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Telecommunications technology applications and standards
Telecommunications technology applications and standards A new role for the user
Christopher Tamarin
Telecommunications is at a critical juncture in the development of technoiogy, policy and industry structure. The industry is becoming increasingly giobal and competitive; technology is developing faster than it can be implemented; and telecommunications is becoming strategically important to user organizations. Regulatory bodies and standards organizations are struggling with these developments. Public policy that encourages both competition in the telecommunications industry as well as the organized participation of users in the develoment of new technology applications, technical standards and industry regulations is essential for realizing the prospective benefits of the information age.
The telecommunications industry is in a period of rapid change and growth that has been brought about by significant developments in technology and accelerated by the deregulation and restructuring of the telecommunications industry in the USA. Concurrently, telecommunications is emerging as an issue of strategic importance for user organizations, affecting methods of operation, goods and services, staffing needs, and organizational structure. The structure of the telecommunications industry and the traditional roles of its institutions are being evaluated and redefined. During this period of flux, a new role for the telecommunications user is emerging: he is beginning to play an active role in developing new technological applications and needs to have a higher profile in the process of formulating regulations and setting standards. This is a significant development with important implications for users, service/equipment providers and regulators.
Christopher Tamarin can be contacted through the Interdisciplinary Teiecommunications Program at the University of Colorado, Campus Box 425, Boulder, CO 80309-0425, USA.
The traditional process The new role of the user is in large part a result of the deregulation of the telecommunications industry in the USA and the divestiture of the Bell System. Consequently, the history and development of the relationship between the user and the Bell System provides a valuable perspective. The Bell System
Prior to divestiture in the USA, the American Telephone and Telegraph Company (AT&T) acted as the end-to-end telecommunications services provider. AT&T determined what services would be available to the user and what technologies would be employed to deliver those services. This structure was effective in the USA and, as is evident by its continued use in other countries, is still considered to be effective. This 0308-5961/88/040323-09$3.00
@ 1988 Butterworth
& Co (Publishers)
Ltd
323
Telecommunications
technology applications
and standards resulted from the view of telecommunications services as a natural monopoly. This capital-intensive service was believed to be best delivered by an end-to-end provider in the form of a regulated monopoly that benefited from economies of scale. This regulated monopoly was charged with the responsibility of providing universal service for all at a reasonable cost and for acting in the public interest. Theodore Vail, the ‘Father of the Bell System’, stated its role as follows in AT&T’s 1910 Annual Report:’ structure
The telephone system should be universal, interdependent and intercommunicating, affording opportunity for any subscriber of any exchange to communicate with any other subscriber of any other exchange [. . . Ithat some sort of connection with the telephone system should be within reach of all [. . . ]that all this can be accomplished [. . . Iunder such control and regulation as will afford the public much better service at less cost than any competition or government-
owned monopoly.
‘Brooke W. Tunstall. Disconnecting Parties: Managing the Bell System Break-Up. An inside View, McGraw-Hill Book Company, New York, 1985, pp 2-3. *Lay. A. Singleton, Telecommunications in the Information Age: A Nontechnical Primer on the New Technologies, Ballinger Publishing Company, Cambridge, MA, 1983. 3Don Radevich, ‘Open network architecture’, paper presented to the Interdisciplinary Telecommunications Program at the University of Colorado, Boulder, 14 October 1987. 4Leonard S. Hyman, Richard C. Toole and Rosemary M. Avellis, The New Telecommunications Industry: Evolution and Organization, Vol I, Public Utilities Reports, Inc. Arlington, VA, 1987, p 29. ‘Op tit, Ref 1.
324
This concept of universal service and a regulated end-to-end service provider has been very effective in building a national telecommunications infrastructure in the USA. Universal service will continue to be an issue of concern and an important measure of performance for the current period of deregulation. The fundamental importance of accessible telecommunications service to public welfare and business enterprise makes universal service an important political and economic issue. Despite proven effectiveness, regulation and universal service were also seen by many as having limitations. It is clearly a barrier to entry for prospective competitors. The existence of a regulated monopoly may also be viewed as a detriment to technological innovation and customer choice as the monopoly provider seeks to maximize its investment in capital equipment and economies of scale. AT&T essentially assumed responsibility for the US telephone system early in the century and proceeded to make changes and improvements according to its own schedule, using its own equipment and research laboratories.’ Rarely did the Bell System approach the customer to define user needs: but instead, the Bell System decided what the customer needed.3 The Bell System accepted the charge of providing universal service and sought to act in the public interest. ‘Ma Bell’ indeed became the personification of the benevolent monopoly. AT&T proceeded to implement new technology at its own speed. ‘Predivestiture and prederegulation changes in the terminal equipment were often determined by technology or what their telephone company wanted, rather than by what the customer desired. Equipment developments moved at a pace set by the supplier, the telephone company.‘4 A classic illustration of this process was the Bell System’s introduction of Picturephone service in 1970, and its prompt withdrawal when it was learned that there was virtually no customer demand for the service. This underscores product and applications development as an internal process with limited user involvement. Insulated from competition, Bell Laboratories could pursue the development of technology without concern for loss of market share. Consequently, the Bell System offered broad product lines designed for monolithic markets.5 The role of the user
It can be seen that the user, other than as a member of the general public, was rarely the primary focus or concern in the development of TELECOMMUNICATIONS
POLICY
December
1988
Telecommunications
rechnology applications
trnd standurds
new technology applications. The needs and interest of the provider network were the primary concern. The traditional process used to develop and utilize new technologies was internal to the monopoly provider. The provider conducted basic research and determined how technology would be used to meet its own operating needs and the needs of its customers. The users’ first exposure to new technologies was in the introduction of new goods and services for predetermined applications. User involvement in the development of telecommunications services and standards has been historically weak in all countries. There remains today an imbalance of influence in many countries that prevents and discourages users from participating in the regulatory decision-making process.6 Cullen says that ‘Existing telecommunication administrations often have the greatest influence on national governments and predictably resist any change which could conceivably weaken their position’.’ This is an ironic situation inasmuch as all institutions in the telecommunications industry exist in order to serve the needs of the user. This ‘marketing concept’ has, unfortunately, historically been lost on almost all telecommunications institutions. The marketing concept views the satisfaction of consumer needs, as defined by the consumer, as the social and economic justification for any business organization to exist.* Unfortunately, there are few mechanisms available for the user to participate in national or international telecommunications policy decision-making. The users’ views and needs, in effect, have been subjugated by the telecommunications industry.’ Even the International Telecommunication Union (ITU) may be considered to be guilty of this neglect as the CCIIT has often produced recommendations on obscure products and services for which there is no evidence of customer demand.” ‘Users could be of considerable help to the CCI’IT by assisting in identifying those products and services likely to be attractive to users and which, should be afforded priority in the standards making therefore, process’.”
