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Week 4 . What you really want to know. Objectives. 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.

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Week 4

What you really want to know


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Objectives

  • 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



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Early Signaling and Telegraphy

A Chappe semaphore tower near Saverne, France



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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.


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Early signaling and Telegraphy

  • 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


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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


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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.


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Early Antitrust Measures

  • 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.


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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


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Post-patent World

  • 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


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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


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Kingsbury Agreement

  • 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.


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1934 Communications Act

  • 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.


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Hush-a-phone/Carterfone

  • 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


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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.


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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


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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


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Results of MFJ

  • 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.


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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.


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AT&T Divestiture

  • As part of the MFJ, AT&T was forced to divide.

  • From the 22 former Bell Operating Companies that provided local phone service and phone directories, the MFJ created seven Regional Bell Operating Companies (RBOCs).

  • 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.

  • The research and development business, formerly Bell Laboratories, became Bell Communications Research (Bellcore) and was jointly owned by the new RBOCs.





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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).



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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.


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1990s

  • US Gov’ auctioned off cell spectrum

  • 1996 Telecom act

  • ILEC

  • CLEC


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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


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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


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