efx: segment from Bell South divestiture celebration ceremonyWhen AT&T spun-off it's local exchanges into seven regional holding companies, the services, the technical systems, the billing -- everything had to be set-up to operate a new way. Planners said it was like disassembling a Boeing 747 airliner in mid-flight -- then reassembling the pieces into smaller 727s -- without crashing any of the eight aircraft and without the passengers noticing anything unusual about their flight.
Blankenship: We had heard a lot of rumors that "oh, well, they're talking about selling Pacific Telephone and a couple other companies and maybe getting rid of Western Electric. But we didn't visualize, I don't think, what it actually ended up being, in terms of losing our inter-LATA capability as well as our interstate capability.
Joan Moore: I don't think we realized what it meant, divestiture. The impact it would have on all of us and the company and the society that we live in.
Narrator: Joan Moore is a union representative for the Communications Workers of America. She began her long career with what was then Pacific Telephone, as a directory assistance operator and later become one of the very first women to climb poles as a maintenance technician.
Moore: But it was a tremendous change for all of us. And all of a sudden you were working for a different company. The attitudes were different. The systems instruction books that I told you filled a whole room -- we were no longer a "System" any more. So en someone said 'you're in violation of S.I. 24, ' Hey, there is no S.I. 24. This ain't a System anymore. And nobody knew how to handle that! I mean, this was a military, Catholic Church organization and all of a sudden somebody took the Mother away! You know! (laughs) So what are we gonna do? There was really a lack of direction.
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efx: segment from Bell South divestiture celebration ceremony
Bob Clark: Well, I think that that concern was real when it was being raised. And I think there was probably even a time that that concern was being lived out.
Narrator: Bob Clark is a Vice President of Sales and Marketing for AT&T.
Clark: I can remember a time when somebody had something go wrong in their service, and there would be a lot of finger-pointing. You know, was it on this side of the network or on that side of the network, and where did the fault lie, and not a lot of clarity sometimes between companies who, once, maybe were brothers and sisters and now might have been in a different arrangement. So I think that did happen for awhile.
But one of the things that a competitive marketplace, and in this particular industry I think that it's really helped everybody a lot, is that you do come to the realization that the only way you can compete, is you've got to compete on quality. And the minute you come to that conclusion, that you've got to compete on quality, then all of a sudden the customer becomes more important than they've ever been.
Narrator: From day one, AT&T was competing head-to-head with other equipment manufacturers such as Northern Telecom, and fought bitterly on the long-distance side with MCI and Sprint. AT&T realized immediately that it must slim-down and become more in tune with the market. The Bell Operating companies caught some of this spirit, too. Although they were still monopoly providers, they were losing many of their largest business and institutional customers. And they knew that eventually there would be competition for local toll service within the LATAs.
Each in its own way, the Bell companies struggled to reinvent themselves. Like insecure teenagers endlessly combing their hair in the mirror, they yearned to be more than just plain-old monopoly phone companies.
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Narrator: Over the last ten years, since the breakup of AT&T we have seen an explosion in the number and variety of telephone-based information services. Some are designed to sell a product, others distribute information for a fee, and still others are designed to save a company money by automating some front-desk operations.
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Narrator: Just two decades ago, it would have been impossible for anyone but AT&T to attach such a service to the network. Now anyone can operate their own messaging, FAX, data, audio, imaging...or ANY kind of service from their phone lines.
With the divestiture of the Bell operating companies from AT&T in 1984, the seven "baby bells" were restricted from long-distance, manufacturing, and information services. These were to be the domain of AT&T and it's competitors. But over these last ten years, the monopoly Bells have fought hard to enter these fields, especially information services.
Kathie Blankenship of Pacific Bell was director of a marketing strategy group looking for ways to enter the enticing world of information services
Blankenship: I think there was a lot of looking across the ocean, to France especially. France had had the most outdated telephone system at one time, and all of a sudden about that time frame we were hearing about the tremendous success of the mini-tel system. They had actually gone in and given away dumb terminals to consumers and had information services and they were making lots of money and that sort of thing. A lot of our policy makers in the United States were going over there and looking at that, and saying why don't we have that kind of infrastructure in this country? What's preventing it? And they were asking that question of a lot of different companies and organizations. We had the consumer advisory panel looking at how could the information age be brought to California, working with Pacific Bell around that time frame.