The evolving role of the user The seeds of change
The seeds of change were planted in the USA with the 1956 Hush-A-Phone Decision by the US District Court of Appeals for the District of Columbia and with the 1968 Carterfone Decision by the Federal Communications Commission, establishing both the subscriber’s right to use the network in ways that are ‘privately beneficial %.C. Cullen, ‘Regulation and the user’, without being publicly detrimental’ and extending this right to all types Telecommunications Journal, Vol 54, No of equipment including telephone terminal equipment.” 3, 1987, pp 180-88. The Bell System’s tight control of the telecommunications industry in ‘Ibid, p 182. BTheodore Levitt, ‘Marketing myopia’, Har- the USA slowly began to weaken through a series of litigations. The vard Business Review, July/August 1960. eventual restructuring of the Bell System and the deregulation of the pp 45-56. telecommunications industry in the USA resulted in greater competition gOp tit, Ref 6. “ibid. in the industry and quickly gave users greater influence over telecom’ ’ Ibid, p 183. munications equipment and service applications. However, with the 12North American Telecommunications Association, Industry Basics: An Introducintroduction of competitive options, users also faced greater responsibiltion to the History, Structure, and Technolity for the selection and management of their telecommunications ogy of the Telecommunications Industry, systems. The user could no longer rely on the benevolent monopoly, North American Telecommunications Association, Washington, DC, 1986. ‘Ma Bell’, to manage their telecommunications systems.
TELECOMMUNICATIONS
POLICY
December
1988
325
Telecommunicutions
technology upplications and stundurds
The telecommunications industry is experiencing significant worldwide change. Telecommunications has become a key political issue in both developed and developing nations. Changing market structures and new technologies are beginning to affect the monopolies that have historically controlled the industry. Many policymakers have come to the conclusion that competition is preferable to detailed regulation as a means of promoting the interests of consumers.13 Other policymakers remain convinced that the traditional model of the end-to-end provider best serves the public interest. Although there is no clear consensus on the appropriate level of regulation in the telecommunications industry, the role of the telecommunications user is irreversibly changing. He is now playing an expanding role in the development of technology applications, technical standards and regulation. Users are becoming directly and actively involved due to the following developments.
a 0 l
a 0
Rapidly developing technologies that are increasing the potential benefits and importance of telecommunications, particularly to business organizations. The emergence of professional telecommunications managers and telecommunications entrepreneurs. Significant changes in national regulation. The increasingly international nature of business. Expanding user needs and greater user expectations.‘”
Telecommunications service providers are being forced to adopt a marketing orientation and are having to focus on customer needs. In the competitive, deregulated environment, telecommunications product and service providers can no longer take the customer for granted. Customer needs and competition rather than universal service are becoming the primary concerns of providers. Given the increasing importance of the end user, a significant change in the responsiveness of service providers can be noted. The process of developing new service applications and standards has changed and been accelerated.t5 Users have driven the information movement and management provide greater flexibility, control, responsiveness, and integrative communications products and services. A new role for
13Bryan Carsberg, ‘Regulation of British Telecom: A reply to Beesley, Laidlaw and Gist’, Telecommunications Policy, Vol 11, No 3, September 1987, pp 18&86. “‘Op tit, Ref 6. “Richard T. Rota, ‘ISDN architecture’, AT&T Technical Journal, January/ February 1986, p 6.
326
industry to capability in
the user
The new role of the user in the development of technology applications is very evident in the current development of the Integrated Services Digital Network (ISDN). This is significant in that the ISDN will provide the architecture for tomorrow’s public network and tomorrow’s customer premises equipment. Telecommunications users across the USA are actively involved in ISDN trials designed to define new services and test ISDN technical standards recommended by the CCITT. The trials are typically organized and coordinated by an operating company with the participation of a central office switch manufacturer, customer premises terminal equipment manufacturers, and one or more user organizations. Mountain Bell’s (US West) Phoenix ISDN trial was the first customer use of an integrated digital network to be implemented, placing the first ISDN call in the USA on 18 November 1986. More historic than the call
TELECOMMUNICATIONS
POLICY
December
1988
Telecommunications
technology applicarions and standards
itself was the fact that it was made by a user. Customers were able to experiment with new technologies on their own premises before these technologies were commercially introduced as products and services. This marks a significant change in the development process. In the Phoenix trial, a new concern for the user is evident in Mountain Bell’s philosophical
approach.
l6
Our premise is to satisfy our customers’ needs, and we have an obligation to provide our customers with the most efficient, streamlined, up-to-date communications system possible. It is important, therefore, to investigate the various technologies available to see if they will work for our customers.
