TELECOM Digest OnLine - Sorted: Re: AT&T Inventions Fueled Tech Boom, And Its Own Fall

Re: AT&T Inventions Fueled Tech Boom, And Its Own Fall
7 Feb 2005 10:06:10 -0800

Lou Jahn wrote:

> The simple fact was AT&T spent more on planning than IBM/ROLM
> did on running their operation. It was a headquarter operation that
> allowed inflated staff headcount and the lack of truthful internal
> presentation of the marketplace dynamics that lead to AT&Ts actual
> demise.

I wouldn't call this a "lack of truthful internals" or "inflated
cost". I would call it the problems of transition as technology

As a monopoly in electro-mechanical technology for the U.S., it made
sense for AT&T have a strong staff for planning. This is what made
the U.S. telephone network so reliable and robust compared to the rest
of the world. Both internal and customer equipment were tested,
re-test, field tested extensive before going out the door. AT&T had
very few "Edsels" over its history.

But with the coming of widespread electronics coupled with divesture
coupled with customer owned equipment, this staff was simply no longer

IBM went through the same thing. In its heydey, IBM computers were
not a commodity, they needed difficult set up and programming so that
a computer with 128K of memory could serve an entire moderate
enterprise, 1 Meg for a big enterprise. Youngsters today with
unlimited cheap gigabytes of RAM memory simply can't imagine what it
was like to run complex business problems on such limited hardware.

Anyway, that took a lot of people. As technology and the marketplace
changed, customers could do their work right out of the box and those
people were no longer necessary. IBM went through painful layoffs as

In a sense, both at IBM and AT&T the technologists automated
themselves out of a job. Cheap fibre-optic cable eliminated the need
for detailed math analysis of calling and traffic patterns to optimize
cable construction; cheap computers eliminated the need to precisely
control the content of every bit at all times.

Some critics blame the mgmt of AT&T and IBM for allowing the companies
to be top-heavy. I don't agree. At the time the people were hired,
there was a need for their skills. At the time they were hired, they
still had a to support a network antiquated by today's standards.

It's really like this in any industry. The use of new technology in
electronics and materials allows my automobile to run further between
maintenance work -- this has cut jobs for car mechanics. Also, cars
last longer, cutting jobs for auto makers. (The flip side is that we
drive much much more nowadays which offsets those savings.)

> Those readers who lived in New Jersey may remember the "many" AT&T
> headcount reduction announcements for the 3-5 years after the 1984
> deregulation. Most were coupled with rifts of 50,000 to 100,000 at a
> time. Just think of the disruption such consistent headquarters
> turnover has on any business operation. I was always amazed the NJ's
> economy did not fall to the ground, but no, in spite of such job
> shedding NJs economy continued to grow until the late 1990's.

> Another factoid: AT&T as a total corporation had about 990,000
> employees in 1981-82. In 1987 the seven ROBCs and AT&T had only about
> 725,000 employees. While one might argue firms like MCI and SPRINT
> were doing some of the former AT&T effort. That total headcount of the
> RBOCs and AT&T continued to fall well into the 1990s.

> So while AT&T did indeed have a magnificent network, AT&T's inflated
> cost structure due to HQ overhead, simply brought it to its knees. It
> just took time for the real problems to register.

> Lou Jahn
> Info Partners Corp
> 609-823-6602
> 609-823-2202 Fax

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