TELECOM Digest OnLine - Sorted: Re: Bell Divestiture

Re: Bell Divestiture
20 Jun 2005 13:36:29 -0700

Michael D. Sullivan wrote:

> I used it starting in 1965, when my high school got a
> single TTY connected to it, either the only or one of a very few high
> schools connected to time sharing in the mid 1960s.

> By the late 1960s, time-sharing was much more widespread and was heavily
> used. But not in the mid-60s.

Our school system got it in 1967. Is that "mid" or is that "late"

In any event, the point is that the demand data lines were growing and
the Bell System was responding to that demand.

Of course let's remember Teletype (a Bell unit) developed a faster
machine (the 33 and 35) that used the new ASCII code.

> The problem for regulators and regulated telcos comes when the
> services that are providing the subsidy for below-cost residential
> service are subject to competition. ...

> ... in the old days, AT&T had an incentive
> to allocate costs to long-distance, to keep that price as high as
> possible within its rate of return and keep local residential
> service low ...

Many people have stated that long distance rates were higher to
cross-subsidize residential service. But where is that documented as
to _original_ reliable source?

Further, what was the dollars/percentage impact of that cross-subsidy?
That is, how much more would residential service have cost and how
much less would long distance? Does anyone have an authoritive

I must note that accurate cost allocation between a "toll call" and a
"local call" would be extremely difficult in the old Bell System
because the infrastructure was so tightly integrated. More distant
calls would get transferred to Long Lines for microwave or carrier
transmission, but even Long Lines used local Bell buildings.
Telephone operators handled local problems and toll connections. And
of course there was the charge to handle to the last mile to the

More importantly, toll calls were charged by distance, not real cost.
As Pat noticed, it was dangerous work to maintain transmission units
in the Rocky Mountains and people were killed doing it. I dare say
toll calls that passed over such locations didn't have to pay anywhere
near what it cost to make that possible. Conversely, toll calls in
highly developed corridors could use high volume microwave or coax
circuits that were quite cheap on a per-call basis.

I think this mileage rate was where the real "cream skimming" occured.
As noted, MCI did not offer operator or directory assistance or even
enough circuits to guarantee good quality. They had the comfort of
AT&T there as a backup. Under those conditions, it was very easy for
MCI to unfairly undercut AT&T on prices and make AT&T "look bad".

> Your one example is off. AT&T introduced the picturephone at the NY
> World's Fair in 1964 and the Bell System never introduced it into
> service at all, as far as I can tell. Does your phone show pictures?

I believe Picturephone was offered in public service as a trial in
some location, as typical Bell System practice of trying out something
new in a single location to see how it works. It was also offered to
some govt agencies as a tryout. A revised system had magnifiers to
allow transmittal of documents on a table rather than just people.
Obviously it failed to attract much attention.

I believe the Bell System then offered picture-conferencing service,
where a conference room was set up with cameras, microphones, and
monitors. A whole group of people could meet this way. I believe
this was moderately successful and still offered today by private

[TELECOM Digest Editor's Note: In Chicago, PicturePhone service was
made available to businesses for a couple years, and at the Illinois
Bell Headquarters building downtown, they had a 'shopping mall' sort
of arrangement for the general public to use. You could go in these
little booths and use a picture phone with a speed dialer which had
all the stores around town who subscribed to picture phone service
in its repretoire. You could go into the little stall entitled
'flowers' and press the button on the phone for the various florists
in town with picture phone. In a couple seconds, the screen would
light up and the clerk in the store would be seen with all the flowers
for sale. You could place your order via PicturePhone after you had
seen the various arrangement they had. You would then be asked by
the merchant to punch in your credit card number and hold the card
clearly in front of the camera (on your end) so the clerk could see
it as she rang up the sale. Or, go to the PicturePhone set up for the
'housewares department' or the 'clothing department' and do the same
thing. But it only lasted a few months (the 'shopping mall' at the
phone company offices) and then was closed. PAT]

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