The significance of the ISDN trials by US West and other telecommunications service providers such as Ameritech, Bell Atlantic Corporation, BellSouth Corporation, Nynex Corporation, Pacific Telesis, and a host of manufacturers is the active involvement of the user. The user has become an active participant, defining needs and determining the nature of trial applications. A key purpose of the trials is to learn what services will meet the customers’ needs. Lee G. Camp, Vice-President of Marketing at Pacific Bell, clearly recognizes the new role of the customer in telecommunications.” When picking new services, Pacific Bell lets the customer be the guide. Any new technology Pacific Bell develops results from in-depth consultation and testing with customers to ensure that services satisfy the greatest needs and have a viable market. [. . .] The primary emphasis during the [ISDN] trial will be working with customers to develop specific applications.
16Mike Fluent, ‘Pursuing the dream: Mountain Bell’s Phoenix ISDN trial’, Connections, March 1987, p 6. 17Lee G. Camp, ‘Customers’ needs are driving the development of new technology’, Telecommunications, August 1987. p 79. ‘*Marda L. Higdon, Judith T. Page and Peter H. Stuntebeck, ‘AT&T Communications ISDN architecture’, AT&T Technical Journal, January/February 1986, pp 2733. lgMark Mikolas, ‘Understanding the art of the oossible: listening to customers’, CO Swiiching Transmission and Network Services Maaazine. Mav 1987. pp 17-20. =Shuki \iiakid, .‘A n&w apprbach to ISDN user needs: the North American ISDN Users Forum’, paper presented to the Fourth Annual Integrated Service Digital Network Conference and Exposition, 1822 April 1988, St Louis, MO. *‘Op cit. Ref 16, p 9.
TELECOMMUNICATIONS
POLICY
AT&T announced that it is planning its ISDN to solve specific customer problems, increase customer productivity, and allow customers direct control and network management capabilities.18 The contrast between this approach and the traditional Bell System approach should be noted. Although initial ISDN planning has focused on commercial users, the new concern for customer involvement is not limited to business and institutional users. Providers are paying new attention to the residential customer. AT&T recently created a consumer laboratory in Holmdel, New Jersey, that will involve consumers in determining future services.” US West recently formed a marketing organization to focus on home and personal services. Residential applications are also being tested simultaneously in many of the ISDN trials. The residential user will become increasingly important as telephone companies develop the capacity to deliver multiple services over the local loop. In response to the trials, many customers have expressed interest in ISDN prior to its commercial availability. Membership is now being solicited in the North American ISDN Users’ Forum which has been organized under the auspices of the National Bureau of Standards. This organization is forming with the stated mission: to create a strong user voice in the implementation of ISDN and ISDN applications, and to ensure that the emerging ISDN is interoperable and meets users’ application needs.” The user is clearly seeking to play an active role in the development of ISDN. One of the user participants in the Phoenix trial, Matt Whittington of the State
of Arizona
Department
of Administration
It is important for standards to be set so the equipment will be compatible and integrated. The
new
December
aggressiveness
1988
of the user is further
noted
that,2’
and systems we purchase
underscored
by the
327
Telecommunications
technology
applications
and stundurtis
publicly announced plans of 3M Company to replace its entire telecommunications system with ISDN during the next five years.” In this case, a major corporate user is not waiting to see what develops, but has made the strategic decision to be a pioneer in developing its own applications to link over 18 000 employees in 23 locations. The process of developing ISDN is representative of the emerging role of the user in the changing structure of the telecommunications industry. The new applications development process is one in which users are actively involved in defining their own needs, determining what the applications of new technologies will be, and influencing the standards that are adopted. This emerging role is not lost on the proponents of ISDN in Europe. The ability to develop applications to meet user needs presents a significant challenge for the PTTs. According to Carrelli and Decina the main strategic directions for the PTTs should include the following: 0 0
0
0
A restructuring of the PTT organizations to serve business users’ needs. The establishment of a partnership between large (business and institutional) customers and PTTs for shaping future service offerings, including tariff structures. The development of consultative selling capabilities to understand the medium business user’s needs and to customize cost-competitive and open networking solutions. The establishment of partnerships between PTTs and professional applications software vendors to conceive and sell specific service applications to small business customers. Unfortunately, the existing and planned ISDN field trials in Europe have focused on technical issues, interworking issues, and exploration of applications, rather than on proving application economics and target market acceptance of such applications.23
Technical
standards
and the user
The influence of the user in setting the technical standards for technologies is still largely indirect. The users’ limited role in establishing standards is reflected in the ITU Secretary-General R.E. Butler’s comments to the Closing Plenary Session of the Telecommunications Forum 87, Legal Symposium in Geneva on 23 October 1987.24 Let us also not forget that telecommunications users are in a way the audience which is watching and judging what we are doing and that these users are not confined to any one region or sub-region of the world. The call is for transparency and accountability and this means that we must build on solid and well understood foundations.
“Kathy Chin Leong, ‘3M will take the ISDN plunge’, Computerworld, 19 October 1987, pp 53,63. %laudio Carrelli, Maurizio Decina, ‘ISDN in Europe: challenges and oooortunities’. Telecommunicatiork, October i 987, p 69: % .E . Butler, ‘Lookina to the future: a view of basic issues’, paper presented to the International Telecommunication Union Forum ‘87, Legal Symposium, the Closing Plenary Session, Geneva, Switzerland, 23 October 1987.
