External Influences on Telecommunications in the Enterprise

1
Chapter 2

• External Influences on Telecommunications in the
  Enterprise

2
Regulation

• Telecom regulation moved from loose to tight and
  back to loose in U.S.
• U.S. model
• Private companies with government regulation
• Other countries
• Most have government operated companies

3
Advantages of Regulation

• Ensures compatibility in a developing technology
• Levels of service develop more uniformly across
  the U.S.
• If unregulated, companies concentrate effort in
  highly populated areas
• Guarantees telecom companies a profit
• Prevents cut-throat competition
• Allows infrastructure to develop
• Sets standards such as frequency allocations for
  radio

4
Advantages of Regulation

• Common Carriers
• Also known as Carriers in telecom industry
• Example Bell companies, cable companies, etc.
• Concept limits number of companies that can
  provide key public services
• Examples transportation or communications
• Idea is to prevent duplication of services and
  expensive infrastructure
• Such as railroad tracks, communications
  transmission facilities, power transmission
  facilities, pipelines, etc.

5
Key Regulatory Events

• In early days (1890s) many small local telephone
  networks in cities
• Not much interconnection between cities
• ATT formed to interconnect Bell franchised
  telephone companies
• Would not connect to other companies
• ATT would buy out non-Bell companies

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Key Regulatory Events
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Key Regulatory Events in the U.S.

• 1910 - Mann-Elkins Act
• Congress sets up Interstate Commerce Commission
  (ICC)
• One of its task is to regulate telecom
• 1913 - Kinsbury Commitment
• First step toward universal service
• Due to ATTs unfair trade practices, U.S.
  government forces them to get approval before
  taking over smaller companies
• Allow non-Bell companies to connect to ATT long
  distance network

8
Key Regulatory Events in the U.S.

• 1921 - Graham Act
• ATT exempted from Sherman Antitrust Act
• One nationwide network
• 1934 - Communications Act of 1934
• Federal Communications Commission (FCC)
  established
• ICC out of the picture
• Regulates all interstate communications

9
FCC sets up tariff structure

• Tariffs describe regulated services and prices to
  be charged
• Tariff categories
• Charges for time service is use, i.e. long
  distance charges
• Flat rate for full-time use of a service, i.e.
  leased line.
• Monthly minimum charge for basic amount of
  service use with additional charges when basic
  limit exceeded, i.e. 800 service
• Charge for amount of data sent, i.e. packet data
  transmission

10
Key Regulatory Events in the U.S.

• 1948 - Hush-a-Phone Case
• Hush-a-Phone developed a device to attach to a
  telephone
• Telephones owned by ATT
• ATT refused
• Hush-a-Phone won in court
• Settled on appeal in 1956
• Opened door for other companies to add TELEPHONE
  DEVICES to telephone network

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Key Regulatory Events in the U.S.

• 1949 - ATT Consent Decree
• ATT sued by U.S. Dept. of Justice for violation
  of Sherman Antitrust Act
• Government wanted ATT to get rid of Western
  Electric, its manufacturing group
• Result
• Settled by consent in 1956
• ATT kept Western Electric
• Bell companies restricted to telephone business
• Unintended result ATT and Bell System kept out
  of data processing activities

12
Key Regulatory Events in the U.S.

• 1968 - Carterfone Decision
• Allowed Carter Electronics to attach device to
  interconnect private radio systems to public
  telephone network
• Made it easier for other NON-TELEPHONE COMPANY
  EQUIPMENT to attach to telephone network
• Companies started up to make equipment to attach
  to network
• Consumers could buy telephones instead of rent
  them
• 1969 - MCI Decision
• MCI (Microwave Communications Incorporated) could
  connect its long distance lines to public
  telephone network
• Other network service companies developed after
  this
• Known as Other Common Carriers (OCCs) or
  Specialized Common Carriers (SCCs)

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Key Regulatory Events in the U.S.

• 1971 Computer Inquiry I
• FCC examined relationship between
  telecommunications and data processing industries
• FCC said the computer industry was not subject to
  its control
• 1971 - Open Skies Policy
• FCC reversed previous satellite communications
  decision
• Anyone could enter satellite communication
  business
• Western Union and RCA joined by new companies
• Todays major players include Scientific Atlanta,
  ATT, and Verizon
• 1981 - Computer Inquiry II
• Computer companies could transmit data
  unregulated
• Bell System could participate in data processing
  market
• Customer premise equipment manufacture deregulated

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Key Regulatory Events in the U.S.

• 1982 - Modified Final Judgement (MFJ)
• ATT seen to be slow in adopting new technology
  and in meeting business customer needs
• Stated that ATT was to divest itself of all 22
  of its Bell operating companies (BOCs) by Jan. 1,
  1984
• Took a while for telephone rates to settle
• 1986 Computer Inquiry III
• FCC study to determine how and to what extent
  carriers could offer enhanced services
• BOCs and ATT could offer enhanced services, but
  must agree to Open Network Architecture (ONA)
• Independents exempt from FCC order

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Key Regulatory Events in the U.S.

