Don Lively is a neighbor of mine. I met him several years ago while walking on a trail that ambles through the town we both live in. He's retried from the old Ma Bell and spends his time stirring up the local political establishment with his insistence that it not treat the taxpayers as temporary conduits for public money.
Don wrote this essay on the eve of the court supervised breakup of the old AT&T. It's a remarkably prescient bit of writing which he's capped off with a couple of epilogues. It's long but worth reading every word unless you're convinced that the service you get from your far too many telecom providers is terrific.
An Insider’s View Of Divestiture’s Insanity
By Don Lively
Introduction
As 1983 winds down it brings dissolution of a 100+ year old and remarkably service-efficient Bell System. It seems appropriate therefore, to record one “insider’s” thoughts regarding this exercise in Big Government bureaucratic insanity.
This monograph offers some perspective and predictions about divestiture - these, from an insider privileged to have worked in many sectors of this remarkable enterprise - both in Operating Company settings, plus, various Headquarters and overseas environments.
A career-long curiosity regarding this organization and the strategic focus of its evolution, including recent work on issues central to the Government’s case, make it seem obligatory that such a record be compiled from a view not likely to be found in the legal briefs surrounding the DOJ’s anti-trust case (with the FCC bureaucracy contributing as Justice’s willing handmaiden).
Background
In general terms, the DOJ has based its justification for bringing the anti-trust suit against the Bell System, and which resulted in this divestiture insanity”, on these primary issues:
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Monopolization of equipment supply by Western Electric
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Foreign equipment (Carterphone) “network harms” issue
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“Inferior access” for competitive long distance firms
In reality, by the time the case reached its present stage, much of the basis for the above complaints, has long since been eliminated. Discussion of what has transpired to address DOJ concerns is offered in some detail - this, to make clear how politics has been allowed to grossly override long term interests of ratepayers and investors (not to mention the national defense and economic competitiveness of America).
Equipment Supply
Of all these complaints, the equipment supply matter makes the least sense (yet carried much weight) - largely because it has the least foundation in reality. Since the BOCs for many years have, in fact, been making significant “buys” of non-Western gear (in both customer equipment areas and transmission products), the procurement issue has rapidly been rendered moot - this, by selections of Bell-quality technology in the market. Even complete central office switching systems are now installed by some of the Companies - e.g., gear from suppliers such as ITT, North Electric, Nippon Electric and Stromberg Carlson.
Regrettably, until AT&T Headquarters established a full fledged division (Bell System Purchased Products Division - BSPPD) to search out and evaluate suitable technology, BOC attempts to introduce big ticket systems such as C.O. switches, were not particularly effective - this, because of reliability, compatibility, maintainability and other “standards-related” issues (i.e., documentation, quality, support, training, etc..
Some years before the divestiture plan came into being, very significant progress had been made in centrally contracting for and “standardizing” major “outside” systems - i.e., technology of the sort Western Electric would have historically built and sold to the Telcos.
For example, new digital central office products (both an exchange central office switch and toll tandem machine) have been successfully put through rigid competitive technical evaluations. In the case of the Northern Telecom DMS-10 Local CO switch, it was found superior to Western’s comparable 3A-ESS digital system. The DMS-200 toll switch was determined to be fully compliant with the requirements which underlie Western’s No. 4ESS machine, and the DMS100 with the 5ESS.
Similar major standardization decisions were made for a wide range of other products. This included developing requirements for major systems and subsystems that could be developed from scratch by any supplier willing to undertake the design and development effort, normally reflected in standard Western offerings. This includes 2nd generation Computerized Directory Assistance systems, digital microwave radio, fiber optic systems, T-1 Carrier and a wide range of outside plant technology.
In effect, by the time divestiture was being considered, the BOCs had “technically compliant”, and economically competitive, alternative choices for virtually all Western product lines.
More important, using the processes developed by BSPPD and the RS&E (Research & Systems Engineering) side of Bell Labs, a systematic form of “requirements and technical evaluation” protocols have been put in place for use by any vendor seeking to sell to the BOCs. Central AT&T testing and contracting in this fashion, has given the BOCs purchasing and pricing leverage none of them will ever be able to realize singly (as stand alone buyers).