Narrator: The consumer advisory panel was known as The Intelligent Network Task Force, and was made up of influential community leaders. Pacific Bell gave each of them a Macintosh computer, a free calling card, a travel budget, staff support, and a mission: Publish a vision, a call to action, about the telco's role in establishing a unified infrastructure for schools, homes, business, government, and community groups.
Their report was given wide circulation throughout the U.S. and served as a template for a national grassroots lobbying effort. The panel's vision was met with a mostly sympathetic company response, and eventually was digested and absorbed into what is today's corporate vision. Dubbed "The Knowledge Network," the idea was to facilitate computing networks, distance learning, and more efficient school administration through centralized facilities designed and controlled by the local telephone company.
Here there were vestiges of the traditional monopoly mindset. Pacific Bell professed that social needs would be far better served if the educational software were all housed in the "intelligent network."
Blankenship: I think the fundamental question was, "gee, we're hearing so much about technology, and we're looking at other countries and they're using technology, and the computer is supposed to be a wonderful thing, but there isn't a computer in every household and the computers aren't all linked together and why isn't that happening? And so we got into a lot of discussions about what benefit, what value-add, could the local exchange companies bring, particularly to information services, if we were allowed.
And there was a lot of discussion about the concept of a gateway, where it would be -- what could you do if you had the technology to use information services? What kinds of things could you have? Medical imaging, remote x-ray diagnostics, there were lists and lists and lists of the kinds of things that could be done that would be facilitated by this gateway. Some of the discussions actually led to some of the freedoms that we did actually achieve from Judge Greene's order on information services.
Narrator: Restrained by the terms of the Conset Decree, the Bell companies have lobbied long and hard in Congress...using special 800 numbers to pound the Capitol with constituent phone calls and telegrams. Their sometimes shrill message has been -- you can't do this without us -- the information age will miscarry if our hands remain tied by artificial legal restrictions.
Audrie Krause: They're agenda and their vision of this information revolution are utter nonsense.
Narrator: Audrie Krause is Executive Director of TURN -- Toward Utility Rate Normalization, an influential San Francisco-based consumer group which scrutinizes the complex financial maneuvers of Pacific Bell.
Krause: If you allow the regional bell operating companies to dump the costs of upgrading the network to an entirely fiber optic system at the expense of ratepayers, you will price basic phone service out of the affordable range for probably a majority of Americans.
I think what's really going on is that big powerful monopolies that used to have it all are worried because the monopoly they have is not everything anymore; it's one very important part of our telecommunications infrastructure -- the basic part of it -- the connection we all get to the telephone system. My feeling is that ought to be good enough for them and they ought to do a good job of running that and running it at low cost and making it work for everybody. If they would refocus their goal on that, and on truly getting to the point of universal affordable telephone service, let private enterprise take care of the rest of it, because it's out there, and if there's a demand for services, somebody's going to provide it and going to be able to do so at a competitive price. Certainly there will be winners and losers in the competitive marketplace, but those winners and losers should be funded by people who are willing to risk their capital through the stock market.
Narrator: Many ratepayers don't want the price of basic service to pay for fancy new information services. But the definition of basic affordable service may be gradually changing, evolving to include more sophisticated connections between homes, businesses, government institutions, and schools -- connections that would be available to everyone at low cost. Andrew Jay Schwartzman is an attorney with the Media Access Project in Washington D.C., a group which speaks up for the public interest in the changing world of communications policy.
Schwartzman: I think that those who advocate letting the services develop and cater to the higher end of the market -- business and the occasional wealthy individual who can afford them -- are missing the point both from a political perspective and an economic perspective. Politically, telecommunications is the mechanism by which we exercise our voice in the democratic process in the last years of the twentieth century. And by giving the tools to a few rather than to the many, you create barriers and differences between and among us that have great political cost.