• 1996 - Telecommunications Act of 1996
• Major revision of Communications Act of 1934
• Deregulated telecommunications
• BOCs allowed to provide long distance service and
  manufacture equipment
• Long distance companies (ATT, MCI, Sprint) could
  provide local service
• Telephone companies could provide cable service

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Regulatory Jurisdiction

• FCC
• Regulates interstate communications
• State Public Utility Commission (PUC)
• Also known as Public Service Commission (PSC)
• Regulates intrastate communications

17
Intent of Deregulation

• Provide better, cheaper service
• Provide better products
• Competition increased dramatically
• All effects of deregulation not known

18
Regulation in Other Countries

• Most countries heavily regulated and/or
  government run
• Developed countries moving to deregulation
• 1997 World Trade Organization (WTO) agreed to
  open most world markets to foreign trade
• Will benefit U.S. companies
• Will reduce international long distance rates
• Will reduce countries internal long distance
• In U.S. long distance averages 10 cents to 15
  cents per minute
• In Japan it is about 95 cents/minute

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Example - Mexico

• Deregulated national telephone company Telefonos
  de Mexico (Telemex)
• Attracted millions of dollars in foreign capital
• Nine new long distance carriers entered the
  market after deregulation
• Still takes a long time to get a phone

20
Example - Russia

• 85 regional telephone companies once owned by
  state monopoly
• Partly privatized
• Rates increased to improve infrastructure
• Improvement will take 20 years

21
Where is the Next Big Cellular Market?
22
Transnational Data Flow (TNDF)

• Countries concerned about data flow across
  borders
• National defense technology transfer concerns
• International companies require TNDF
• Difficulties caused by
• Tax or tariff on information transfer
• Monitoring content of international
  communications
• Restricting availability of private lease lines
• Privacy legislation restricting personal
  information to cross border
• U.S. wants free flow
• Scandanavian countries restrict personal data
  flow across borders

23
Telecom Industry in U.S.

• After ATT breakup in 1984
• 7 Regional Bell Operating Companies (RBOCs)
• 22 Bell Operating Companies (BOCs) within the
  RBOCs
• Recent mergers resulted in 4 RBOCs
• Verizon made up of NYNEX, Bell Atlantic, and GTE
• GTE was independent not originally part of ATT
• Was not a BOC or RBOC
• SBC made up of old SBC (Southwestern Bell),
  Ameritech, and Pacific Telesis
• QWEST made up of QWEST (a new company) and U.S.
  West

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Original BOCs and RBOCs
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BOCs and RBOCs in 2000
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Services Offered by RBOCs

• RBOCs provide local phone service in their areas
  using original ATT network with upgrades
• Conduct business through BOCs
• RBOCs pursued new opportunities
• Ameritech invested in New Zealands telephone
  company
• U.S. West invested in Time Warner cable
• Bell South provides nationwide paging
• Others invested in non-telecom businesses that
  have been less successful

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Independent Phone Companies

• Many independents exist that were never part of
  ATT
• Were not subject to Consent Decree and the
  restriction on local/long-distance service that
  RBOCs and ATT had
• Often were small

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LECs

• Original BOCs and independents are called Local
  Exchange Carriers (LECs) or Incumbent Local
  Exchange Carriers (ICLECs)

29
CLECs

• Competitive Local Exchange Carriers (CLECs) are
  competing in local telephone market with BOCs
• Three types
• Those with their own networks
• Those that leas the network infrastructure
• Those that build a new network
• Causing competition in prices and services

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LATAs

• Local Access and Transport Areas (LATAs)
• 165 defined after divestiture
• LECs provide service within LATA
• Inter-LATA traffic provided by long distance
  companies
• Examples ATT, WorldCom, and Sprint
• Long distance companies called Interexchange
  Carriers (IXCs)
• Important Telecommunications Act of 1996
  eliminated limits on types of traffic LECs and
  IXCs could carry
• Beginning 1997, IXCs started offering local
  service and LECs began offering long distance
  service

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LATA Example
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Demarcation Point

• Telephone companies responsible for network up to
  customer site
• Point where network is terminated in customer
  site is the demarcation point

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Long Distance Carriers

• AT T
• Largest, 55 market share
• 1996 split into
• AT T domestic and international transmission
  and on-line services
• Lucent Technologies manufactures telecom
  equipment
• NCR Corporation manufactures computers
• AT T began offering local service in 1996
• Wants to improve wireless and cable business

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Long Distance Carriers

• WorldCom
• WorldCom started as CLEC and bought MCI in 1997
• MCI had developed domestic and international long
  distance service to more than 180 countries
• MCI began offering local service in 1997
• Sprint Communications Company
• Third-largest long distance carrier
• Similar services to AT T and WorldCom
• Also in cable and wireless business
• First to offer residential 800 service, first to
  build nationwide all-digital fiber network, first
  in U.S. to offer prepaid calling cards

35
International Carriers

• Provide voice and data service
• Each country charges for half the line
• Customer gets bill from company on each end of
  line

36
Equipment Makers and Providers (Alphabetical by
Country)