The Network “Harms” Issue
Despite those who claim the “Harms” issue was a smoke screen to keep out competition, this writer’s experience as a BOC district maintenance engineer, provided plenty of proof that indiscriminate connection of non-standard devices to the Bell network, can and has caused harms of one sort or other (service affecting impairments, expense-causing compatibility investigations, etc.) - these, ranging from excessive transmission levels, out of spec dialing and signaling formats, poor or inadequate electrical protection designs and the like.
Most of these matters have been rendered moot in recent years - largely by widespread availability of Bell Standards and Technical Requirements publications. This has ensured that non-Western products or non-Bell communications links can be safely and cost-effectively connected to the Network.
Inferior Access
This is another smokescreen by “technology carpetbaggers” who want a free ride on a different set of shareowners. The present forms of two-wire of telephone number interconnection to the “Network”, require only minimal investment. Providing “toll grade” connections like those furnished to other regulated common carriers, require far more elegant and pricey technology costs for the “carpetbaggers”.
Their demands are as though Grand Union came into a “Pathmark town”, demanding under government authority, that Pathmark provide floor space, carts and parking lot privileges at cut rates (until GU can take enough Pathmark business to build its own store and lots).
The “Insanity’s” Principal Destructive Elements
These “perceptions” treat “divestiture insanity“ in the following contexts:
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Customer and Ratepayer Impact
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Network & Service Standards
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Loss of a Unique and Irreplaceable Scientific Resource
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Exacerbating Already Counterproductive Regulatory Harms
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Degradation of Service
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Loss of Telecom Institutional Memory
With one or two exceptions, all of these “perspectives” are demonstrably provable - not just speculation about what might occur!
Customer & Ratepayer Impact
Absent a radical restructuring of state regulatory policies, including elimination of predictable political delay in removing artificial subsidy of local service by toll revenues, overall rates will not decrease. No regulatory bureaucrat or politician is likely to want “real cost” rate making that will raise local dial tone rates by a factor of two or three.
Further, as each new part of the network is disaggregated, end-to-end accountability for service will diminish. Service delays and quality deterioration will follow as multiple standards and policies materialize, absent the discipline of a single “quality controlled” and tightly indexed “natural system”.
Finally, the “circular finger pointing” phenomenon will increase as more players get into what has until now been a single game. That is, as multiple players become involved in delivering a ratepayer’s overall service, trouble clearing or service establishment becomes the customer’s job to coordinate.
The concept of a “control office” tech, with responsibility to act for the customer, including authority for escalating service problems to some distant company CEO (to demand application of resources needed to resolve an un-addressed service priority), will disappear with divestiture. The rate payer will truly be on the outside, looking in.
Network & Service Standards
The existing Bell System structure provides for common operating procedures and technical standards throughout the Companies. In emergencies, every BOC can call on any other Bell Company for help with manpower, equipment and facilities. This, knowing that tools, training and practices are compatible and immediately usable to meet rebuilding and restoration needs.
Sharing costs of creating and maintaining the practices and procedures for operating the Network, offer the economies of scale not realizable by individual Telcos. The cost and overhead of developing and maintaining such things as the traditional Bell System Practices (BSPs) will become prohibitive. Plus, the ability to do things in a uniform fashion across corporate boundaries, will have to give way to concerns for competitive security and protection of trade secrets and markets. There will eventually have to be some sort of re-aggregation to meet customer and shareowner expectations (but likely on a contracted basis or the like).
Creation of the Central Services Organization (CSO), made up of BTL Research and Systems Engineering (RS&E) personnel and ATT General Dept’s specialists, may provide some of the traditional support services, and in fact, may suffice for awhile. But, as the divested Companies begin to compete with one another, CSO will be caught in conflicts of cost, service, priorities and security.
It is not probable that study work funded by one company, aimed at stealing the lunch of a neighbor, can result in the economies of scale and cost effectiveness realized by doing such work just once for an entire nationwide enterprise.
It is also not likely that an artificially structured “standards” organization of this sort, will survive for long in a real world market place. Worse, probably, most of the Companies will be forced to establish their own standards and practices creation capability - that, or rely on suppliers and contractors for such services. This observer’s guess is that CSO will not last 10 years in its presently conceived form.
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Kevin Hoffberg
Last modified:
07/24/05