328
It is heartening that user calls for transparency and accountability have been heard. It is unfortunate that the user is perceived as an outsider or as an audience for the proceedings when the appropriate (and developing) role is that of active participant. Users are no longer inclined to take a ‘wait and see what happens’ approach to telecommunications. Users will increasingly seek to exert direct influence on the formulation of standards and regulations. The impact of these standards and regulations on user organizations is too great for them to do otherwise.
Conclusions The role of the user in the telecommunications TELECOMMUNICATIONS
industry
POLICY
is clearly
December
1988
Telecommunications
technologv
upplicatiom
and standards
changing. Rapidly evolving technologies and the deregulation of the telecommunications industry are changing the structure of the market. Telecommunications service and equipment providers serving the US market are among the first to recognize the new role and are becoming more orientated towards marketing. Many are beginning to address the needs of consumers as the structure of the industry is changing. Despite this progress, users fall far short of being full partners in the regulatory process. Their influence has been indirect through user participation in new technology trials. Users will ultimately seek more power and influence in setting standards and formulating regulations. The direct and active involvement of the user in the development of telecommunications technology applications and standards will have benefits not only for the user, but also for service providers and regulators. Benefits to the user
Active involvement in the process of developing applications and setting technical standards will improve the user’s ability to meet telecommunications needs. Users require equipment and services that are designed to perform needed tasks and functions. These goods and services will be increasingly important to user organizations in the information age. Users also need standardization to ensure compatibility of equipment and applications. The operations of many user organizations are national and international in scope. Ubiquitous technical standards and availability of services are very desirable from the user’s perspective. Benefits to service equipment providers
The ultimate success of ISDN and future telecommunications technology applications is dependent upon its acceptance by paying customers. The risk of investing the large amounts of capital needed to develop and implement new technologies will be reduced if the user is involved during the development stage. It is in the provider’s interest to focus on the needs of users and to develop equipment and services that will satisfy those needs. User involvement will help to ensure that markets will exist for new equipment and services when they are offered. Benefits to regulators
Regulatory organizations are, for the most part, public agencies charged with formulating and administering policies that serve the public interest. Increased user involvement at all levels of the regulatory process will serve to build the telecommunications infrastructure needed for universal access and economic development in a manner that is consistent with the public interest.
Recommendations Recommendation
I
Users need to become aggressively and actively involved in the development of telecommunications applications, standards and regulations. Users have a vested interest in encouraging the adoption of international standards for ISDN and future technologies in order to TELECOMMUNICATIONS
POLICY
December
1988
329
TelrcommLtnicarions technology upplicurions and srandards
build and maintain an open network that is uniformly accessible. This will serve to meet user telecommunications needs and facilitate world commerce. It is in the interest of the user to see that technical standards promote competition in the telecommunications industry by minimizing technical, economic and legal barriers to entry. Large organizations have the need and the resources to become involved in the regulatory process through direct participation. Small organizations can exert influence through trade or industry associations. Organizations of all sizes should seek participation in telecommunications user organizations such as the International Telecommunications Users’ Group (INTUG), The International Communications Association (ICA), and the Telecommunications Association (TCA). Special interest user groups also provide a vehicle for exerting influence such as the National Centrex Users’ Group, the National Rolm Users’ Group (NRUG), and the Coalition of Open Network Architecture Parties.25 This involvement is already beginning and will increase as more user organizations recognize the strategic importance of telecommunications to their operations. It is in the interest of multinational organizations, in particular, to seek international telecommunications standards to meet their organizational communication needs. It will be to the benefit of these organizations to have not only technical standards but standardization of available services. Such standards will facilitate the management of their telecommunications systems and intra-organization communications. Recommendation
2
Telecommunications equipment and service providers should seek and support user involvement in the process of developing new applications and setting technical standards. It is in the interest of telecommunications service and equipment providers to support and encourage the expanded role of the user in a competitive environment. Given the introduction of competition to the telecommunications market, traditional providers will find that monopoly attitudes and approaches result in customer dissatisfaction and loss of market share in a competitive environment. In the USA, AT&T and the regional Bell operating companies are an excellent illustration of the change in management attitude that is required. It is essential for provider organizations to focus on the wants and needs of their customers. Recommendation
25MitchBetts,
‘Users group airs ONA wish list’, Computerworld, 27 July 1987, pp 37-38. See also Roger Underwood, ‘User associations are doing innovative things, both individually and in concert with each other’, Communications News, September 1987, p 58.
330
3
National and international regulatory agencies must seek to coordinate policy and provide a means for increased user participation in the regulatory process. Currently, the representation of private sector interests is largely limited to organizations in the telecommunications industry. Places must be opened on committees and boards for user representatives. User participation beyond submitting comments must be etablished. Large users with professional telecommunications management staff and user organizations will probably fill these positions. The need for a comprehensive telecommunications policy on a national and international level is frequently noted. Though the difficulty of formulating such a policy is recognized, its development will TELECOMMUNICATIONS
POLICY
December
1988
Telecommunications
technolog_v applications and stundurds
greatly assist all parties in the planning, development and implementation of telecommunications technologies. One very significant result of the new technologies has been the user’s ability, given sufficient resources, to bypass the public network and build private telecommunications facilities. This is a trend that will surely continue, to the detriment of the public telecommunications infrastructure. if traditional service providers do not become more responsive to user needs. Consequently, regulatory organizations need to be active in seeking user involvement in order to avoid user abandonment of the public network.
