est problem fac- ing the company. Breaking into the local phone business was proving prohibitively expensive. AT&T had already spent $1 billion on its local effort, had only 11,000 customers to show for it, and was losing money on every one of them. Combining with SBC would give it a huge leg up in figuring out how to enter local markets nationwide. Besides, Allen was already committed to leaving in January of 1998. It would probably take at least that long to get the merger approved. Whitacre would be fifty-five by then, and Walter could imagine work- ing the same deal with him that he had reached with Allen. By 1999, he could be atop Ma Bell reincarnated. Thus began five months of discussion between "Star" (SBC, which was headquartered in the Lone Star State of Texas) and "Garden" (AT&T, which was headquartered in the Garden State of New Jersey). It was not the first time that AT&T had entertained the idea of merg- Tough Calls ing with one of its former offspring (and it would not be the last), but it was probably the most serious effort to date. Neither company had any illusions about how high the regulatory hurdles would prove to be, but they had sharply different views on how to scale them. SBC preferred to make the announcement and then wait for the regulators to set the height the two companies would have to jump as a condition for the merger. That was the approach that SBC had taken in negotiating its merger with Pacific Telesis, and it seemed to be working. The AT&T negotiators, on the other hand, believed that the merger would never even receive serious consideration unless its very announcement included a declaration of "model citizenship" on SBC's part. In their view, SBC should drop all objections to the Tele- com Act, commit to even more rigorous standards for opening its local networks to competition than the law required, and agree not to close on the merger until it had facilities-based local competition. Further, SBC shouldn't try to offer long-distance service in its local territory until the m