Where Have You Gone, Bell Labs? [Telecom]

[major snippage]

Which is how, of course, that Motorola's engineering guru, Martin Cooper, made that first "cellular call" back on 03-April-1973, to... his friendly rival at AT&T who came in second....

It was clear the AT&T wanted out of the local switching business. Verizon is now doing the same thing in what they call "under served" areas.

-- The only good spammer is a dead one!! Have you hunted one down today? (c) 2009 I Kill Spammers, inc, A Rot in Hell. Co.

I worked at AT&T from 1987-1990 while in college. Virtually everyone I worked with was strongly anti-divestiture some even claiming the decree would soon be rescinded and Ma Bell would rise again. I never voiced my opinion for a whole host of reasons, but I thought they were all delusional. I saw the phone monopoly as some relic you would've found in the Soviet Union.

I just read a piece that was anti-Ted Kennedy. But the attack came from the left claiming Kennedy was the champion of deregulating the trucking, airline, and telephone business. It went on to detail how workers in those industries have it far worse today than they did in the 1970's. I think that charge is debatable. On the consumer side I simply can not imagine cell phones, broadband Internet, VOIP, or even the added features on land-line service existing as we know them today if we still had a regulated telephone monopoly. In 1984 who'd have guessed that 20 years later I'd get my dial tone from my cable TV company and 5 years after that I'd have no land-line because I carried in my pocket a phone about the size of a dozen playing cards stacked together.

I know that having a monopoly aided getting phone service to every remote corner of the country. The world benefited from the innovations out of Bell Labs. I know divestiture was painful. But in the long run I believe we did the right thing.

John

Certainly the divestiture was good for the stockholders... However, there is one terrible loss that is not frequently mentioned. Bell Labs had what was known as area 11, a large group of highly educated and intelligent people doing what was called "basic research". It was out of this that things like the transister were developed along with a whole host of other things that at the time were considered "not particularly useful" but later proved crucial to the advancement of technology. It also did a lot of material studies and basic work that might not become commercially viable for years or decades.

After divestiture this all dissappeared and Bell Labs essentially became a development organization. The basic fundamental science investigations virtually ceased and now are left to government and academia as there is no competitive commercial enterprise willing to invest the big bucks (at one time Bell Labs was 40% research and 60% development) in research that might not be commercial for years. Truly a great loss that industry today has not replaced. The impact on the future is uncertain, but likely not to be positive.

ET

I worked for Bell Labs from 1959 to 1990. When divestiture came in

1984, there was a lot of talk from our managers that because we were no longer a regulated utility we could become more entrepreneurial: try out new ideas for products or services, it's OK if some of these ideas don't work out. Well, some people found out the hard way that it really was _not_ OK if ideas didn't work out; their ideas didn't work out, and they were fired or demoted.

I see the loss of basic research as it was previously funded by large organizations and government as a national (USA) disaster. Where is today's Xerox-PARC? DARPA's funding seems to be channeled towards only short-term results nowadays. IBM still does some amazing things:

but I don't see the long-term breakthroughs of yore.

Even HP Labs has been "altered" to a results-now operation compared to some of the "Wow!" things I've seen done there over the years as this article sort-of laments:

Seems to be a symptom of the "me now" generation with its "just good enough" philosophy.

I respectfully must disagree. The Bell System provided the best telephone service at the lowest price; it obviously was doing many things right. It was and remains common for capital intensive utilities, like water, sewer, power distribution, local telephone loop, and cable TV, to be monopolies since it would be wasteful to have duplication. There were very sound reasons to have the old Bell System as it was in its time.

The primary motivation for breakup of the Bell System was NOT the publicized claimed "public interest", that is, better and cheaper service for folks like you and me. The motivation was (1) cheaper rates for the largest subscribers, (2) ability for new businesses (like MCI) to get into the game, and (3) an _ideological_ dislike of big businesses and AT&T in particular. Several books have been written detailing all this, citations were previously posted.

It's easy for a newcomer not subject to any rules to "skim the cream" off a tightly regulated business by focusing on low cost areas and ignoring high cost ones, which is what MCI did. MCI did not offer improved services, indeed, their early services were of poor quality. In real life, competitors break in by offering superior service, not superior lawyers.

The issue of "competition" is quite complex. Simply saying "competition is good" is totally inadequate because often times so- called competitors settle on a high-rate plain; they don't automatically get into a price war and reduce prices. Real life competition is very different than the competition in economics books.

The govt has regulated the private sector when the private sector failed to provide good service or had other problems. Deregulation of various industries was certainly not an automatic panacea and while there were some benefits, there were also many nasty problems. I would definitely agree that remaining workers in the airline and telephone industries have it much worse today than in the past; a great many people lost their jobs. (I don't know about trucking).

Certainly govt regulation is not perfect (it killed the railroads and Western Union). But eliminating it altogether is not the only option; it could be modified to be more flexible and meet modern needs, too.