TELECOMMUNICATIONS
POLICY
December
1988
331
Christopher Tamarin
Telecommunications is at a critical juncture in the development of technoiogy, policy and industry structure. The industry is becoming increasingly giobal and competitive; technology is developing faster than it can be implemented; and telecommunications is becoming strategically important to user organizations. Regulatory bodies and standards organizations are struggling with these developments. Public policy that encourages both competition in the telecommunications industry as well as the organized participation of users in the develoment of new technology applications, technical standards and industry regulations is essential for realizing the prospective benefits of the information age.
The telecommunications industry is in a period of rapid change and growth that has been brought about by significant developments in technology and accelerated by the deregulation and restructuring of the telecommunications industry in the USA. Concurrently, telecommunications is emerging as an issue of strategic importance for user organizations, affecting methods of operation, goods and services, staffing needs, and organizational structure. The structure of the telecommunications industry and the traditional roles of its institutions are being evaluated and redefined. During this period of flux, a new role for the telecommunications user is emerging: he is beginning to play an active role in developing new technological applications and needs to have a higher profile in the process of formulating regulations and setting standards. This is a significant development with important implications for users, service/equipment providers and regulators.
Christopher Tamarin can be contacted through the Interdisciplinary Teiecommunications Program at the University of Colorado, Campus Box 425, Boulder, CO 80309-0425, USA.
The traditional process The new role of the user is in large part a result of the deregulation of the telecommunications industry in the USA and the divestiture of the Bell System. Consequently, the history and development of the relationship between the user and the Bell System provides a valuable perspective. The Bell System
Prior to divestiture in the USA, the American Telephone and Telegraph Company (AT&T) acted as the end-to-end telecommunications services provider. AT&T determined what services would be available to the user and what technologies would be employed to deliver those services. This structure was effective in the USA and, as is evident by its continued use in other countries, is still considered to be effective. This 0308-5961/88/040323-09$3.00
@ 1988 Butterworth
& Co (Publishers)
Ltd
323
Telecommunications
technology applications
and standards resulted from the view of telecommunications services as a natural monopoly. This capital-intensive service was believed to be best delivered by an end-to-end provider in the form of a regulated monopoly that benefited from economies of scale. This regulated monopoly was charged with the responsibility of providing universal service for all at a reasonable cost and for acting in the public interest. Theodore Vail, the ‘Father of the Bell System’, stated its role as follows in AT&T’s 1910 Annual Report:’ structure
The telephone system should be universal, interdependent and intercommunicating, affording opportunity for any subscriber of any exchange to communicate with any other subscriber of any other exchange [. . . Ithat some sort of connection with the telephone system should be within reach of all [. . . ]that all this can be accomplished [. . . Iunder such control and regulation as will afford the public much better service at less cost than any competition or government-
owned monopoly.
‘Brooke W. Tunstall. Disconnecting Parties: Managing the Bell System Break-Up. An inside View, McGraw-Hill Book Company, New York, 1985, pp 2-3. *Lay. A. Singleton, Telecommunications in the Information Age: A Nontechnical Primer on the New Technologies, Ballinger Publishing Company, Cambridge, MA, 1983. 3Don Radevich, ‘Open network architecture’, paper presented to the Interdisciplinary Telecommunications Program at the University of Colorado, Boulder, 14 October 1987. 4Leonard S. Hyman, Richard C. Toole and Rosemary M. Avellis, The New Telecommunications Industry: Evolution and Organization, Vol I, Public Utilities Reports, Inc. Arlington, VA, 1987, p 29. ‘Op tit, Ref 1.
324
This concept of universal service and a regulated end-to-end service provider has been very effective in building a national telecommunications infrastructure in the USA. Universal service will continue to be an issue of concern and an important measure of performance for the current period of deregulation. The fundamental importance of accessible telecommunications service to public welfare and business enterprise makes universal service an important political and economic issue. Despite proven effectiveness, regulation and universal service were also seen by many as having limitations. It is clearly a barrier to entry for prospective competitors. The existence of a regulated monopoly may also be viewed as a detriment to technological innovation and customer choice as the monopoly provider seeks to maximize its investment in capital equipment and economies of scale. AT&T essentially assumed responsibility for the US telephone system early in the century and proceeded to make changes and improvements according to its own schedule, using its own equipment and research laboratories.’ Rarely did the Bell System approach the customer to define user needs: but instead, the Bell System decided what the customer needed.3 The Bell System accepted the charge of providing universal service and sought to act in the public interest. ‘Ma Bell’ indeed became the personification of the benevolent monopoly. AT&T proceeded to implement new technology at its own speed. ‘Predivestiture and prederegulation changes in the terminal equipment were often determined by technology or what their telephone company wanted, rather than by what the customer desired. Equipment developments moved at a pace set by the supplier, the telephone company.‘4 A classic illustration of this process was the Bell System’s introduction of Picturephone service in 1970, and its prompt withdrawal when it was learned that there was virtually no customer demand for the service. This underscores product and applications development as an internal process with limited user involvement. Insulated from competition, Bell Laboratories could pursue the development of technology without concern for loss of market share. Consequently, the Bell System offered broad product lines designed for monolithic markets.5 The role of the user
It can be seen that the user, other than as a member of the general public, was rarely the primary focus or concern in the development of TELECOMMUNICATIONS
POLICY
December
1988
Telecommunications
rechnology applications
trnd standurds
new technology applications. The needs and interest of the provider network were the primary concern. The traditional process used to develop and utilize new technologies was internal to the monopoly provider. The provider conducted basic research and determined how technology would be used to meet its own operating needs and the needs of its customers. The users’ first exposure to new technologies was in the introduction of new goods and services for predetermined applications. User involvement in the development of telecommunications services and standards has been historically weak in all countries. There remains today an imbalance of influence in many countries that prevents and discourages users from participating in the regulatory decision-making process.6 Cullen says that ‘Existing telecommunication administrations often have the greatest influence on national governments and predictably resist any change which could conceivably weaken their position’.’ This is an ironic situation inasmuch as all institutions in the telecommunications industry exist in order to serve the needs of the user. This ‘marketing concept’ has, unfortunately, historically been lost on almost all telecommunications institutions. The marketing concept views the satisfaction of consumer needs, as defined by the consumer, as the social and economic justification for any business organization to exist.* Unfortunately, there are few mechanisms available for the user to participate in national or international telecommunications policy decision-making. The users’ views and needs, in effect, have been subjugated by the telecommunications industry.’ Even the International Telecommunication Union (ITU) may be considered to be guilty of this neglect as the CCIIT has often produced recommendations on obscure products and services for which there is no evidence of customer demand.” ‘Users could be of considerable help to the CCI’IT by assisting in identifying those products and services likely to be attractive to users and which, should be afforded priority in the standards making therefore, process’.”
