Transcript Week 4 - Cochise College

Week 4
What you really want to know
Objectives
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Government and Non-gov’t involvement
Bell and patents
Post Patent World
Kingsbury commitment
1934 Communications Act
Monopoly challenges
Pre/Post-MFJ
Telecom Act of 1996
Legal Aspects of
Telecommunication
Early Signaling and Telegraphy
A Chappe semaphore tower near Saverne, France
France’s Semaphore map
Early signaling and Telegraphy
• Semaphore Proposal to do the same in U.S.
• Morse – Painter saw a demonstration on
electro-magnetism on a return from Europe
• More noted for code that telegraph
• Demonstration for Postmaster General- $30K
grant -1843.
• Ezra Cornell plow that buries cable.
Early signaling and Telegraphy
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Multiple Telegraph Companies
Railroad Right of Ways
Civil War
WU emerges as the strongest
By 1872 WU largest monopoly in the U.S.
1876 Telegraph reached coast-coast
A.G. Bell
• Deaf Mother and wife devoted life to sounds.
• Work on sending multiple signals over
telegraph. Edison and Gray also working on
this problem.
• Offered patent to WU for $100K, WU Pres –
”toy”
• Raised Capital by barnstorming
Bell Telephone
• Created in 1877- Most valuable patent.
• Acquired Edison’s Carbon microphone from
WU. “Can you hear me now?”
• 1880 -30K phones; 1886 – 150K phones
• WU agrees not to enter telephony, Bell agrees
not to get into telegraphy.
• Limited financing -sold franchises - RBOCs.
• Over 18 years 600 legal cases.
Early Antitrust Measures
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In 1882, American Bell gained a controlling interest in the Western Electric
Company, and together, they became known as the Bell System.
In 1885, American Telegraph and Telephone (AT&T) was incorporated as a
subsidiary of the Bell System, with the aim of constructing a long distance
telephone network and providing long distance service (to Bell System
subscribers only).
By 1899, AT&T bought out American Bell and became the parent company of
the Bell System.
After acquiring dozens of new patents from other companies and exponentially
increasing its value, the Bell Telephone Company became American Bell in 1880.
Post-patent World
• Competitors form USTA.
• J.P. Morgan controls both AT&T and WU
buying up competitors at an alarming rate.
• ICC responsible for regulation
• Fearing complaints would cause US attorney
to act.
• Nathan Kingsbury AT&T VP has agreement
with US Attys. 1913
Post-patent World
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1893 Patent expires
Competition springs up
Small “Hometown” companies offer service
Bell has 50% of market. GTE major competitor
Bell refuses them to interconnect.
More companies, more complaints
Bell Co. stifling competition
Kingsbury Commitment
• Kingsbury Commitment - fearing that the
government might use its antitrust laws against it,
AT&T approached the U.S. Department of Justice in
1913 with a proposal for reducing its monopoly.
• As a result of the Kingsbury Commitment, AT&T
functioned as a regulated monopoly from 1913 to
1984. Being a regulated monopoly meant that
although AT&T was allowed to provide services
without any competitors, it was subject to a great
deal of constraints dictated by the government
Kingsbury Agreement
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Allow independents to connect with A&T
AT&T divested from WU.
AT&T to stop buying independents
AT&T sole telephone in geographical areas.
Where no presence - competitors.
• AT&T given long lines. Had to connect to
others.
1934 Communications Act
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Created FCC to oversee Phone Co.
Regulate costs of service
States formed PUC, PCCs
Stable, Expensive, Bombproof Nets
99% of calls thru 99% of time.
Universal access – Pay for it?
Long distance subs local calls.
Hush-a-phone/Carterfone
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No non-AT&T devices on the Net.
No “Foreign attachments”
Challenged no harm, no foul.
Created CPE industry
Rolm, Mitel, Northern Telcom
$10 phones to Sophisticated PBXs.
