TELECOM Digest OnLine - Sorted: Re: Bell Divestiture

Re: Bell Divestiture
18 Jun 2005 13:50:37 -0700

Robert Bonomi wrote:

> I _guarantee_ that AT&T and the Bells were not 'voluntarily' reducing the
> prices just because of a decrease in costs.

> There were precisely *two* possible reasons for a price reduction:

> 1) pressure from competition.
> 2) enough 'pent up demand' that the price reduction brought in 'more
> than enough additional volume' to make up for the reduction in
> profitability.

Neither of those make sense. There was not significant competition
before divesture except from other modes (ie writing a letter,
telegram). If you say the Bell System had no interest in the
customer, then it would not have lowered rates to meet that "pent up
demand", rather just put in more lines and made all the more money.

>> 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.

> The _rate_ of deployment, however, was driven by the competition
> _doing_it_ FIRST.

Again that fails to explain the continual rate reductions before

> Can you name a single railroad that had a developed long-haul telecom
> network that _voluntarily_ converted to AT&T service? The one that I
> am aware of where that happened did it _because_ the railroad was
> *sold*, but the prior owner _kept_ the telecom operation *(including
> R-O-W on all that railroad's trackage) rather than including it in the
> sale.

The Pennsylvania Railroad/Penn Central network was privately owned,
maintained, and operated, then turned over to AT&T.

Other systems include private networks of SEPTA and the City of

> There were numerous big-city locations where you _could_not_get_ RBOC
> phone lines in quantity, when you wanted them. 'Rationing' _was_ in
> effect. For a variety of reasons -- lack of field workers to do
> physical interconnects, lack of C.O. capacity, among the big ones.

Would you name those big city locations and the time frames for which
rationing was in effect?

> Home computers didn't *exist* until the mid 1970s. The Altair 8800
> plans ran in PE's Jan 1975 issue. The APPLE-II didn't exist until
> late 1977.

But businesses and schools were heavy users of time sharing by the mid
1960s -- using dial-up Teletypes. Businesses were also getting dial
up dataphone services between computers.

> The first BBS went online in Feb 1978. Within two years, the operator
> of that system had crossed swords with the local telco
> _at_least_three_times_, where they refused to install the additional
> residential lines he wanted. Claiming he "had" to be running a
> business. Public-utility commission complaints ensued, and the telco
> did, in each case, end up installing the additional lines.

> Other large-scale "hobby BBSs" across the country reported similar
> problems.

That is a tarrif issue. Rates for a business and residential line are
based on expected use. A non-profit is still considered a business.
Seems to me a high volume BBS should've been classified as a business
line due to high volume of use.

> The mid-90's debacle _was_ Internet driven.

That was after divesture and the Bell System no longer existed at
that point.

> Even prior to divestiture, the 'road signs' were there for anyone to
> read. "Measurements" for quality of U.S. service were flat-lining,
> and in some cases, actually declining.

Could you provide specifics of the measurements, areas in question
(presumably representing significant population centers, not just an
isolated location), and the time frames?

> Space was not an issue, generally. Possibly in a few central-city
> facilities in a few of the largest cities.

Space IS a MAJOR issue. Real estate is expensive in growing areas,
whether city or suburb. ESS takes up a far smaller footprint than the
equivalent No 5 crossbar location.

> "Speed" is not related to call-handling capacity.

Yes, it is. I believe you yourself said it was the to the advtg of
common control equipment to get in and out of the call as quickly as
possible. A faster common control can handle more calls.

> The Bell system, like any regulated monopoly was _guaranteed_ a
> certain minimum rate-of-return on investments.

Regulated monopolies were NOT _guaranteed_ a minimum rate of return.
If they were Western Union would not have gone broke nor would the
railroads. In some locations of the Bell System and even today,
regulators mandate below-cost services for social reasons or deny rate

> Very, *very* rarely was 'how' that money was spent questioned.

*NO*, <that> is _not_ true.

As Pat pointed out, Ma Bell was under constant scrutiny by the news
media and govt and advocates. Shareholder gadflies made a point of
disrupting stockholders' meetings every year. Activists filed
constant lawsuits against the system.

> Can you name a feature/capability introduced by the Bell System after
> 1970 that was not present in third-party-provided, customer-owned, PBX
> equipment first? The only one I can think of is the "picturephone".

I guess to really answer that claim one would have to list the latest
PBX offerings of the Bell System of 1970, their cost, and the
competition's offerings.

How many third party PBXs were available in 1970?

Getting back to your claim the Bell System did nothing it didn't have
to, let's not forget the Princess, Trimeline, Panel, Home Interphone,
and Bell Chime units.

The Eng & Sci history of the Bell System describes a multitude of PBX
systems and features.

> 3-way calling, conference calling, call waiting, speed-dial, call
> 'camping', etc. Standard features on PBXs years before there was
> Centrex availability. And even longer before they were offered on
> plain-jane POTS service.

All available on Bell PBXs of the 1960s.

> 'Native touch-tone' was far less expensive for the telco than native pulse
> dialing.

Not in SxS, which required extra equipment. See Eng & Sci book.

> To "sell" more extensions, they _had_ to have something that was
> 'acceptable' decor-wise to the decision-maker in the household.

Most families we knew did not bother paying extra for "premium"
telephone *sets*, BUT *did* pay +extra+ for _extensions_ in various
_rooms_ and particular <floors> of a house. Having three (3) phones--
'basement', 1st fl, 2nd fl, was very _common_ to -save- steps.

Most families we knew did not bother paying extra for premium
telephone sets, but did pay extra for extensions in various rooms and
particular floors of a house. Having three phones -- basement, 1st fl,
2nd fl, was very common to save steps.

[Side note: Are the emphasis symbols really necessary? Compare
the two paragraphs above.]

> [TELECOM Digest Editor's Note: Before Charlie Brown became Chairman of
> AT&T, he was President and CEO of Illinois Bell. At that time, he
> lived about two blocks from me in Rogers Park, a north side
> neighborhood in Chicago. In chatting with him at his home one day, he
> said to me basically what Robert Bonomi claims above.

I'm not sure which claims you're referring to.

I'm not claiming the Bell System was perfect, however, my own
experience as a customer in large organizations was that the service
was generally excellent and the company responsive, and that rates
were on a decline before divesture.

[TELECOM Digest Editor's Note: I was talking about Robert Bonomi's
claims that Bell System did just what the law required of them, and
not much else, unless it worked to their advantage. PAT]

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