering and Research), D. K. McNear (Executive Vice President), T.A. Miller (Senior General Attorney), and H.A. Nelson (Vice President – Accounting). Overall responsibility for engineering, installation, operation, and maintenance of the system fell under J.N. (Johnny) Albertson. In 1972, SPCC directly employed its first personnel. It grew from five employees in 1972 to 625 employees in 1977.
In January 1973, C. Gus Grant was hired as President of SPCC. He came with executive experience at General Electric Company and Teledyne. Under Grant’s leadership SPCC expanded dramatically, both in terms of geography and scope of services.
Following MCI’s court victory in 1977, allowing it to broaden its services to include public switched telephone services, SPCC began offering switched capability under the SPRINT name. The ability to offer public switched telephone was a huge step for SPCC. The SPRINT name became so popular that SPCC began to be referred to as SPRINT.
AT&T continued its efforts to thwart the expansion of MCI and SPRINT, principally by denying or limiting connections in the local exchanges that were required for “last mile” connections to customers. As a result, the United States Department of Justice, MCI, and SPCC filed separate lawsuits against in the federal court in Washington, D.C. against AT&T. After four years of litigation the court ordered the break-up of AT&T. AT&T’s long-distance was separated from its local exchange business and AT&T’s local exchange business was broken into seven separate corporate entities called Regional Bell Operating Companies. Finally, a basis was established for fair competition in the communications industry.
SPCC’s value increased such that Southern Pacific sought to sell the communications enterprise. It found a buyer in GTE Corporation. The sale of SPCC to GTE Corporation was consummated on June 15, 1983 for $1.2 billion. Representing Southern Pacific at the closing were B.F. Biaggini (Chairman), Alan C. Furth (President), R.J. McLean (Treasurer), and R.S. Kopf (Sprint’s General Counsel).
Post SPCC Era
The sale of SPCC to GTE is not the end of the story. SPCC’s senior management team stayed with Southern Pacific. Utilizing their expertise and industry connections they formed a joint venture in 1984 among Southern Pacific, Santa Fe, and Norfolk Southern to build the nation’s first transcontinental fiber optic system along the rights of way of the respective railroads. The venture was named “Fibertrak,” with headquarters in Reston, Virginia. Over the next two years, Fibertrak engineered its fiber optic system, identified a fiber provider, and obtained service contracts with users to justify the cost of construction. Nevertheless, in early 1986 Norfolk Southern decided to terminate the joint venture.
But that is still not the end of the story. Some of the Fibertrak’s management team returned to Southern Pacific in San Francisco to develop a regional fiber optic bale communication system. A new entity, SP Telecom was formed in 1988, as a wholly owned subsidiary of Southern Pacific Transportation Company. Later in 1988, billionaire Philip Anschutz acquired SP Telecom and injected new management and capital. Over the next few years SP Telecom constructed its fiber optic system along 15,000 miles of railroad right of way. In 1995, SP Telecom changed its name to Qwest Communications and became a publicly traded corporation in 1997. In 1999, Qwest acquired US West, one of the seven Regional Bell Operating Companies resulting from the 1982 break-up of AT&T.
GTE struggled knowing how to blend SPRINT into its system. GTE was a local exchange with a monopoly position in certain secondary markets. GTE acquired SPRINT to add a long-distance communication capability to its system. But long-distance communication is highly competitive, and GTE was not successful in that environment. In 1986, GTE entered into a joint venture with United Telecom, a major independent telecommunications company headquartered in Kansas City, to operate SPRINT. Within a few years, United Telecom bought out GTE’s interest in the joint venture and changed the name of its company to SPRINT. Over the years SPRINT evolved to being principally a cellular communication company. In 2020 SPRINT, merged with T-Mobile. The SPRINT name was discontinued. This is the end of the Sprint name, but its legacy continues through T-Mobile and Qwest.