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From loading coils to microwaves
Comment From loading coils to microwaves The rise and fall of Bell Dean Gillette
‘The 1956 agreement is usually referred to as a ‘Consent Decree’, but was, formally, the ‘Final Judgement’ that was modified in 1982. Actually, it was ‘vacated in its entirety’ by the 1982 MFJ. *Congress passed the first patent legislation in 1790; the US patent community is now planning a bicentennial celebration.
For 60 years the American Telephone and Telegraph Company had a monopoly on long-distance telephony in the USA. AT&T began to offer good intercity service in 1900, and aggressive management quickly brought it to its dominant position. The FCC reached its ‘Above 890’ decision in 1959, letting businesses erect microwave radio relay systems for their own corporate communication purposes, including telephony. In the intervening years there was only one way for Americans to talk over a long-distance telephone line: call on AT&T. Subsequent FCC decisions permitted entry of carriers that offered telephone service in competition with AT&T. The competition was only for intercity services, however, and other carriers had to depend on local telephone companies, primarily AT&Towned, to complete calls to their customers. In its 1974 antitrust suit, the US Department of Justice claimed, among other things, that the AT&? companies had been less than cooperative in interconnecting with competing carriers. The outcome of the suit was the ‘Modified Final Judgement’ under which AT&T divested itself of the local operating companies. In exchange, AT&T was relieved of restrictions imposed in 19.56 as a result of an earlier antitrust suit.’ In particular, AT&T was no longer obligated to license patents on a non-
TELECOMMUNICATIONS
December
AT& T’s 60-year monopoly on intercity service in the USA was founded on its sole ownership of patents on the loading coil and the electronic amplifiers that made long-distance telephony possible. The monopoly lasted in spite of social, economic and political pressures for a free market only as long as there was no technical alternative to wireline systems for large capacity telecommunications. When microwave radio relay was developed, it proved to be less expensive than wireline, and AT&T did not control the patents on it. The technical foundation of the monopoly vanished and the structure crumbled. Dean Gillette is Professor in the Information Science Department at The Claremont Graduate School, 130 E Ninth Street, Claremont, CA 9171 l-6190, USA.
POLICY
1989
discriminatory basis and at reasonable fees. There were other provisions in the MFJ, but those two are the relevant ones for the present discussion. After years of litigation, the breakup of the Bell System did not come as a surprise. In retrospect, the destruction of the monopoly is less surprising than the length of time it existed, because a ‘monopoly’ is a bad thing in the USA, unless you are the monopolist, as when you own Boardwalk and Park Place when playing the Parker Brothers’ game. Indeed, it has been illegal to monopolize in the real America ever since Congress passed the Sherman Act in 1890. How. then, did AT&T create the monopoly in the first place? The answer to the question is that AT&T took advantage of a loophole deliberately written into the Constitution of the United States. Section 8, Article I enables Congress ‘. to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries .‘.* The exclusive right for inventors is called a ‘patent’, and, in the USA, a patent holder has a monopoly on the invention for 17 years, either to use it himself, allow it to be used by others under licence, or to sell it, as the holder chooses. AT&T’s perfectly legal monopoly was based on patented inventions, and the structure crum-
309
Commenl
‘AT&T recognized the loading coil as the way to build an empire’
3John Brooks, Telephone: The First Hundred Years, Harper and Row, New York, 1976, noted that Pupin ‘would never again be penniless, or anything like it; he lived his later years like a grand duke of his native land.’ 4Brooks does not record De Forest’s post1913 standard of living.
