TELECOM Digest OnLine - Sorted: Re: Bell Divestiture

Re: Bell Divestiture
17 Jun 2005 07:00:37 -0700

Fred Goldstein wrote:

> Monopolies in LD transmission? That
> would have held up the price of data transmission, slowing down all
> sorts of datacomm. Ma Bell viewed leased lines, so necessary for
> data, as a substitute for profitable long distance minutes of use, so
> they overpriced them. The RBOCs still do the same thing with their
> Special Access tariffs!

But long distance rates for both switched and private line service
were both on the way down well before actual divesture. Also, faster
and faster digital lines were being installed before divesture.

I maintain it was mostly technology -- cheaper terminal equipment and
carrier media followed by higher call volume and greater economies of
scale -- that caused and still cause long distance rates to fall.

As Pat noted in his comments, in the early days MCI had a big advanage
serving only the high profit markets with no obligation to handle the
expensive stuff or provide support services. Any time a phone call
had trouble they dump it into AT&T's lap.

> Let's say digital leased line rates were, instead, regulated at
> cost-based levels.

Are you sure they weren't? I'm not that familiar with private line
tarrifs, but as mentioned my own employer's network went down in price
and up in speed before divesture. Private networks, such as owned and
run by railroads, were shifted over to AT&T since it was cheaper for
AT&T to provide it than doing it themselves. Considering they already
had a network in place, there must be have been good cost savings to
dump it for AT&T.

> But without local competition in 1996, and with the Internet going
> public when it did in 1992, I suggest that the BOC networks would have
> collapsed in 1996! The RBOC networks came within months of doing so.
> Dial-up Internet traffic was exploding. Bell System culture bought
> switches on a 5-year planning schedule, so they could not react
> quickly. CLECs were authorized in February, 1996, and by the end of
> the year they were carrying substantial dial-up ISP traffic. ...
> AOL did not use CLECs in 1996, and the RBOCs could
> not provide circuits fast enough (I know; I was working on AOLnet at
> the time). Other ISPs did, and that prevented more RBOC switches from
> melting down under the load.

I'm not sure "months of collapse" is an accurate characterization.

The Internet boom did not happen suddenly overnight. Remember that
since the 1960s people used dial-up to communicate with computers and
this traffic continued to grow. Hobbyists with early home computers
began to talk to each other then BBS's came along. The RBOC were
serving this growing traffic all along; and it was well recognized and
expected it would increase greatly. There were the early services
such as Compuserve and Prodigy.

Remember too that many users got a second telephone line for their
computer use. At the same time, the real (inflation adjusted) cost of
local phone service went down and more people got second lines for
their kids. The phone companies were planning and responding to this
all along -- expanding switch and local loop capacity.

> America will, as a result, fall even farther behind the rest of the
> world in most matters of telecom.

Is the U.S. really "behind" the rest of the world? Ironically, prior
to divesture the U.S. was by far the leader in telecom service.
Indicators like cost, lines per person, etc. all were best for the
U.S. wrote:

> The No. 1ESS was basically a No 5XBAR with stored program control
> (SPC). The real motivator was to cut labor cost and secondarily to be
> able to market special calling features.

Well, basically every switch was an advancement on the basic Strowger
unit which itself was to eliminate manual operators.

But I suspect the ESS offered more benefits than you suggest. I
believe it took up less floor space and operated faster, so it could
handle more calls in the same building. I believe it was more
reliable and more flexible.

Also, since the Bell System's rates were based partly on cost, cost
savings would be passed along to the customer which they were. In a
time of great inflation local rates remain nearly level.

> Not knocking that nice forward step in switching, but it was good for
> Ma Bell first, and the customer could (would) ride along for whatever
> benefits it gave to the subscribers.

But isn't that what EVERY business does? Any large business has teams
of engineers figuring out ways to do things cheaper. Then the
marketing people tell us something that is more inconvenient is
actually an "improvement".

When airlines buy new jet planes, they do so because the planes are
more fuel efficient and need less crew to fly, rather than making
flying better for the passenger.

Indeed, in many telephone service has gotten worse for us end users
because of cost savings. Instead of a live PBX operator serving us,
we get a machine and phone mail jail. Ironically, the old Bell System
constantly implored its business customers to provide excellent
service on their PBXs -- it offered training and guides and support

[Telecom Editor's Note]

> Bell got hit so bad for a few years, they finally decided they had
> to rebuild the entire phone system from the ground up, and the answer
> to that was ESS. So as you stated, Bell did not develop ESS in order
> to make a few dollars selling 'custom calling features' to users; ESS
> was developed so the telephone company could regain control of a
> network which was rapidly getting out of control.

Another major reason for the system rebuild was to protect the network
itself. The "phone phreaks" were using 'blue boxes' to take control
of the network and lock up long distance trunks. While mostly used to
save money, it was potentially very dangerous.

As to the issue of not interested in providing the customer with
advanced features, I'm not sure I agree. According to Bell Labs
Record and the history books, advanced service features (especially
for business users) were important.

The Bell System did not have to retrofit Step-by-step exchanges with
Touch Tone converters -- it didn't save them any money. But they
still developed four models for various SxS situations.

The Bell System didn't have to develop the Princess or Trimline
telephone sets. But they did. And we know they put a heck of a lot
of effort into optimizing the design for user comfort.

The entire history of the Bell System has been one of improving the
economies of scale to lower the cost to get more traffic and make more

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