The evolving role of the user The seeds of change
The seeds of change were planted in the USA with the 1956 Hush-A-Phone Decision by the US District Court of Appeals for the District of Columbia and with the 1968 Carterfone Decision by the Federal Communications Commission, establishing both the subscriber’s right to use the network in ways that are ‘privately beneficial %.C. Cullen, ‘Regulation and the user’, without being publicly detrimental’ and extending this right to all types Telecommunications Journal, Vol 54, No of equipment including telephone terminal equipment.” 3, 1987, pp 180-88. The Bell System’s tight control of the telecommunications industry in ‘Ibid, p 182. BTheodore Levitt, ‘Marketing myopia’, Har- the USA slowly began to weaken through a series of litigations. The vard Business Review, July/August 1960. eventual restructuring of the Bell System and the deregulation of the pp 45-56. telecommunications industry in the USA resulted in greater competition gOp tit, Ref 6. “ibid. in the industry and quickly gave users greater influence over telecom’ ’ Ibid, p 183. munications equipment and service applications. However, with the 12North American Telecommunications Association, Industry Basics: An Introducintroduction of competitive options, users also faced greater responsibiltion to the History, Structure, and Technolity for the selection and management of their telecommunications ogy of the Telecommunications Industry, systems. The user could no longer rely on the benevolent monopoly, North American Telecommunications Association, Washington, DC, 1986. ‘Ma Bell’, to manage their telecommunications systems.
TELECOMMUNICATIONS
POLICY
December
1988
325
Telecommunicutions
technology upplications and stundurds
The telecommunications industry is experiencing significant worldwide change. Telecommunications has become a key political issue in both developed and developing nations. Changing market structures and new technologies are beginning to affect the monopolies that have historically controlled the industry. Many policymakers have come to the conclusion that competition is preferable to detailed regulation as a means of promoting the interests of consumers.13 Other policymakers remain convinced that the traditional model of the end-to-end provider best serves the public interest. Although there is no clear consensus on the appropriate level of regulation in the telecommunications industry, the role of the telecommunications user is irreversibly changing. He is now playing an expanding role in the development of technology applications, technical standards and regulation. Users are becoming directly and actively involved due to the following developments.
a 0 l
a 0
Rapidly developing technologies that are increasing the potential benefits and importance of telecommunications, particularly to business organizations. The emergence of professional telecommunications managers and telecommunications entrepreneurs. Significant changes in national regulation. The increasingly international nature of business. Expanding user needs and greater user expectations.‘”
Telecommunications service providers are being forced to adopt a marketing orientation and are having to focus on customer needs. In the competitive, deregulated environment, telecommunications product and service providers can no longer take the customer for granted. Customer needs and competition rather than universal service are becoming the primary concerns of providers. Given the increasing importance of the end user, a significant change in the responsiveness of service providers can be noted. The process of developing new service applications and standards has changed and been accelerated.t5 Users have driven the information movement and management provide greater flexibility, control, responsiveness, and integrative communications products and services. A new role for
13Bryan Carsberg, ‘Regulation of British Telecom: A reply to Beesley, Laidlaw and Gist’, Telecommunications Policy, Vol 11, No 3, September 1987, pp 18&86. “‘Op tit, Ref 6. “Richard T. Rota, ‘ISDN architecture’, AT&T Technical Journal, January/ February 1986, p 6.
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industry to capability in
the user
The new role of the user in the development of technology applications is very evident in the current development of the Integrated Services Digital Network (ISDN). This is significant in that the ISDN will provide the architecture for tomorrow’s public network and tomorrow’s customer premises equipment. Telecommunications users across the USA are actively involved in ISDN trials designed to define new services and test ISDN technical standards recommended by the CCITT. The trials are typically organized and coordinated by an operating company with the participation of a central office switch manufacturer, customer premises terminal equipment manufacturers, and one or more user organizations. Mountain Bell’s (US West) Phoenix ISDN trial was the first customer use of an integrated digital network to be implemented, placing the first ISDN call in the USA on 18 November 1986. More historic than the call
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technology applicarions and standards
itself was the fact that it was made by a user. Customers were able to experiment with new technologies on their own premises before these technologies were commercially introduced as products and services. This marks a significant change in the development process. In the Phoenix trial, a new concern for the user is evident in Mountain Bell’s philosophical
approach.
l6
Our premise is to satisfy our customers’ needs, and we have an obligation to provide our customers with the most efficient, streamlined, up-to-date communications system possible. It is important, therefore, to investigate the various technologies available to see if they will work for our customers.