310
of a bandpass filter that cuts off at bled when AT&T could no longer 4 kHz. control the underlying technology. l A mathematician would recogThe Bell System was built by capitalnize the physical embodiment of izing on Alexander Graham Bell’s an integral of a pair of partial 1876 and 1877 telephone patents differential equations, of the first which it used to make telephones and order and first degree, known as whose use it licensed for a fee, but the ‘telegrapher’s equations’. never licensed others for manufacturing. When the patent ran out, over Most importantly, however, the own6000 other telephone companies ers of AT&T recognized the loading appeared throughout the country, coil as the way to build an empire. sometimes where Bell service had not The loading coil was invented and yet been offered, and sometimes in patented in 1899 by Michael Pupin, a competition with a Bell company. Serbian immigrant who became a proThese companies only provided local fessor at Columbia University. Reservice, however, because beyond a searchers at AT&T had been working few score miles, even with the thickest on the same problem, but, instead of copper wires, telephone communicastarting a patent fight, AT&T bought tion ranged from poor to awful. It exclusive rights to the loading coil. turns out that a simple pair of telepaying handsomely for it.3 With the phone wires attenuates high frequenloading coil, long-distance telephony cies more than low ones, and the became possible, and by 1911. AT&T distortion accumulates over distance. linked New York to Denver with If a beautifully blended baritone/ wires and pencil-thick copper soprano duet were transmitted a long thousands of heavy iron rings. No-one distance over plain old telephone else could offer such service, again wires, the baritone would sound like a because AT&T had a legal monopoly bass and the soprano’s contribution technically possible of the only would be reduced to a faint whisper. method. An individual voice becomes unrecogToday, we use electronic amplifiers nizable and, at longer distances, an to overcome the losses and distortions incomprehensible growl. The problem of telephone wires, but they did not is a technical one, and invention of the exist in the earliest years of the cen‘loading coil’ provided a technical tury. The modern age opened in 1906, solution that was turned into the when Lee De Forest invented the ‘aufoundation of AT&T’s enduring dion’, an electronic vacuum tube that monopoly on long-distance telephony. could, in principle, amplify electronic A loading coil is a ring of iron, or signals. An AT&T researcher, Harold other carefully selected magnetic Arnold, made the crucial improvematerial, around which are wrapped ment to the audion by significantly the two wires of a telephone circuit. reducing the pressure inside the Loading coils installed every mile or vacuum tube. Not surprisingly, AT&T long-distance telephony so make bought the rights to Lee De Forest’s possible by emphasizing vital lower patents in 1913 and in 1915 the coasts frequencies at the expense of less of America were connected by AT&T necessary higher ones. The sound telephone lines.’ from the top few keys on a piano are These developments gave AT&T not transmitted over a ‘loaded’ line, the technical foundation for a but enough overtones from even a monopoly. All that was required to child’s voice are carried faithfully to put it in place was the corporate will, make it recognizable. How one deand AT&T had that. Theodore N. scribes the phenomenon depends on Vail, President of AT&T from 1907 to one’s taste: 1919, stated his corporate objectives l clearly: ‘One policy, one system, uniA physicist might say that energy versal service’. is coupled from the higher to the A completely interconnected syslower portions of the voice fretem is obviously necessary if every quency spectrum. l telephone subscriber is to be able to An electrical engineer would talk to any other. A set of completely characterize the result as creation
TELECOMMUNICATIONS
POLICY
December 1989
Comment
‘Competing independents had no way of offering longdistance service’
‘AT&T’s banker was J.P. Morgan, who is alleged to have done such things as refusing, and getting other bankers to refuse, to extend lines of credit to companies targeted for takeovers by AT&T. ‘The 1913 ‘Kingsbury Commitment’, named for an AT&T Vice President. ‘Those that shudder at this simplistic use of the term may prefer Gerald FL Faulhaber’s thorough and lucid explanation of natural monopolies in telephony in Telecommunicatichz in Turkoil, -Ballinger, Cambridge. MA. 1987. During this time, however: AT&T did not extract monopoly profits from its subscribers, because it had accepted rate regulation even before the Interstate Commerce Commission was given Federal regulatory authority over telephone in 1910.