Mike Godwin: I think what the Bells see, what you tend to see when you talk to people in the Bells is they want big pipes.
Narrator: Mike Godwin is legal counsel to the Electronic Frontier Foundation, a group dedicated to the preservation of civil rights in the information age...
Godwin: They want fiber to the home, which -- fiber optics to the home are gonna take thirty years, my guess, to implement up in the ninety percentile range. But they want to have this high bandwidth -- really, really high bandwidth connectivity to the home. The idea being that once you do that you can send video telephone and other kinds video media that are transported over the phone lines. That's very exciting to them. But it's essentially a hardware vision. I think what it lacks and what some other groups are able to provide, is a social vision or maybe some kind of -- that vision thing -- about what people are gonna do with this hardware once it's in place.
Narrator: Because they are so big, the Bell operating companies were legally restrained from entering into the content business, the creation or manipulation of information. Now the courts have lifted many of the information services restrictions. So far, the Bells have played the role of pure common-carrier, a neutral, non-discriminatory conduit for the information of others.
But in a curious twisting of roles, the phone companies want to retain their historic role as common carrier, but also desire First-Amendment rights to publish, package, and edit the new information services flowing over their network.
Kitty Burnick: Just being the provider of the pipeline isn't enough to make the investment worthwhile, so you need to be able to have some control of the programming.
Narrator: Kitty Burnick is director of External Affairs for the Pacific Telesis Group in San Francisco, the parent company of Pacific Bell.
Burnick: You're talking about shaking things up that didn't really even exist a decade ago. There wasn't cellular service a decade ago. We didn't have information services a decade ago. And so people who had invested in one kind of technology, for example printing presses, could afford to be complacent and not have to worry about their investment being at risk. Since technology is changing so rapidly, it becomes a political debate, and I think any existing entrenched competitor fears competition.
Narrator: But entrenchment is in the eye of the beholder. Burnick portrays Telesis as a David taking on the publishing Goliath -- the American Newspaper Publishers Association. Meanwhile AT&T, recently freed to enter information services, has taken out newspaper ads condemning the Bell Operating Companies as monopolists. A. Michael Noll is a professor at the Annenberg School for Communication at the University of Southern California.
Noll: In terms of past history, if you look at the AT&T history from the perspective of just monopolization, you certainly see a lot there that could create a pattern. You see these early days of the Morgan-Vail combination, attempting to wipe out their competitors and simply acquire them. You see the Vail-Morgan view of a monopoly of telephone and telegraph service, together, a total monopolization of all telecommunications. So you see it there. It failed -- because of threats of government action. So that monopoly disappeared from their fingers.
So, there is, in a sense, if you look at that past history, you can say, you could lay claim that whatever the AT&T empire got near, in terms of a new business, their instant attempts were to monopolize it. So you could claim that.
Nick Johnson: The single most important issue in telecommunications policy right now is the issue of the extent to which telephone companies, those who provide the conduits for communication, should be permitted to also provide the content that flows along those conduits.
Narrator: Former FCC commissioner Nicholas Johnson wrote the landmark Carterphone and MCI decisions which opened the door to competition in the telephone business.
Johnson: It's my position that that raises enormous problems for our society, not only for consumers and regulators but actually for shareholders in the telephone companies as well, who I think will end up making less money if their companies go off down this road.
Burnick: Well we DO want to be a content provier. We already are a content provider. Being a content provider is different than the notion of how you provide that content. And I think this whole discussion about content vs. conduit, to me, insults the intelligence of the American consumer. What it all boils down to is let the marketplace decide who should be providing what services. And the consumers can make some intelligent choices for themselves about what they choose to watch, what they choose to buy, what phone numbers they choose to call. And it's the consumer and the marketplace that's deciding that, not some bureaucrat or some self-appointed guardian of the public's First Amendment rights.
Schwartzman: The danger of creating a bottleneck by allowing those who control the the access into the home, to determine the content of what travels into the home, I think is a grave threat to the democratic process and to the lives of our grandchildren.