The significance of the ISDN trials by US West and other telecommunications service providers such as Ameritech, Bell Atlantic Corporation, BellSouth Corporation, Nynex Corporation, Pacific Telesis, and a host of manufacturers is the active involvement of the user. The user has become an active participant, defining needs and determining the nature of trial applications. A key purpose of the trials is to learn what services will meet the customers’ needs. Lee G. Camp, Vice-President of Marketing at Pacific Bell, clearly recognizes the new role of the customer in telecommunications.” When picking new services, Pacific Bell lets the customer be the guide. Any new technology Pacific Bell develops results from in-depth consultation and testing with customers to ensure that services satisfy the greatest needs and have a viable market. [. . .] The primary emphasis during the [ISDN] trial will be working with customers to develop specific applications.
16Mike Fluent, ‘Pursuing the dream: Mountain Bell’s Phoenix ISDN trial’, Connections, March 1987, p 6. 17Lee G. Camp, ‘Customers’ needs are driving the development of new technology’, Telecommunications, August 1987. p 79. ‘*Marda L. Higdon, Judith T. Page and Peter H. Stuntebeck, ‘AT&T Communications ISDN architecture’, AT&T Technical Journal, January/February 1986, pp 2733. lgMark Mikolas, ‘Understanding the art of the oossible: listening to customers’, CO Swiiching Transmission and Network Services Maaazine. Mav 1987. pp 17-20. =Shuki \iiakid, .‘A n&w apprbach to ISDN user needs: the North American ISDN Users Forum’, paper presented to the Fourth Annual Integrated Service Digital Network Conference and Exposition, 1822 April 1988, St Louis, MO. *‘Op cit. Ref 16, p 9.
TELECOMMUNICATIONS
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AT&T announced that it is planning its ISDN to solve specific customer problems, increase customer productivity, and allow customers direct control and network management capabilities.18 The contrast between this approach and the traditional Bell System approach should be noted. Although initial ISDN planning has focused on commercial users, the new concern for customer involvement is not limited to business and institutional users. Providers are paying new attention to the residential customer. AT&T recently created a consumer laboratory in Holmdel, New Jersey, that will involve consumers in determining future services.” US West recently formed a marketing organization to focus on home and personal services. Residential applications are also being tested simultaneously in many of the ISDN trials. The residential user will become increasingly important as telephone companies develop the capacity to deliver multiple services over the local loop. In response to the trials, many customers have expressed interest in ISDN prior to its commercial availability. Membership is now being solicited in the North American ISDN Users’ Forum which has been organized under the auspices of the National Bureau of Standards. This organization is forming with the stated mission: to create a strong user voice in the implementation of ISDN and ISDN applications, and to ensure that the emerging ISDN is interoperable and meets users’ application needs.” The user is clearly seeking to play an active role in the development of ISDN. One of the user participants in the Phoenix trial, Matt Whittington of the State
of Arizona
Department
of Administration
It is important for standards to be set so the equipment will be compatible and integrated. The
new
December
aggressiveness
1988
of the user is further
noted
that,2’
and systems we purchase
underscored
by the
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Telecommunications
technology
applications
and stundurtis
publicly announced plans of 3M Company to replace its entire telecommunications system with ISDN during the next five years.” In this case, a major corporate user is not waiting to see what develops, but has made the strategic decision to be a pioneer in developing its own applications to link over 18 000 employees in 23 locations. The process of developing ISDN is representative of the emerging role of the user in the changing structure of the telecommunications industry. The new applications development process is one in which users are actively involved in defining their own needs, determining what the applications of new technologies will be, and influencing the standards that are adopted. This emerging role is not lost on the proponents of ISDN in Europe. The ability to develop applications to meet user needs presents a significant challenge for the PTTs. According to Carrelli and Decina the main strategic directions for the PTTs should include the following: 0 0
0
0
A restructuring of the PTT organizations to serve business users’ needs. The establishment of a partnership between large (business and institutional) customers and PTTs for shaping future service offerings, including tariff structures. The development of consultative selling capabilities to understand the medium business user’s needs and to customize cost-competitive and open networking solutions. The establishment of partnerships between PTTs and professional applications software vendors to conceive and sell specific service applications to small business customers. Unfortunately, the existing and planned ISDN field trials in Europe have focused on technical issues, interworking issues, and exploration of applications, rather than on proving application economics and target market acceptance of such applications.23
Technical
standards
and the user
The influence of the user in setting the technical standards for technologies is still largely indirect. The users’ limited role in establishing standards is reflected in the ITU Secretary-General R.E. Butler’s comments to the Closing Plenary Session of the Telecommunications Forum 87, Legal Symposium in Geneva on 23 October 1987.24 Let us also not forget that telecommunications users are in a way the audience which is watching and judging what we are doing and that these users are not confined to any one region or sub-region of the world. The call is for transparency and accountability and this means that we must build on solid and well understood foundations.
“Kathy Chin Leong, ‘3M will take the ISDN plunge’, Computerworld, 19 October 1987, pp 53,63. %laudio Carrelli, Maurizio Decina, ‘ISDN in Europe: challenges and oooortunities’. Telecommunicatiork, October i 987, p 69: % .E . Butler, ‘Lookina to the future: a view of basic issues’, paper presented to the International Telecommunication Union Forum ‘87, Legal Symposium, the Closing Plenary Session, Geneva, Switzerland, 23 October 1987.