TELECOMMUNICATIONS
POLICY
consistent physical, electrical and operational standards is also necessary, but non-technical people frequently do not appreciate the difficulty of arriving at them or of adapting them as technology changes. Vail did understand the interdependency of telephone system components, and he included within ‘one policy’ the notion standards of for compatibility. AT&T’s technical organization set them for AT&T’s long-distance service, for the local Bell companies and for independents who had chosen to become affiliated with the Bell System. Vail’s policy went beyond standards and operations, however. When he said ‘one system’ he meant AT&T and its affiliates, and he refused to interconnect the long-distance service with other independent telephone companies. Since AT&T would not license the loading coil patents to anyone, competing independents had no way of offering long-distance service. But, to achieve the goal of ‘universal service’, telephone service for everyone, Vail stood ready to buy any independent company. There was no question about the legality of the long-distance monopoly, but there were many complaints about the refusal to interconnect and about some business practices in what we would now call ‘hostile takeovers’.5 The independents took the issue to the Department of Justice as a Sherman Act violation, suggesting that the DoJ start an antitrust suit against AT&T. Enough of a case was made to force AT&T to agree to stop buying the independents and to interconnect long-distance service with all of them.6 Although it was not the structure Vail wanted, non-discriminatory interconnection meant one system for longdistance service to and from any telephone, Bell or independent. AT&T, however, was still the only provider of the service, because it had a legal monopoly, through patents, on the necessary technology. By the time the patents ran out, AT&T had such a head start in scope of interconnection and amount of investment that no-one else could enter the market and compete successfully by installing a parallel wireline system. In this sense,
December 1989
AT&T had a ‘natural monopoly’.’ The crucial word for maintenance of the monopoly, however, is ‘wireline’, and when an alternative ‘wireless’ technology was fully developed, the monopoly began to disintegrate. Guglielmo Marconi demonstrated the power of the wireless alternative with transatlantic radiotelegraphy in 1901. Radiorelephony awaited development of electronic amplifiers, just as did transcontinental wireline telephony, and AT&T demonstrated both in 1915. For the next three decades, however, radio systems could carry only a small fraction of the telephone calls needed throughout the USA. The task was to find a way around the natural laws of wireless transmission, just as the loading coil had been a way around the distortion of wireline. The difficulty here is that different frequencies are needed for each message if radio waves are to spread in all directions as they do in broadcasting, but radio signals interfere with each other if two or more are captured by a single receiver at the same time. To avoid the problems of interference. two methods were developed: to exploit higher frequencies. which is the same thing as using shorter wavelengths, to make more room for communication; and to focus the radio waves into narrow beams like searchlights instead of spreading them widely, to be able to use the same frequencies again and again by pointing the beams in different directions. The two together; the shorter the go wavelength, the easier it is to focus. Narrow beams are needed in radar, too, and technical developments in the Second World War led to use of the extremely short radio waves that came to be known as ‘microwaves’. Microwave radio transmission systems were used by the US Army in North Africa and Europe during the Second World War, and were developed for commercial application immediately after. A string of microwave radio relay towers on hilltops about 25 miles apart could carry thousands of voice channels or a few television signals from coast to coast. They had two crucial characteristics: l The cost per channel mile for
311
Commenl
distances over 100 miles or so was less than that of any wireline system. The technology was not exclusive to AT&T; any of a dozen manufacturers had experience in building radar, and had access to a sufficient number and scope of patents.
‘The FCC had also permitted competition in the terminal market, but that decision had another technical basis. ‘lthiel de Sola Pool, ‘Competition and universal service’, in Harry M. Shooshan III, ed, Disconnecting Bell, Pergamon, Oxford & New York, 1984. “One example is Southwestern Bell’s interest in offering Electronic Yellow Pages service in Bell Atlantic’s operating area, cited by Henry Geller in ‘Government policy as to AT&T and the BOCs: The next 5 years’, IEEE Communications Magazine, Vol 27, No 1, January 1989. The entire issue is devoted to various aspects of telecommunications deregulation, and throughout the diveroence of RHC obiectives is apparent. “One such might have been AT&T Bell Laboratories’ 1973 invention of the modified chemical vapor deposition process, which is crucial for making glass fibres with the high performance necessary in optical communication systems.