Again I must disagree. Many of those technologies were originally developed by the old regulated Bell System. The Bell System was certainly NOT static, it was constantly developing and implementing new features and technologies. There was a lot of stuff in the pipeline at the time of Divesture, and it was coming out regardless of Divesture or not.

Also, remember that there was an explosion of technology after Divesture that affected everything. In 1984 who would've guessed that computer power costing about $30,000 in today's dollars would be available for $250 today? Who would've guessed that 512 MB of random access storage would cost all of $5.00, that several gigabytes would fit on a postage stamp? This explosion in technology allowing all these things also allowed the revolution in telecommunications. It was a dramatic reduction in the price of terminal equipment that allowed cheap high speed and high volume communciations over toll lines, which in turn allowed the Internet. Cheap but reliable components allowed C.O. switches to be smaller and inexpensive.

As to "wanting" to be broken up, I don't agree. AT&T's first choice was to continue mostly as is (with some changes per below). Given a breakup was unavoidable, they sought the best deal possible under the new order of things.

First, we must remember that several long standing Bell System policies were going to change regardless of Divesture. A Bell System textbook of 1975 reported that the historical rate average structure-- where rates were based on the average of costs spread over a large customer base--would be eliminated in favor of more cost-oriented rates. It stated this was the result of MCI's successful entry into a low-cost corridor and the Carterphone decision allowing customer-owned equipment. New tarrifs were being filed to reflect those changes.

(I find it ironic but sad that the Bell System's effort to meet competition by lowering its rates was found to be objectionable by the critics. In IBM's case, the court fully supported lowering prices as the whole idea of competition.)

Secondly, AT&T negotiated the terms of Divesture so that it kept those pieces it perceived to have the best value for the future, and, it gained the ability to enter new desirable markets previously blocked to it.

Third, other policies were going to change regardless. Renting extension sets meant providing 24/7 maintenance for them and wiring and that was becoming rather expensive and not worth the rental income and public complaints. New technology allowed long distance rates to drop, and new services and equipment to be offered.

Unfortunately for AT&T, it predicted wrong, The operating companies had higher value. Long distance and network management, AT&T's big strengths, ceased to be of value as a result of very cheap technology. Western Electric, something AT&T always had strong feelings for, also ceased to be of major value. AT&T attempted to get into computers with the purchase of NCR but didn't do well with it.

Note that the govt tried to break up IBM. IBM went to trial and prevailed. However, IBM had anticipated the govt action and made several major changes which undoubtedly saved it (cutting a deal with CDC, abandoning its historic bundling policy.)

Per Mr. Tappert and the invention of the transistor: IIRC, the transistor was an outgrowth of applied research to find a superior alternative to the vacuum tube, and several laboratories were working on it. Semi-conductors were already known at that point, though obviously a new field of study.

Per Mr. Burstein and cell phones, AT&T pioneered the ground station automatic switching and handoff needed for cell phones in the 1968 Metroliner telephone system. AT&T was ready with a cellular test system in the 1970s but the FCC simply sat on it for several years trying to figure out what to do. (Great job of "public interest", letting no one use a new technology!)

Gordon Moore, Thomas Watson, Bill Hewlett, Dave Packard, Steve Jobs, and Steve Wozniak; just to name a few.

Those involved in the technology know what is coming. The trick is figuring out how to take advantage of the coming advancements and produce winning products with the technology.

Apple was talking about a hand held computing device back in the 80's. The Newton was their first attempt. Now we have the iPhone. There are plenty of other examples of ideas that were envisioned decades ago that are just now reaching consumers. It was the visionaries of years ago that planted the seeds to take advantage of the technology of the future (today).

Technology will keep getting better. Those who know this are working today to take advantage of tomorrow's advances. They will be the new Apple's, IBM's, and HP's.

-Gary

But I can imagine cell phones as big as a brick that would _never_ suffer from dropouts or poor voice quality that is the norm today.

***** Moderator's Note *****

I think we should bring back the BC-745A. It eliminates the problem of distracted drivers. ;-)

Bill Horne

And to relate this to the Bell System, I remember a traveling lecturer from Bell Labs in the late 1950s (anybody else remember when Bell sent out those road shows, some to the general public, some to schools and colleges?). He assured us that in the future there would be a telephone you would wear on your wrist, and that you would have a single telephone number that was yours for life, wherever you went.

The old Bell System had a _huge_ number of lecturers and road shows for all sorts of purposes. They sent special equipment and teachers to schools to teach kids how to work the telephone. They had technical lectures. They had public demonstrations and museum exhibits. For businesses, they sent out people to train PBX attendants and provide other support services. They had all sorts of literature on good telephone manners, most of which is still very relevant today*.

Some of the business analysts they had now work directly for the large customers they once served.

A look at old Bell System literature shows much of it dealt with service quality, not just the technical this-button-does-that. The Bell System pushed hard for PBX attendants to give the best service possible. Sadly today no one is providing that training and service quality has gone way down.

