Bell Divesture (was Re: Schools Prohibit Personal E-mail Sites)

Robert Bonomi wrote:

If the "Bell System/AT&T/Western Electric" had remained a monolithic > entity, The rate of change in the "Internet" would likely have been > much slower. There probably would not have been the telecom boom/bust > of circa 5 years ago,

What is your basis to claim "the rate of change in the Internet would likely have been much slower"?

It seems that many critics of the former Bell System "freeze it" at the time of divesture. That is, they presume the Bell System's physical plant and operating policies would never change and remain in

1983 technology. That premise is absurb. Throughout its history the Bell System was improving its plant. The system of 1983 was radically different than the system of 1973, and clearly the system of 1993 and 2003 would be radically different than 1983.

I know that data communications improved greatly just during the late

1970s, for example. Digital lines replaced analog lines for faster speed and higher reliability. Private line costs were coming down.

It is also clear operating policies and service plans would have changed, too. (They were always envolving in the past). How or what is tougher to say -- it depends on the external environment.

Don't forget the Bell System was heavilly controlled by (1) regulation and (2) the consent decree. We know that deregulation became popular later on. It's possible the Bell System may have been allow to adjust its rates so the the profitable corridors (the "cream") may have gotten discounts so Bell could compete fairly against newcomers. It's possible the Bell System may have escaped the consent decree--just as IBM was able to do -- and go into new markets previously closed to it.

Who knows, perhaps LANS and WANS would've been bult FASTER had the Bell System been allowed to be involved and use it strengths.

Fred Atkinson wrote:

Regarding divestiture, I'd have to disagree with your position. Have > you ever studied economics and the principles thereof?

Yes, I have studied economics. I know that "competition" in as much by itself is no guarantee of lower prices. There are a great many more significant variables that must be considered. In the case of the Bell System, it must be remembered that Bell's prices were NOT set by being a monopoly, but rather set by the govt in accordance with social policy.

It was easy for MCI to undercut Bell's pricing because MCI focused solely on the most lucrative markets and unlike Bell, did not have to spread its costs and revenues a wide base. MCI didn't have to build microwave towers high in the Rockies yet charge no more. Nor did MCI have to carry deadbeat or higher cost customers or provide support service.

That's not free competition.

The telephone system never improved all that much over the years (at > least, to the perception of the end user) until the Bell companies had > to compete.

That is utter nonsense.

If your statement was true, then the Bell System would still be at a

1910 technical level. Obviously it went beyond that.

The reality is that the Bell System was continually improving its switchgear, transmission media, customer service, and subscriber equipment right up until divesture. Long distance rates were falling.

Before divesture my employer was getting faster, more reliable, and cheaper private line data service and Centrex service.

Thus, competition played a big role in bringing prices down. And > the end user got a lot more say so about his/her telephone > service(s) and got what they wanted at prices they could afford.

The divesture result in costs being _shifted_, not coming down. For many subscribers, cost went UP.

Users could define their service requirements before divesture.

One cost shifting was moving former telco employees into the employ of corporations they once served. That didn't really save any money, indeed, for many employers, it increased costs. That is, instead of contracting out specialized work to specialists, one now had to hire those specialists in house.

I remember when an answering machine could only be provided and > installed by the phone company. The cost was enormous and there > were no other alternatives. Then came Carterphone, thank goodness. > And then came competition between carriers ... and the walls came a > tumbling down (with apologies to 'Joshua').

There were answering machines available in the early 1960s. Back then the technology was limited to what a machine could cost effectively do (not a lot of microprocessors in the early 1960s). Many business people preferred human answering services to provide superior customer service.

BTW, Carterphone was not Divesture. Separate issue.

Because everyone was trying to provide something that the other > carriers didn't provide (to target their niche in the marketplace), > the technology began to develop and new things were offered. I often > doubt that we'd have ever seen the Internet if the industry hadn't > become competitive (or at least not for many more years to come).

Your statement implies there was no technology development prior to divesture. I suggest you read some Bell Laboratories Record magazines to see all the things that were going on. A great many of the technologies of the 1990s were originally developed at Bell Labs.

As to the Internet, as mentioned the cost of private lines was declining while speed was going up before divesture. This would continue.

Indeed, I wonder if the old Bell System had stayed around and had a hand in regulating the Internet, some of the problems we have today would not exist.

[TELECOM Digest Editor's Note: Here is a question for the collected > readership: _If_ Bell had not gotten divested, and was still in > charge of most everything relating to telecommunications, what would > the internet be like today?

Probably better. Pat, look at the many problems you articulated about Internet control and supervision. I dare say the Bell System would have handled it better.

Would it all be run by 'the telephone company'? Would we be getting > all our attachments and peripherals from the telephone company? I > suggest that might be the case. What do the rest of you think?

Carterphone already removed a big barrier and private lines were already free to hook up their own stuff. So, many attachments would be available from private sources. However, I suspect a healthy Bell System would've kept Western Electric, modified it to meet modern business needs, and been a competitive player.

Much would've depended on the regulators.

IBM was able to radically change as a company and save itself because it was freed from its 1956 consent decree and got into some lines of business previously forbidden to it and not forced to share free very valuable research patents.

Presumably there'd be deregulation of the Bell System. Private services would be allowed as well as long distance interconnection. But at the same time, Bell would be allowed to modify its rates to meet specific market conditions and compete better, and get revenues from new services previously forbidden, just like IBM.

Let's remember that MCI got a foothold in many doors not by offering superior service and lower rates, but by suing regulators or other agencies to force itself in the door. That's not "free market" activity either.

[TELECOM Digest Editor's Note: Recall please that MCI got its start by filing a fraudulent petition with the Illinois Commerce Commission. The radio repair shop in Joliet, Illinois (MCI's humble beginnings) _claimed_ all they wanted to do was run a microwave link for a small, selected handful of their private customers between Joliet, Chicago and St. Louis. Illinois Bell protested, but to no avail. ICC allowed Microwave Communications (the small private dealer of radio equipment and repair of same) to install a link between Chicago and St. Louis. Soon thereafter, Microwave Communications somehow 'snuck in' an interconnection to the 'outside' world via a telephone central office in Chicago and one in St. Louis.

Regards how they initially built up their customer base, MCI took advantage of two things: (1) the public's general dislike for Bell System (remember, VietNam, anti-everything big business in the 1960's) and (2) whether they were 'anti-everything' or not, the general ignorance of the public regards the working of things telephonic. Knowing nothing about the concepts of Separations and Settlements, nor the costs of running big telcos versus rural telcos, nor the profits to be had in the east coast corridor versus the heavy expenses of putting repair people to work atop telephone poles in the Rocky Mountains in the dead of winter, when MCI proffered 'much cheaper rates for calls by using us instead of them', between that and (1, above) people jumped at the chance to 'get one over on Ma Bell' ... As Charlie Brown, AT&T's Chairman during Divestiture once phrased it, "When was the the last time MCI had two of their long-time, dedicated workers fall to their deaths from a high peak in the Rockies in the dead of winter when they had gone out to repair lines for a small community of a few hundred people who otherwise would have had to go without phone service until spring when the lines could be safely restored? If AT&T did not have to deal with hideous conditions like that in the interest of providing round the clock phone service to small, rural areas, then I could afford to give cut rate long distance service also." And he continued, "the nerve of those people to tell customers to use _our_ directory service (which we provide for 'free' as part of our over all expense in running the telephone company) and then to place the _revenue_ portion of the call using their facilities 'because they are cheaper, and why would you want to spend money on Bell when you could get it for less' ..." PAT]