312
Entrepreneurs were quick to plan competitive transmission systems. All they needed was capital, a market, a source of equipment and permission from the Federal Communications Commission to transmit radio signals. Capital could be found, distribution of the new entertainment medium, television, seemed a likely market, any of several manufacturers were eager for the business, but the Federal Communications Commission held back for a decade. The FCC was convinced that AT&T could provide all the transmission needed for public comeither by wireline or munications, microwave radio. Further, AT&T was no more eager to interconnect with potential competitors to help them provide extensive intercity service than it had been in 1910, and the FCC did not force it to do so. The lure of the low-cost alternative to AT&T intercity service remained, and the FCC felt continuous pressure to let others help satisfy the nation’s telecommunications demands. In 1959 the FCC took a new position with its ‘Above 890’ decision, by which it would grant licences for microwave radio relay systems to be used for private business transmission. Interconnection with AT&T companies for private-line service came with the FCC’s specialized common carrier decision, and the introduction of MCI’s Execunet ended the Bell System’s monopoly of public switched longdistance telephony. The technical foundation of the intercity telecommunications monopoly was gone. The American social, economic and political pressures for free markets eventually prevailed, and other communications firms entered to compete with AT&T.’ Interconnec-
tion remained an issue. Even though competition existed in the longdistance market, local service was, and still is, a natural monopoly, and to provide end-to-end service, intercity carriers needed to connect with local ones. AT&T’s long-distance competitors claimed that AT&T’s local operating companies gave preferred treatment to AT&T’s intercity service, and brought private antitrust suits. The Department of Justice included the theme in its 1974 suit, and the final resolution was the 1982 MFJ that separated local service and longdistance service. Vail’s concept of ‘one policy, one system’ was totally abandoned. ‘Ten years from now, a substantial revisionist literature will undoubtedly have emerged lambasting the Consent Decree of 1982 as shortsighted and ill-considered’. So Ithiel de Sola Pool started his forecast that division of responsibility for network service would lead to grave difficulties in technical advancement.” Short of nationalization, however, the telecommunication infrastructure of the USA can never be reassembled into a single corporate structure. Even if a legal mechanism were found, management remains diverse. The local Bell operating companies. and their owners, the regional holding companies, have no interest in subordinating themselves again to masters at AT&T or anywhere else. Soon after divestiture they took different paths in corporate expansion and now have widely different interests. “’ The question as to whether anyone could gain as dominant a position as did AT&T with the loading coil has a more positive answer. The patent laws remain in force, and any of a dozen laboratories might discover a principle or process that could become the necessary technical monopoly.” The MFJ imposes no long-term patent conditions on either AT&T or the RHCs, and both support superb laboratories. Both, too, have the corporate will to expand. The opportunity exists for a new, completely legal telecommunications monopoly to arise.
TELECOMMUNICATIONS
POLICY
December
1989
‘The 1956 agreement is usually referred to as a ‘Consent Decree’, but was, formally, the ‘Final Judgement’ that was modified in 1982. Actually, it was ‘vacated in its entirety’ by the 1982 MFJ. *Congress passed the first patent legislation in 1790; the US patent community is now planning a bicentennial celebration.
For 60 years the American Telephone and Telegraph Company had a monopoly on long-distance telephony in the USA. AT&T began to offer good intercity service in 1900, and aggressive management quickly brought it to its dominant position. The FCC reached its ‘Above 890’ decision in 1959, letting businesses erect microwave radio relay systems for their own corporate communication purposes, including telephony. In the intervening years there was only one way for Americans to talk over a long-distance telephone line: call on AT&T. Subsequent FCC decisions permitted entry of carriers that offered telephone service in competition with AT&T. The competition was only for intercity services, however, and other carriers had to depend on local telephone companies, primarily AT&Towned, to complete calls to their customers. In its 1974 antitrust suit, the US Department of Justice claimed, among other things, that the AT&? companies had been less than cooperative in interconnecting with competing carriers. The outcome of the suit was the ‘Modified Final Judgement’ under which AT&T divested itself of the local operating companies. In exchange, AT&T was relieved of restrictions imposed in 19.56 as a result of an earlier antitrust suit.’ In particular, AT&T was no longer obligated to license patents on a non-
TELECOMMUNICATIONS
December
AT& T’s 60-year monopoly on intercity service in the USA was founded on its sole ownership of patents on the loading coil and the electronic amplifiers that made long-distance telephony possible. The monopoly lasted in spite of social, economic and political pressures for a free market only as long as there was no technical alternative to wireline systems for large capacity telecommunications. When microwave radio relay was developed, it proved to be less expensive than wireline, and AT&T did not control the patents on it. The technical foundation of the monopoly vanished and the structure crumbled. Dean Gillette is Professor in the Information Science Department at The Claremont Graduate School, 130 E Ninth Street, Claremont, CA 9171 l-6190, USA.