• Admittedly, we no longer need to prepare of list of toll calls we'll be making in rapid sequence to give to the long distance operator in advance.

On Tue, 01 Sep 2009 11:02:29 -0400, Gary wrote: .......

New technologies are always a threat to organisations that lock themselves into current or older technologies (for whatever reason).

"Telephone" companies that wanted to remain "Telephone" companies using their incumbent infrastructure, and not actually be "Communication" companies that embrace newer technologies, would have died if they did not have some sort of artificial protection.

Many companies successfully evolve into changed environments. IBM was late getting into computers, but eventually beat its competition. Today IBM has moved on into services (which it always did well).

That is not true in the case of the Bell System. First, the 1950s Consent Decree strictly limited AT&T to communications despite the strengths of Western Electric in other fields. WE would've been a heck of a competitor in industrial electronics if allowed, for example. Bell Labs developed Unix, computers for in-house use, and could've been a major computer provider.

Second, the Bell System was the company that developed most of the new technologies.

It wasn't "artificial protection", but rather "artificial limitation" that restricted AT&T's business.

Western Electric used to make all kinds of electrical devices:

AM and FM Broadcast equipment:

Motion Picture Sound Systems; Even sewing machines:

On Wed, 02 Sep 2009 12:46:07 -0400, hancock4 wrote: ........

Probably right, but it is amazing that when a company reaches a point that is essentially a "Comfort zone" where the money rolls in with little extra effort required, that [everyone involved] seems to want to reside in it and protect that zone from any internal as well as external threat.

It just doesn't seem to be in Telecoms/IT where this occurs, it seems to be in any area where a company has sufficient market share so [it] then decides to actually control the market for the purposes of maximising profit over whatever innovative behaviour got them to that position in the first place.

It just seems inevitable that incumbent technologies that already make big money will suppress emerging technologies if they can, and if both of these happen to be in a single entity it makes the job of the newer technology even harder.

But that was not the case of the Bell System and AT&T before divesture. Nor was it the case for the larger Independents.

It does happen. Some companies can recover and some can't.

As an example, Philadelphia had two popular restaurant chains, Linton's and Horn & Hardart. Changing tastes killed off the restaurant business. H&H shutdown. But Linton's evolved into an institutional caterer company, such as providing food service for nursing homes. (Some residents recognize the recipes.)

Of course some companies make great efforts to change with the times but still fail to. Horn & Hardart tried to modernize its restaurants but it wasn't enough.

It's really not quite so simple. There are many different variables and influences in the business world that effect the development and deployment of new technologies. You can't generalize in something like this.

First off, new technologies are not necessarily as good as their promoters claim them to be. Some do not save very much money or are an improvement in functionality.

Secondly, when an existing technology is established, there is a cost to implement a replacement technology, and customers are hesitant to pay that cost unless there is clear payback.

For example, when color TV came out, the chosen system was compatible with existing B&W TVs. Also, the US television broadcast standard remained in place from circa 1941 to just now. While that standard eventually became obsolete, there was so much investment--both in consumer sets and broadcasters' equipment--that the standard remained in place for a very long time.

By the way, the old Bell System provided transport for radio and TV networks.

Another example, today many people are critical of the Windows operating system and MS applications. But it is in such widespread use it's not going anywhere.

It most certainly _was_ the case. The monopoly telephone companies, like other 'regulated' utilities, were _guaranteed_ (by force of law) that they would make a profit delivering service. "Whatever" the service cost to deliver, they were allowed (by *statute*) to set rates such that they got a guaranteed rate-of-return on investment. If one digs deep enough in PSC regulations, one can find actual numbers for the minimum guaranteed ROI.

,

Umm, I think your response is out of context. This sub-thread dealt with the statement:

""Telephone" companies that wanted to remain "Telephone" companies using their incumbent infrastructure, and not actually be "Communication" companies that embrace newer technologies, would have died if they did not have some sort of artificial protection. "

My response was that the pre-divesture AT&T did not rest in a "comfort zone", even with a guranteed rate of return.

As to PSC regulation, the 'rate of return' was not automatic, but rather negotiated. More importantly, it was only one of many critieria used to set rates. Further, the old Bell System was expected to provide good service, not just live off its fat. Contrary to critical myth, the PSCs acted upon receiving a complaint from an unhappy subscriber, even a residence, and the phone company responded quickly to such complaints. (Sadly, it was easier for an individual person to get assistance years ago than now.)

One early policy objective of the new "baby bells" was to modify their services to be unregulated, that is to dump the yoke of regulation. One reason today's phone bills are so complex is that the regulated and unregulated portions are broken out separately.

I'm not sure it is accurate to say regulated companies were "guaranteed a profit delivering service". The old Bell System was profitable. However, as we know, the old Western Union went bankrupt; its rates were unable to sustain its business.

Railroads were regulated too, though by a different commission. They certainly were not guaranteed a profit, rather, in the "interests of public service" they were mandated to provide service below cost, even if it bankrupted them (which it did in many cases).