Chapter 1: A Brief History of Telecommunications
Overview
Before one
can understand the baffling scope of the modern, global telecommunications industry,
one needs to attain basic knowledge of the history of telecommunications and
how the industry grew to this point. This chapter begins with an overview of
the Bell System and continues with the first anti-trust suit in 1949 and the
second anti-trust case in 1975 which led to the Modified Final Judgment. This
first chapter continues with 1996 Telecommunications Act and ends with a description
of the world of standards.
The Bell System
The Bell System grew out of Alexander
Graham Bell's invention of the telephone.
·
Small
companies started switching services after Bell's patents expired in 1893.
·
AT&T
was incorporated in 1885 and acquired franchise rights to provide service across
the United States.
·
In
1918 during WWI, the federal government nationalized the Bell System. This led
AT&T president Theodore N. Vale to propose the principle of a "regulated
monopoly" for AT&T.
·
As
a regulated monopoly, AT&T would be treated more like a pubic utility than
a private corporation.
Universal Service
Early in
the years of regulation, universal service was sought to add value to the phone
system:
·
The
value of every phone increased whenever more phones were added to the network.
·
Urban
phone users are cheaper to service than rural phone users.
·
The
view continues to be that low-cost users should subsidize high-cost users; this
is done by making basic services cheap and marking up optional services far
above cost.
Business Services:
·
Much
of the cost of providing universal service has been pushed onto business customers.
·
Business
customers are charged three or four times the rate as residential customers.
This helps to keep costs down for the basic residential services.
·
Even
the business prices charged for such things as handset cords are far above cost.
Long Distance Service:
·
Revenue
from long-distance was placed in a settlement pot that AT&T Long Lines Division
administered.
·
At
the end of the settlement period, companies could retrieve money from the pot
to recover costs (as regulated by the FCC) for equipment and earn interest on
invested capital.
·
Toll revenue
helped to keep local service rates down because the long-distance cost recovery
also paid (in part) for local service.
First Antitrust Suit
In 1949,
the U.S. Government sued the Bell System charging it was in violation of U.S.
antitrust laws.
·
The
government thought that the structure of the Bell System was vertically integrated
to stifle competition from telecommunications manufacturers.
·
Western
Electric, the manufacturing arm of AT&T, produced some products that had
little to do with telecommunications.
·
Allegedly,
Western Electric also charged Bell companies with high prices that were then
passed on to unsuspecting consumers.
The Consent Decree:
·
The
result of a 1955 settlement of the antitrust suit
·
Known
as the Final Judgment
·
Stated
that AT&T could keep Western Electric provided that Western Electric confine
all distribution to the Bell System and cease with non-telecommunications manufacturing.
·
Bell Labs
was ordered to license its technology to outside firms.
Bell System Manufacturing
AT&T
General Departments (Responsible
for assisting Bell Operating Companies):
·
Ownership
of Bell Laboratories was split between AT&T and Western Electric.
·
Western
Electric was owned by AT&T
·
The
closely aligned business relationships within the Bell System were thought to
be unfair by outside manufacturers.
Interconnection:
·
Outside
manufacturers were concerned about the Bell Systems policy regarding “foreign
attachments”.
·
Bell
System theory stated that since it was responsible for quality of service for
the whole phone system, allowing non-Bell Operating Companies to attach their
equipment may pose a threat to quality of service.
·
Bell
also felt that interconnecting un-regulated foreign attachments would also pose
a voltage risk to people who worked on the system.
·
The
Carter Electronics Company sued Southwestern Bell because the BOC wouldn’t allow
its Carterfone to operate on its network.
·
After
Carter prevailed in court, the FCC ordered that outside equipment be allowed
on the network as long as protective coupling adapters were used as an interface.
Long-Distance Restrictions:
·
Microwave
Communications Inc. (MCI) was allowed in 1970 to compete with AT&T for private-line
long distance service.
·
In
a later suit, FCC decided that MCI should be allowed interconnection on AT&T’s
network.
The Second Antitrust Case
Many other companies echoed MCI’s
complaints about AT&T and its continued monopoly in a technological world
that was evolving far beyond the world that existed when the Bell System was
nationalized.
·
In
1975, the second antitrust suit was filed against AT&T by the Justice Dept.
·
The
suit was settled in 1982 by the second consent decree (Modified Final Judgment)
·
The
BOCs were spun off into seven Regional Bell Operating Companies (RBOCs).
·
The
Regional Bell Operating Companies were forbidden from manufacturing equipment
and providing services outside their local access transport areas (LATAs).
·
Equal
access to local exchange networks guaranteed to all long-distance carriers
The Telecommunications Act of 1996
·
Passed
because the Telecommunications Act of 1934 was woefully outdated
·
By
giving all parties on all sides of the debate some of what they wanted, Congress
may have diluted the purpose of the Telecommunications Act.
·
Opened
the door for Competitive Local Exchange Carriers (CLECs) to provide local telecom
services
·
Universal
Service Fund created to help subsidize low-income and rural users (along with
schools, libraries and rural hospitals)
·
All
service providers must place a portion of their revenues into the USF except
for Internet service providers (ISPs).
·
Opened
local phone/ Internet competition to cable television companies, electricity
providers and other utilities
· Allowed
users to keep phone numbers even if they changed service providers (Local Number
Portability)
·
FCC has the daunting task of administering the rules and regulations signed
into law under the Telecommunications Act.
Standards
When the only game in town was the Bell System and foreign attachments were not allowed onto the network, there was little reason to have a firm set of public standards regarding the manufacture and operation of telecommunications networks. However, in this vastly more complicated industry, standards are now necessary.
International Telecommunications Union (ITU)
·
A
United Nations Agency formed in 1865
·
Advisory,
not obligatory
Two groups:
·
ITU-T
(formerly CCITT) handles wired telecommunication standards
·
ITU-R
(formerly CCIR) handles wireless telecommunications standards
International Standards Organization (ISO)
Multinational association of standards setting organizations. OSI model is probably its most familiar standard set
International Electrotechnical Commission (IEC)
Much the same as the ISO except that it is primarily responsible for electrical standards, not logical standards
American National Standards Institute (ANSI)
Although
it is responsible only for the United States, it is non-governmental and non-profit.
It also promulgates standards outside the realm of information technology and
telecommunications.
·
Made
up of 300 standards committees
·
ANSI
X.3 committees deal with information-related standards
·
T1
committees deal with telecommunications standards
·
The
Institute of Electrical and Electronics Engineers (IEEE) is a well-known organization
that promulgates standards through ANSI.
Various Data standards
include:
·
202A
and 212C (old Bell modem standards)
·
System
Network Architecture or SNA (current IBM data protocol)
·
SNA
is the model for which the ITU open systems interconnect (or OSI model) is based.
·
OSI
is the basis of almost all modern protocols
Other important
associations:
·
Telecommunications
Industry Association (TIA)
·
Electronics
Industries Association (EIA)