snipped-for-privacy@bbs.cpcn.com wrote:
Very large businesses were moderate users of time sharing by the mid
1960s, and smaller and midsize businesses were not. Schools were not. Commercial time sharing only got started in the 1962-64 time frame. Dartmouth began its time sharing system -- the first academic TSS, the first step into TSS for its vendor, GE, and the first broadbased TSS -- in 1964. 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. (Dartmouth professors Kemeny and Kurtz invented BASIC (Beginner's All-purpose Symbolic Instruction Code) for the Dartmouth TSS in 1964; it initially allowed only 26 variables (A-Z), and no string variables. By 1965, it allowed A-Z and A0-Z9, or 286 variables, as well as matrices, so it became a bit more useful.)By the late 1960s, time-sharing was much more widespread and was heavily used. But not in the mid-60s.
They are not, and have not been, guaranteed anything strictly speaking. They are allowed a "reasonable" rate of return for purposes of ratemaking, which has traditionally meant they have been permitted to set a target of X% return on used-and-useful investment in plant, where X is based on cost of capital plus a kicker. The standard ratemaking formula is that R, the "revenue requirement," equals X times the used-and-useful investment in plant (after depreciation) plus reasonable expenses plus depreciation. That revenue requirement is then used as the target in setting rates for a plethora of services, some of which are priced below "cost" for many reasons and others are priced above "cost" to offset them. So if the PUC says that rural residential subscribers pay the same as urban, residential service is below "cost" (i.e., doesn't pay the required return), and other services are priced to make it up -- i.e., business and long-distance services.
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. If you were MCI in the late
1960s, you would have targeted your service (after getting into the business by saying you'd be providing specialized microwave service for truck lines) to businesses paying phone bills providing the highest subsidies for residential service. This was referred to as cream-skimming. It only makes sense. The problem is, it upset all of the factors on which the traditional ratemaking scheme depended. MCI could offer long-distance service for half the price of AT&T because AT&T was using the excess revenues of long-distance service to keep residential and rural service prices low to please regulators. When MCI came along, AT&T had to lower the prices of its most profitable services, but it couldn't raise the price of residential service due to those darn regulators. As a result, AT&T earned below its regulatorily-established rate of return. It wasn't guaranteed, after all. Of course, AT&T then got the FCC to move the subsidies around by creating access charges, and then there was the divestiture, which changed everything. Now AT&T was in the same position as MCI with respect to subsidies.I can't speak to the issues raised by shareholders, or activists' suits. There were, however, many regulatory inquiries into the "costs" incurred by the telcos and the pricing of their services. The FCC was very diligent in trying to prevent abuse of the telcos' ability to classify costs. Unfortunately, cost is a very complex concept in the area of regulated telephone service, because a given expense is used to support many different services. How the cost is allocated is a can of worms: 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, but with competition, telcos have an incentive to allocate costs to the services least subject to competitition, keeping those prices as high as possible. Back in the old days before MCI, when there was no real long-distance competition, the FCC conducted an inquiry into the below-cost pricing of TELPAK service (a high-volume long-distance service used by large businesses and the government) and was unable to come to any definitive conclusions after ten years because the costs were as slippery as eels, so it defused the issue by allowing resale and shared use of long-distance circuits, including TELPAK, and AT&T responded by discontinuing TELPAK, which it had to do because otherwise resale of TELPAK would have eliminated its captive retail long-distance traffic. And AT&T's TELPAK tariff was, in turn, a response to the FCC's 1959 "Above 890" decision that allowed private entities to set up private microwave networks instead of having to use AT&T for long-distance service.
The Above 890 and Resale and Shared Use decisions presaged the end of the traditional Bell System and set the stage for our current competitive telecom arena. I can't think of a single shareholder gadfly or consumer lawsuit that had a comparable effect. There were much more significant cost allowance and allocation issues in other regulated industries, such as whether to allow electric utilities to charge consumers for the humongous cost of constructing nuclear power plants before they were producing electricity.
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?
Michael D. Sullivan Bethesda, MD (USA) (Replace "example.invalid" with "com" in my address.)