POLICY
1989
discriminatory basis and at reasonable fees. There were other provisions in the MFJ, but those two are the relevant ones for the present discussion. After years of litigation, the breakup of the Bell System did not come as a surprise. In retrospect, the destruction of the monopoly is less surprising than the length of time it existed, because a ‘monopoly’ is a bad thing in the USA, unless you are the monopolist, as when you own Boardwalk and Park Place when playing the Parker Brothers’ game. Indeed, it has been illegal to monopolize in the real America ever since Congress passed the Sherman Act in 1890. How. then, did AT&T create the monopoly in the first place? The answer to the question is that AT&T took advantage of a loophole deliberately written into the Constitution of the United States. Section 8, Article I enables Congress ‘. to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries .‘.* The exclusive right for inventors is called a ‘patent’, and, in the USA, a patent holder has a monopoly on the invention for 17 years, either to use it himself, allow it to be used by others under licence, or to sell it, as the holder chooses. AT&T’s perfectly legal monopoly was based on patented inventions, and the structure crum-
309
Commenl
‘AT&T recognized the loading coil as the way to build an empire’
3John Brooks, Telephone: The First Hundred Years, Harper and Row, New York, 1976, noted that Pupin ‘would never again be penniless, or anything like it; he lived his later years like a grand duke of his native land.’ 4Brooks does not record De Forest’s post1913 standard of living.
310
of a bandpass filter that cuts off at bled when AT&T could no longer 4 kHz. control the underlying technology. l A mathematician would recogThe Bell System was built by capitalnize the physical embodiment of izing on Alexander Graham Bell’s an integral of a pair of partial 1876 and 1877 telephone patents differential equations, of the first which it used to make telephones and order and first degree, known as whose use it licensed for a fee, but the ‘telegrapher’s equations’. never licensed others for manufacturing. When the patent ran out, over Most importantly, however, the own6000 other telephone companies ers of AT&T recognized the loading appeared throughout the country, coil as the way to build an empire. sometimes where Bell service had not The loading coil was invented and yet been offered, and sometimes in patented in 1899 by Michael Pupin, a competition with a Bell company. Serbian immigrant who became a proThese companies only provided local fessor at Columbia University. Reservice, however, because beyond a searchers at AT&T had been working few score miles, even with the thickest on the same problem, but, instead of copper wires, telephone communicastarting a patent fight, AT&T bought tion ranged from poor to awful. It exclusive rights to the loading coil. turns out that a simple pair of telepaying handsomely for it.3 With the phone wires attenuates high frequenloading coil, long-distance telephony cies more than low ones, and the became possible, and by 1911. AT&T distortion accumulates over distance. linked New York to Denver with If a beautifully blended baritone/ wires and pencil-thick copper soprano duet were transmitted a long thousands of heavy iron rings. No-one distance over plain old telephone else could offer such service, again wires, the baritone would sound like a because AT&T had a legal monopoly bass and the soprano’s contribution technically possible of the only would be reduced to a faint whisper. method. An individual voice becomes unrecogToday, we use electronic amplifiers nizable and, at longer distances, an to overcome the losses and distortions incomprehensible growl. The problem of telephone wires, but they did not is a technical one, and invention of the exist in the earliest years of the cen‘loading coil’ provided a technical tury. The modern age opened in 1906, solution that was turned into the when Lee De Forest invented the ‘aufoundation of AT&T’s enduring dion’, an electronic vacuum tube that monopoly on long-distance telephony. could, in principle, amplify electronic A loading coil is a ring of iron, or signals. An AT&T researcher, Harold other carefully selected magnetic Arnold, made the crucial improvematerial, around which are wrapped ment to the audion by significantly the two wires of a telephone circuit. reducing the pressure inside the Loading coils installed every mile or vacuum tube. Not surprisingly, AT&T long-distance telephony so make bought the rights to Lee De Forest’s possible by emphasizing vital lower patents in 1913 and in 1915 the coasts frequencies at the expense of less of America were connected by AT&T necessary higher ones. The sound telephone lines.’ from the top few keys on a piano are These developments gave AT&T not transmitted over a ‘loaded’ line, the technical foundation for a but enough overtones from even a monopoly. All that was required to child’s voice are carried faithfully to put it in place was the corporate will, make it recognizable. How one deand AT&T had that. Theodore N. scribes the phenomenon depends on Vail, President of AT&T from 1907 to one’s taste: 1919, stated his corporate objectives l clearly: ‘One policy, one system, uniA physicist might say that energy versal service’. is coupled from the higher to the A completely interconnected syslower portions of the voice fretem is obviously necessary if every quency spectrum. l telephone subscriber is to be able to An electrical engineer would talk to any other. A set of completely characterize the result as creation