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It is heartening that user calls for transparency and accountability have been heard. It is unfortunate that the user is perceived as an outsider or as an audience for the proceedings when the appropriate (and developing) role is that of active participant. Users are no longer inclined to take a ‘wait and see what happens’ approach to telecommunications. Users will increasingly seek to exert direct influence on the formulation of standards and regulations. The impact of these standards and regulations on user organizations is too great for them to do otherwise.
Conclusions The role of the user in the telecommunications TELECOMMUNICATIONS
industry
POLICY
is clearly
December
1988
Telecommunications
technologv
upplicatiom
and standards
changing. Rapidly evolving technologies and the deregulation of the telecommunications industry are changing the structure of the market. Telecommunications service and equipment providers serving the US market are among the first to recognize the new role and are becoming more orientated towards marketing. Many are beginning to address the needs of consumers as the structure of the industry is changing. Despite this progress, users fall far short of being full partners in the regulatory process. Their influence has been indirect through user participation in new technology trials. Users will ultimately seek more power and influence in setting standards and formulating regulations. The direct and active involvement of the user in the development of telecommunications technology applications and standards will have benefits not only for the user, but also for service providers and regulators. Benefits to the user
Active involvement in the process of developing applications and setting technical standards will improve the user’s ability to meet telecommunications needs. Users require equipment and services that are designed to perform needed tasks and functions. These goods and services will be increasingly important to user organizations in the information age. Users also need standardization to ensure compatibility of equipment and applications. The operations of many user organizations are national and international in scope. Ubiquitous technical standards and availability of services are very desirable from the user’s perspective. Benefits to service equipment providers
The ultimate success of ISDN and future telecommunications technology applications is dependent upon its acceptance by paying customers. The risk of investing the large amounts of capital needed to develop and implement new technologies will be reduced if the user is involved during the development stage. It is in the provider’s interest to focus on the needs of users and to develop equipment and services that will satisfy those needs. User involvement will help to ensure that markets will exist for new equipment and services when they are offered. Benefits to regulators
Regulatory organizations are, for the most part, public agencies charged with formulating and administering policies that serve the public interest. Increased user involvement at all levels of the regulatory process will serve to build the telecommunications infrastructure needed for universal access and economic development in a manner that is consistent with the public interest.
Recommendations Recommendation
I
Users need to become aggressively and actively involved in the development of telecommunications applications, standards and regulations. Users have a vested interest in encouraging the adoption of international standards for ISDN and future technologies in order to TELECOMMUNICATIONS
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TelrcommLtnicarions technology upplicurions and srandards
build and maintain an open network that is uniformly accessible. This will serve to meet user telecommunications needs and facilitate world commerce. It is in the interest of the user to see that technical standards promote competition in the telecommunications industry by minimizing technical, economic and legal barriers to entry. Large organizations have the need and the resources to become involved in the regulatory process through direct participation. Small organizations can exert influence through trade or industry associations. Organizations of all sizes should seek participation in telecommunications user organizations such as the International Telecommunications Users’ Group (INTUG), The International Communications Association (ICA), and the Telecommunications Association (TCA). Special interest user groups also provide a vehicle for exerting influence such as the National Centrex Users’ Group, the National Rolm Users’ Group (NRUG), and the Coalition of Open Network Architecture Parties.25 This involvement is already beginning and will increase as more user organizations recognize the strategic importance of telecommunications to their operations. It is in the interest of multinational organizations, in particular, to seek international telecommunications standards to meet their organizational communication needs. It will be to the benefit of these organizations to have not only technical standards but standardization of available services. Such standards will facilitate the management of their telecommunications systems and intra-organization communications. Recommendation
2
Telecommunications equipment and service providers should seek and support user involvement in the process of developing new applications and setting technical standards. It is in the interest of telecommunications service and equipment providers to support and encourage the expanded role of the user in a competitive environment. Given the introduction of competition to the telecommunications market, traditional providers will find that monopoly attitudes and approaches result in customer dissatisfaction and loss of market share in a competitive environment. In the USA, AT&T and the regional Bell operating companies are an excellent illustration of the change in management attitude that is required. It is essential for provider organizations to focus on the wants and needs of their customers. Recommendation
25MitchBetts,
‘Users group airs ONA wish list’, Computerworld, 27 July 1987, pp 37-38. See also Roger Underwood, ‘User associations are doing innovative things, both individually and in concert with each other’, Communications News, September 1987, p 58.
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3
National and international regulatory agencies must seek to coordinate policy and provide a means for increased user participation in the regulatory process. Currently, the representation of private sector interests is largely limited to organizations in the telecommunications industry. Places must be opened on committees and boards for user representatives. User participation beyond submitting comments must be etablished. Large users with professional telecommunications management staff and user organizations will probably fill these positions. The need for a comprehensive telecommunications policy on a national and international level is frequently noted. Though the difficulty of formulating such a policy is recognized, its development will TELECOMMUNICATIONS
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1988
Telecommunications
technolog_v applications and stundurds
greatly assist all parties in the planning, development and implementation of telecommunications technologies. One very significant result of the new technologies has been the user’s ability, given sufficient resources, to bypass the public network and build private telecommunications facilities. This is a trend that will surely continue, to the detriment of the public telecommunications infrastructure. if traditional service providers do not become more responsive to user needs. Consequently, regulatory organizations need to be active in seeking user involvement in order to avoid user abandonment of the public network.
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