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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

Week 4

What you really want to know

  • 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
early signaling and telegraphy
Early Signaling and Telegraphy

A Chappe semaphore tower near Saverne, France

early signaling and telegraphy6
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 telegraphy7
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
a g bell
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
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
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.
post patent world
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 world12
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
kingsbury commitment
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
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.
1934 communications act
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.
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
challenging the monopoly
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
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
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.
at t divestiture
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 divestiture22
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.
at t divestiture26
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 divestiture28
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.
  • US Gov’ auctioned off cell spectrum
  • 1996 Telecom act
  • ILEC
  • CLEC
the telecommunications act of 1996
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 199631
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