TELECOMMUNICATIONS
POLICY
December 1989
Comment
‘Competing independents had no way of offering longdistance service’
‘AT&T’s banker was J.P. Morgan, who is alleged to have done such things as refusing, and getting other bankers to refuse, to extend lines of credit to companies targeted for takeovers by AT&T. ‘The 1913 ‘Kingsbury Commitment’, named for an AT&T Vice President. ‘Those that shudder at this simplistic use of the term may prefer Gerald FL Faulhaber’s thorough and lucid explanation of natural monopolies in telephony in Telecommunicatichz in Turkoil, -Ballinger, Cambridge. MA. 1987. During this time, however: AT&T did not extract monopoly profits from its subscribers, because it had accepted rate regulation even before the Interstate Commerce Commission was given Federal regulatory authority over telephone in 1910.
TELECOMMUNICATIONS
POLICY
consistent physical, electrical and operational standards is also necessary, but non-technical people frequently do not appreciate the difficulty of arriving at them or of adapting them as technology changes. Vail did understand the interdependency of telephone system components, and he included within ‘one policy’ the notion standards of for compatibility. AT&T’s technical organization set them for AT&T’s long-distance service, for the local Bell companies and for independents who had chosen to become affiliated with the Bell System. Vail’s policy went beyond standards and operations, however. When he said ‘one system’ he meant AT&T and its affiliates, and he refused to interconnect the long-distance service with other independent telephone companies. Since AT&T would not license the loading coil patents to anyone, competing independents had no way of offering long-distance service. But, to achieve the goal of ‘universal service’, telephone service for everyone, Vail stood ready to buy any independent company. There was no question about the legality of the long-distance monopoly, but there were many complaints about the refusal to interconnect and about some business practices in what we would now call ‘hostile takeovers’.5 The independents took the issue to the Department of Justice as a Sherman Act violation, suggesting that the DoJ start an antitrust suit against AT&T. Enough of a case was made to force AT&T to agree to stop buying the independents and to interconnect long-distance service with all of them.6 Although it was not the structure Vail wanted, non-discriminatory interconnection meant one system for longdistance service to and from any telephone, Bell or independent. AT&T, however, was still the only provider of the service, because it had a legal monopoly, through patents, on the necessary technology. By the time the patents ran out, AT&T had such a head start in scope of interconnection and amount of investment that no-one else could enter the market and compete successfully by installing a parallel wireline system. In this sense,
December 1989
AT&T had a ‘natural monopoly’.’ The crucial word for maintenance of the monopoly, however, is ‘wireline’, and when an alternative ‘wireless’ technology was fully developed, the monopoly began to disintegrate. Guglielmo Marconi demonstrated the power of the wireless alternative with transatlantic radiotelegraphy in 1901. Radiorelephony awaited development of electronic amplifiers, just as did transcontinental wireline telephony, and AT&T demonstrated both in 1915. For the next three decades, however, radio systems could carry only a small fraction of the telephone calls needed throughout the USA. The task was to find a way around the natural laws of wireless transmission, just as the loading coil had been a way around the distortion of wireline. The difficulty here is that different frequencies are needed for each message if radio waves are to spread in all directions as they do in broadcasting, but radio signals interfere with each other if two or more are captured by a single receiver at the same time. To avoid the problems of interference. two methods were developed: to exploit higher frequencies. which is the same thing as using shorter wavelengths, to make more room for communication; and to focus the radio waves into narrow beams like searchlights instead of spreading them widely, to be able to use the same frequencies again and again by pointing the beams in different directions. The two together; the shorter the go wavelength, the easier it is to focus. Narrow beams are needed in radar, too, and technical developments in the Second World War led to use of the extremely short radio waves that came to be known as ‘microwaves’. Microwave radio transmission systems were used by the US Army in North Africa and Europe during the Second World War, and were developed for commercial application immediately after. A string of microwave radio relay towers on hilltops about 25 miles apart could carry thousands of voice channels or a few television signals from coast to coast. They had two crucial characteristics: l The cost per channel mile for
311
Commenl
distances over 100 miles or so was less than that of any wireline system. The technology was not exclusive to AT&T; any of a dozen manufacturers had experience in building radar, and had access to a sufficient number and scope of patents.
