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CIT 307 OnlineData Communications
History of TelephonyHistory of Telephony
Module 9 Module 9 Kevin Siminski, InstructorKevin Siminski, Instructor
The History of the Telephone Industry
1876 to the Present Why Study History? Is that Important?
– It is important! It is always a good idea to know where you have been to know where you are going at this point in time.
– It allows you to look at the steps and missteps in hopes of avoidance or progress.
– It places the study of telecom into a context that makes it easier to operate in the environment
General Comments
The Telephone– The most ubiquitous electric/electronic instrument in the world– Changed the way people interact
The Patent– Broadly covered the entire subject of transmitting speech electrically – Filed March 10, 1876 ahead of Elisha Gray– A very important event that has shaped the culture of the industry to
this day.– Tried to sell the patent to Western Union in late 1876. WU refused
to buy it.– The question of whether Bell was the true inventor of the telephone
is perhaps the single most litigated fact in U.S. history. Bell patents were defended in some 600 cases. Bell never lost a case.
History
March 10, I876 - The Bell patent 1894 – Bell’s patents expire 1894 – 1924 – about 50% of cities over
5,000 people had two telephone systems not interconnected.
1905 – Bell had 1.2 million and the independents about 2 million subscribers– Independents had lower pricing, better service
with automatic dialing
History
1878- the public switched telephone network was born – Started with the deployment of the switchboard in
1878.– 1878 saw the first White House phone
1879 - Bell consolidation in the National Bell Company, which became the American Bell company. Bell wins its patent infringement suit against Western Union in the United States Supreme Court.
1880 – reorganized in to the Bell System – regional operating companies for local service, long distance company for toll and a manufacturing arm for equipment.
History
1881- take over of Western Electric, which remained the manufacturing arm of Bell through 1984.
1885 – CEO Vail forms long distance company: AT&T
ATT v. The Independents
Had no access to ATT long distance network Can’t match WECO’s pricing Bell money allowed pricing below market to
gain market share. Bell buys controlling interest in many
independents.
History
1899 – American Bell becomes AT&T. Moves to NY for better access to financial markets.
AE, SC, Kellog formed to serve independent telco’s as WECO served Bell.
History
1903 - J.P Morgan gains control of Bell System, buys independents, forms Regional Bell Operating Companies – the structure for the next 70 years
1907 – investors persuaded Theodore Vail to come out of retirement
History
Theodore Vail– CEO (general manager in those days) of Bell from
1878 to 1888.– Left in a huff – problems with investors who wanted
nothing but profits.– Intent on establishing a natural monopoly– Committed to a nation-wide long distance company– Established Bell Laboratories– Independents were deterrents to anti-trust
History
Theodore Vail .. Cont’d – ATT slogan: One Policy, One System, Universal
Service– "Effective, aggressive competition, and regulation
and control are inconsistent with each other, and cannot be had at the same time."
History
1913 – Kingsbury Commitment - a plan whereby – AT&T would sell off its $30 million in Western
Union stock, – agree not to acquire any other independent
companies, and– allow other competitors to interconnect with the
Bell System.
History
Kingsbury Interconnection– Kept the independents from developing a
competing long distance network– No calls from Bell to the independent –only from
independent to Bell– Costly – 10 cents per call
Kingsbury no-buy clause– Swapped instead of bought – created geographic
monopoloes
History
On August 1, 1918, in the midst of World War I, the federal government nationalized the entire telecommunications industry for national security reasons. Returned to private control 8/1/1919
– Vail appointed as manager of ATT– Vail applied for rate increases– ATT received 4.5% of revenues for services– High service connection charges were put into place for the
first time – long-distance rates had increased by 20 percent .– Vail's vision of a single, universal service provider was
being adopted and implemented by the government through discriminatory rate structuring.
History
Rate Averaging– The year of government nationalization was the
nail in the coffin of competition – Rate regulation led to rate averaging – low cost in
urban – high cost in rural – cost averaged. (Cross-subsidization)
– Vail's vision of a single, universal service provider was being adopted and implemented by the government through discriminatory rate structuring.
History
Rate Regulation– rate regulation in the pursuit of universal service objectives
virtually demands a single monopolistic provider in order to be truly effective
– the initiation of extensive federal rate regulation is important because it propelled state regulatory commissions to follow suit by greatly extending the scope of their authority
– by averaging rates geographically to artificially suppress rural rates, policymakers and regulators created a serious disincentive to local telephone competition
– AT&T's motto was adopted as the nation's de facto regulatory policy
History
1921 - Willis-Graham Act– Superseded the Kingsbury Commitment– Allowed consolidation of all remaining dual
service systems– Gave Congressional approval to the elimination of
competition– Established the concept of geographic monopoly
as long as regulated by ICC and PUC.
History
1934 – Communications Act –– The commission (FCC) was created, "for the
purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges."
History
The FCC– the power to regulate rates to ensure they were "just and
reasonable" – the power to restrict entry into the marketplace.
potential competitors were, and still are required to obtain from the FCC a "certificate of public convenience and necessity."
– The intent of the licensing process was again to prevent "wasteful duplication" and "unneeded competition."
– it served as a front to guard the interests of the regulated monopoly and the FCC's social agenda.
History
1938 - AT&T controls 83% of U S telephones, 91% of telephone plant and 98% of long distance lines.
History
1938 – crossbar switching 1950 – dial tone; 1961 direct distance dialing 1956 – ATT & WECO agree not to enter
computer and business machine fields in exchange for leaving the Bell System in tact
1955 – General Telephone formed
History
1963 – digital transmission schemes: the T1 1965 – first computerized central office
switch (No. 1 ESS) 1968 – non-Bell equipment attached to ATT
system 1969 – MCI
History
January 1, 1984, the Western Electric Company, then older than the telephone itself, ceased to exist.
– On that day of court ordered divestiture, the Bell System was broken into seven regional operating companies (the Baby Bells) and a more compact AT&T. AT&T retained the long-distance part of the business, its venerable research organization (Bell Laboratories), and its manufacturing operations (which could no longer have exclusive supply arrangements with the operating companies
RBOCs
Pacific Telesis Southwestern Bell US West Ameritech Bell South Bell Atlantic Nynex
RBOC Summary
The RBOCs– provide local exchange services – sell customer premises equipment– restrained from providing
interexchange service, manufacturing telephone equipment, information services, and, except with court approval, engaging in other
unregulated non-telecommunications businesses ("line-of-business restrictions," )
The divestiture
Separation of local exchange service from industry segments vertically linked to the local exchange network
This separation resulted in AT&T divesting of its power over the local exchange market, and
creating in seven RBOCs forbidden from entering manufacturing, long-distance, and other related markets
Results
The natural monopoly in local exchange services remained intact
LATAs -term in the U.S. for a geographic area covered by one or more local telephone companies (LECs)
– A connection between two local exchanges within the LATA is referred to as intraLATA.
– A connection between a carrier in one LATA to a carrier in another LATA is referred to as interLATA.
– InterLATA is long-distance service..- LATA = Local Access and Transport Area
History
1990 – the Internet and digital communications
1996 – The Telecom Act of 1996 http://www.privateline.com/index.html