Who's VTech? What happened to AT&T & Western Electric?

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 bewildered.

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 AT&T name.

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 center.

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 cut costs.

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.