‘The FCC had also permitted competition in the terminal market, but that decision had another technical basis. ‘lthiel de Sola Pool, ‘Competition and universal service’, in Harry M. Shooshan III, ed, Disconnecting Bell, Pergamon, Oxford & New York, 1984. “One example is Southwestern Bell’s interest in offering Electronic Yellow Pages service in Bell Atlantic’s operating area, cited by Henry Geller in ‘Government policy as to AT&T and the BOCs: The next 5 years’, IEEE Communications Magazine, Vol 27, No 1, January 1989. The entire issue is devoted to various aspects of telecommunications deregulation, and throughout the diveroence of RHC obiectives is apparent. “One such might have been AT&T Bell Laboratories’ 1973 invention of the modified chemical vapor deposition process, which is crucial for making glass fibres with the high performance necessary in optical communication systems.
312
Entrepreneurs were quick to plan competitive transmission systems. All they needed was capital, a market, a source of equipment and permission from the Federal Communications Commission to transmit radio signals. Capital could be found, distribution of the new entertainment medium, television, seemed a likely market, any of several manufacturers were eager for the business, but the Federal Communications Commission held back for a decade. The FCC was convinced that AT&T could provide all the transmission needed for public comeither by wireline or munications, microwave radio. Further, AT&T was no more eager to interconnect with potential competitors to help them provide extensive intercity service than it had been in 1910, and the FCC did not force it to do so. The lure of the low-cost alternative to AT&T intercity service remained, and the FCC felt continuous pressure to let others help satisfy the nation’s telecommunications demands. In 1959 the FCC took a new position with its ‘Above 890’ decision, by which it would grant licences for microwave radio relay systems to be used for private business transmission. Interconnection with AT&T companies for private-line service came with the FCC’s specialized common carrier decision, and the introduction of MCI’s Execunet ended the Bell System’s monopoly of public switched longdistance telephony. The technical foundation of the intercity telecommunications monopoly was gone. The American social, economic and political pressures for free markets eventually prevailed, and other communications firms entered to compete with AT&T.’ Interconnec-
tion remained an issue. Even though competition existed in the longdistance market, local service was, and still is, a natural monopoly, and to provide end-to-end service, intercity carriers needed to connect with local ones. AT&T’s long-distance competitors claimed that AT&T’s local operating companies gave preferred treatment to AT&T’s intercity service, and brought private antitrust suits. The Department of Justice included the theme in its 1974 suit, and the final resolution was the 1982 MFJ that separated local service and longdistance service. Vail’s concept of ‘one policy, one system’ was totally abandoned. ‘Ten years from now, a substantial revisionist literature will undoubtedly have emerged lambasting the Consent Decree of 1982 as shortsighted and ill-considered’. So Ithiel de Sola Pool started his forecast that division of responsibility for network service would lead to grave difficulties in technical advancement.” Short of nationalization, however, the telecommunication infrastructure of the USA can never be reassembled into a single corporate structure. Even if a legal mechanism were found, management remains diverse. The local Bell operating companies. and their owners, the regional holding companies, have no interest in subordinating themselves again to masters at AT&T or anywhere else. Soon after divestiture they took different paths in corporate expansion and now have widely different interests. “’ The question as to whether anyone could gain as dominant a position as did AT&T with the loading coil has a more positive answer. The patent laws remain in force, and any of a dozen laboratories might discover a principle or process that could become the necessary technical monopoly.” The MFJ imposes no long-term patent conditions on either AT&T or the RHCs, and both support superb laboratories. Both, too, have the corporate will to expand. The opportunity exists for a new, completely legal telecommunications monopoly to arise.
TELECOMMUNICATIONS
POLICY
December
1989