TELECOM Digest OnLine - Sorted: Re: Why is Congress Considering Such Anti-Consumer Telecom Bills?

Re: Why is Congress Considering Such Anti-Consumer Telecom Bills?

Tue, 01 Aug 2006 07:42:21 -0400 wrote:

> DLR wrote:

>> My point to all of this is that the world changes and big dominant
>> companies hate change. It makes them work to maintain their dominance
>> and what they really want to do is coast and talk about what they are
>> doing, not actually do something.

> You make many good points. However, not all "big dominant" companies
> dislike change and are stagnet, indeed, many of them are the ones
> developing and pushing the changes.

> The Bell System and IBM of the 1960s were behind many of the social
> changes in business communication. Reduced toll rates and more
> sophisticated technology allowed the telephone to be a commodity than
> high cost specialized appliance. Centrex and DDD allowed someone to
> call another instantly compared to operator arrangements people were
> used to. IBM's reports and punched cards dramatically raised the
> volume of information being passed around.

> There was much social criticism of the new world of phones and
> computers. People pleaded for a place away from the incesant ring of
> the phone.

> The Bell System was huge. Some parts were better than others, some
> quite responsive, others sluggish. From reading responses, I don't
> know if NYC ever got over the past service crises.

> IBM went through a relatively brief period of stagnation. It did get
> too bloated by hiring too many people to fit the IBM "no layoff" model
> and ceased being lean.

It was not relatively brief. It was continuous. But it wasn't
stagnation as much as taking great things and doing mediocre things
with them. It was just that being dominant in their fields hid much of
it most of the time. I have friends in some key places inside IBM and
they talk about the constant battle to compete against the
competition, not against what they did last year. But it has gotten
much better. Read the Mythical Man Month. He talks about how only IBM
had the resources to do the System 360 at the time but the bureaucracy
of IBM almost doomed the project. There's another book about quality
written by a senior IBMr from the past. For a while he ran the
typewriter division in the 60s/70s with a mandate to turn a profit or
shut it down. Manufacturing was a disaster. He cleaned it up, totally
changed it, and 5 years after he left it was back as if he's never
been there. Dominance breeds contempt of others. Sometimes through
ignorance but it's there.

The best IBM story is why they got out of the networking businesses.
When Gerstner came in he made everyone show their P&L and if you were
loosing money justify why you should exist other than "because". He
also had them break out green vs. blue revenue and profits. This is
what created the riots. Networking was something like 90% blue and 10%
green. I.E. only 10% of the revenue came from sales to customers. The
rest came from sales to run the IBM in house network, service
contracts, and bundles with other hardware sales. Note in this last
category that IBM was forbidden to sell anything from a competitor if
IBM made something else that worked. So a $10 million mainframe sale
might include $5 million of IBM networking. Once they dug deep into
this practice and what their customers wanted, they shut down the
networking division within a year and sold it off to Cisco.

But try going into an IBM retail store in the 80s and buy something
for PC. Before you could pay for it and leave you had to register
the serial number of the floppy disk drive with your name and address.

There are other stories about DB2, Microchannel, disk drives, etc ...

At to Bell Labs, they did great work. Most of it took years to make it
into the field. Much of it went no where in terms of the phone
system. I still remember how colored phones were marketed as
innovations. I had an older cousin who was a senior sales rep for Bell
in IL in the 70s. He could spout the company line all day long about
innovation, protecting network from foreign devices, etc ... He would
also say privately it was all about locking everyone else out of the

> But plenty of small companies are merely followers of the big guys
> with no contribution of their own. IBM was mad at small companies
> that cloned the fruits of IBM's research (as in tape and disk drives),
> sold them cheaper, then complained when IBM made upgrades that hurt
> their clones.

It's called a free market. If they really impinged on IBM patents they
could have been made to pay royalties or not sell the products. What
really was happening was IBM was claiming that plugging in any non-IBM
device voided the warranties and service contracts on the entire system;
similar to Bell and their $150 + monthly charges data protection
device to plug in a phone not supplied by the phone company. Or heaven
forbid a modem. If the old Bell system was still in place without the
fall out of the MCI situation, we'd all still be debating whether or not
128kbps ISDN was worth the extra costs and wondering why the rest of the
planet had 3mbps Internet. But we'd be told over and over it wasn't very
reliable compared to the great product we were using. Heard that line
WAY too many times.

Watching the mainframe sort wars of the 80s was similar. Syncsort(?)
had a sort that was up to twice as fast as IBMs. Every week in
ComppurterWorld they'd run a different ad showing how their sort
ground IBM into the dust in a different situation. After a few years
IBM started running ads showing how they really were better according
to their "fair" tests. Then it came out when no one could reproduce
IBM's results that they were faked. High up at IBM the troops were
told to beat the competition, period. So they did. They just forgot to
play by the rules since that was the only way to win.

Bell and IBM had great research arms. They had lots of bright people.
But the companies were run by managers who were out to protect their
turf at all costs. And bringing new widgets to markets where they
already owned 90% of the market was riskier than doing nothing.

I say the above based on a variety of information sources. I've been a
potential customer of IBM where they wanted us to switch to them in
the 80s for the 500 or so minicomputers we were installing around the
country a year. To be blunt, they flat out lied about the capabilities
of the computers. And given the looks on the faces of the folks we
worked with, they knew it but were under orders. I also worked in IBM
manufacturing as a grunt to pay the bills during a career switch.
(Amazing way you can see from the bottom. :) ) I have current friends
who are high up in Leveno and IBM. They like the company but want to
fix the flaws, not ignore them.

> My argument against the first poster was that it seems to be more of a
> triade against the traditional phone companies and not one based on
> the facts.

> I am greatly suspicious when someone holds up a new invention and is
> upset that it isn't in everyone's hand the next day. The world
> doesn't work that way.

Agreed. But then again IBM and AT&T were never in a hurry to put out
new things unless it would increase profits. And new things in
technology tend to lower profits unless you also grow the market and
that's not always a given. If you want to really see the economics of
high tech at work, look around and think about the turn over in retail
computer stores for the last 15 years. They just have a real hard time
dealing with the costs of their products dropping by 1/3 year after
year after year. It makes you scared to put out a new product. And if
you "own" the market you tend to do just that. Sit on things that are

As to a counter to this think of Intel, Cisco (usually), Texas
Instruments, and lately Motorola.

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