First time AT&T had competition
Challenging the Monopoly
• The restriction against interconnecting to AT&T’s telephone network was
challenged in 1965 and eventually lifted in 1968 through the Carterfone
decision.
• In 1969, a company called Microwave Communications International
(MCI) began carrying business phone calls over a private microwave link
between St. Louis, Missouri and Chicago. Because MCI didn’t use the Bell
System, it did not have to pay AT&T for use of its infrastructure.
PRE MFJ
• Until 1984, AT&T consisted of the following:
– AT&T, the parent company and long-distance provider
– 22 Bell Operating Companies (BOCs), the telephone companies that
provided local service in different regions of the nation
– Western Electric, the manufacturing arm of the company
– Bell Telephone Laboratories, the research and development arm of the
company, responsible for innovation and new technology
MFJ – Green Decision
• 1970s MCI filed to be a specialized common
carrier
• 1976 files anti-trust suit Justice Dept. joined
suit.
• 1982 MFJ by Judge Green
Results of MFJ
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Broke up AT&T into 7 RBOCs /AT&T
AT&T kept LD, WE, and Cinci Bell
RBOCs could not offer LD
SPRint, MCI - major competitors
“Equal Access” Charges?
Lower long distances rates –local charges
went up.
AT&T Divestiture
• The Modified Final Judgment (MFJ) - accompanied by over
500 pages of instructions detailing exactly how AT&T should
be divided.
• The Justice Department’s primary goal for breaking up AT&T
was to spur innovation and competition in a field that would
prove even more vital in the latter part of the century than it
had in the first.
AT&T Divestiture
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As part of the MFJ, AT&T was forced to divide.
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From the 22 former Bell Operating Companies that provided local phone service
and phone directories, the MFJ created seven Regional Bell Operating Companies
(RBOCs).
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The business that AT&T kept was separated into two divisions: AT&T Technologies,
which handled the innovation and production of new technologies, and AT&T
Communications, which handled long distance phone service.
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The research and development business, formerly Bell Laboratories, became Bell
Communications Research (Bellcore) and was jointly owned by the new RBOCs.
AT&T Divestiture
AT&T Divestiture
Current Ownership
AT&T Divestiture
• Until the divestiture of AT&T, the distinction between local service
and long distance service was not clear.
• In the MFJ, Judge Harold Greene subdivided each RBOC region into
Local Access and Transport Areas (LATAs), roughly equivalent to area
codes at that time.
• Phone service within a specific LATA was known as intraLATA service.
• Companies that supply local, or intraLATA telephone service are
known as local exchange carriers (LECs).
AT&T Divestiture
AT&T Divestiture
• InterLATA - a service that allowed for calls between LATAs was known.
• Interexchange carriers (IXCs) - another name for InterLATA service
providers. Examples of IXCs include Sprint, MCI (now WorldCom), and
AT&T.
• Equal access - requiring local phone companies to provide equal access to
their facilities meant that AT&T no longer had an unfair advantage over
new competitors in long distance services.
1990s
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US Gov’ auctioned off cell spectrum
1996 Telecom act
ILEC
CLEC
The Telecommunications Act of 1996
• The Act codified requirements for the interconnection of all local
exchange carriers. These policies included:
– Interconnecting with other service providers and not imposing any
barriers to interconnection
– Enabling nondiscriminatory resale of their services to competitors
– Providing number portability, or the ability of telecommunications service
users to retain their same telephone number without hampering the
quality, reliability, or convenience of their phone service
– Allowing competitors to access and connect to their facilities
The Telecommunications Act of 1996
To increase competition in local phone service, the Act placed the
following requirements on all ILECs:
– Negotiating interconnection agreements in good faith
– Providing competitors with the same type and quality of access to their
facilities that they themselves could obtain at their cost
– Providing competitors with access to subscriber information, such as
telephone numbers and billing data
– Offering nondiscriminatory, wholesale prices for telecommunications services
to all competitors