TELECOM Digest OnLine - Sorted: Re: The Day the Bell System Died

Re: The Day the Bell System Died
9 Jan 2005 10:40:55 -0800

Fred Goldstein wrote:

> Divestiture was the high point in telecom history. The old Bell
> System was too powerful, too resistant to progress. It was good at
> one thing -- proving Plain Old Telephone Service to residential
> subscribers at low rates.

That isn't true. At the time of divesture, the Bell System provided
sophisticated high speed communication services to business and was
developing improvements and new products.

> And it was pretty good at being a steady money-earner, paying a good
> dividend. But as technology was advancing, as solid-state
> electronics was shortening product cycles, the Bell System's
> monopoly ways were impeding progress.

No, they were not. The Bell System was introducing new electronic
telephone sets and central office equipment quickly in those years,
consistent with the pace of electronic offerings elsewhere.

> By vertically integrating everything including manufacturing, it was
> an island of a planned, command economy, a miniature Soviet, here in
> the United States, cleverly masquerading as capitalism.

The Bell System did not manufacture everything, it outsourced
considerable work. The company was not a total monothith, the
different operating companies had different environments to reflect
local needs.

> ... Divestiture was more important than the Telecom Act of 1996 in
> fueling the late 1990s telecom boom, which led to the meltdown of
> 2000-2002.

The continuing drop in the cost of electronics -- the stuff that made
a a 4 Mhz 8 bit PC go down from $2,000 to $500 yet yield tremendous
more horsepower -- was responsible for the boom. Telephone service,
including long distance and feature services, cost less to provide
since the electronics behind it were so cheap. Fiber optic cable is
worthless without sophisticated electronics at each end to compress
and uncompress all the data being sent over it.

Everyone forgets that the old Bell System was lowering its rates yet
enhancing service continually since WW II. Several people here seem
to think the 1983 Bell System was exactly the same in terms of rates
and equipment as 1933 or even 1963 and that's ridiculous. Independent
telecom vendors love to paint that picture.

It must also be remembered that consumers lost a lot from divesture.
Those within the telecom industry don't see it that way since they're
the ones who have personally gained, in some cases gained very well.
But we private people have paid for that in terms of finger-pointing
between vendors, "access charges" for stuff that used to be free, and
less human support and service. Big companies didn't get hurt since
they simply hired their Bell rep to work for them doing the same job.

> But that doesn't make either the divestiture or the Telecom Act bad.
> It means that many people who didn't understand how competition
> worked -- the telecom industry -- and people who didn't understand
> how monopolies worked -- money people -- had a very bad date. And
> only now, years later, are they figuring out how to get along on new
> terms.

From the point of view of the end-consumer, to "understand how
competition worked" is utterly irrelevent. They look at it simply
from the point of view of what service they received and how much they
had to pay for that service. For a great many consumers, service went
down and costs went up. (I was very irritated at the great long
distance scam of cheap minutes but a with a monthly minimum charge and
other restrictions with in reality made the cost the same or even
higher than the before.)

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