Burnick: I think that is a totally absurd argument and that's the argument that the newspapers made when radio was introduced 50 years ago. That radio would be controlling the editorial content, that newspapers would go down the drain -- this is a quote -- that 'newspapers would be nothing but a plaque on the halls of Radio City Music Hall.' And that's nonsense! Newspapers are flourishing. If you've ever sat on public transportation you've seen the number of newspapers that people are looking at. People want a variety of media for their information.
Schwartzman: I don't think that the telephone companies ought to have any role whatsoever in determining content or other alternatives which have been suggested such as quote-unquote bundling of programming. I believe that it will be most unfortunate if the telephone companies succeed in earning some degree of First Amendment speaker status, which they have been demanding and asking for, and I profoundly hope that the courts will reject those claims.
Burnick: First amendment rights of corporations, lots of corporations, not just media companies like the New York Times or Cox Cable, have been recognized by the U.S. Supreme court for this entire century. The most dominant case was in the late '70s when the Supreme Court found that all corporations have First Amendment rights. The First Amendment protects all speech, by EVERYONE. One of the purposes of the First Amendment is to promote a full discussion of issues. Therefore all speech is allowed and the source is irrelevant. So to say that some corporations, that newspaper companies have First Amendment rights and other corporations don't, is just plain wrong under the current laws of this country.
Johnson: With this right of speech goes their right to censor any view they don't like. So having lost our First Amendment rights with regard to newspapers, with regard to radio, with regard to television and just about with regard to cable -- the fight is still going on there to some degree -- and the billing envelope, we've lost all those things -- the ONLY remaining media of mass communication in this country to which we all have a legally enforceable right of access is the telephone system.
I think it's going to be very difficult, once the telephone company gets in the information business, to try to get the Supreme Court to understand and support the notion that although newspapers can censor and radio stations can censor and television stations can censor and cable television systems can censor and utility envelopes can be censored, that somehow the telephone company can't censor. I mean, why is that going be, that the telephone company is so different from all these others that when they are using their own conduit for their own communication and their own exercise of First Amendment rights, that somehow their First Amendment rights don't permit them to censor other people -- even though others do.
So I think it's just incredibly dangerous and it will mean the absolute end of free speech in America -- for citizens. It won't mean the end of free speech in America for the people with a hundred million dollars of spare pocket change, who can go out and buy a television station or newspaper. But if you don't happen to have a hundred million dollars in spare pocket change, you're going to be denied your ability to communicate by means of the most effective monopolistic conduits of communication in this country which are the way by which most people get their information.
Burnick: We were not able to, as much as our customers would have liked us to, we were not able to stop carrying the traffic of dial-a-porn providers. What the courts did enable us to do, because we were common carriers, was to segment their services onto certain types of lines, they also permitted us not to bill and collect for those services. But we were not able, indeed, we continue to carry, dial-a-porn traffic because the courts have ruled that as common carriers we cannot exclude that or any other particular content that we or anyone else may decide is unsavory.
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Schwartzman: Where we want to be at the end is broadband-type services available to all members of the public. Whether this has to be fiber to the home, whether this has to be by the year 2010 or 2015 or 2020 -- that's less clear to me. What I feel most strongly about is that this has to be done on a pure common carrier basis. There must be complete separation between the ownership of the conduit, and control of the editorial content of material that is carried over these transmission systems.
Burnick: We've never said, of any of the businesses that we're in, whether it's information services or voice mail or cellular, that we want to be the only provider or that we should be the only provider or that we're best suited to be a provider. What we're saying is let us be a player, let us be one of the players, and see what consumers and the marketplace decide. Let them decide, don't let the bureaucrats decide.
Narrator: The telephone giants have their share of bureaucrats too. How will they respond when faced with agonizing editorial choices -- when the Cop Killer video is broadcast on their channels or the Ku Klux Klan wants a slot in the new fall lineup? Will they wear their traditional hat as neutral common carrier, or will they reach for a new hat, that of editorial gatekeeper. Perhaps we CAN have it both ways, but only if the groundrules for this game are clearly spelled out -- and we all keep a watchful eye, as we write this next chapter in the history of the telephone.
"Hell's Bells: A Radio History of the Telephone"
