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The End of the Dial Tone Monopoly

From Higher Intellect Vintage Wiki

Several weeks ago, one of our British colleagues here placed a good description of the current status of telephone services deregulation in the UK, and asked for a response that indicated the usual question of, "How is it over there?" The way here in the US is definitely different, but no one seemed to respond. It just might be that many US Digest readers don't yet understand. What follows is a short piece I recently prepared for an editor, and I hope it answers both kinds of parties:

           By: Donald E. Kimberlin, Principal Consultant
               Telecommunications Network Architects
                         Safety Harbor, FL
                          August 12, 1990

While many Americans have been trained to believe that "dial tone" is the sacrosanct property of telephone companies, evidence is coming clear to show that "dial tone" is not a "natural monopoly." Saying this is certain to raise many hackles, but it is time we faced up to it: The "natural monopoly" view of providing Public Switched Telephone Network services on a local basis was valid in its 1913 context, when the Bell interests struck a deal to end their pillage of Independent telephone companies in the U.S.

Technology and removal of the art of running a telephone network from the status of "trade secret" has changed all that. It's occurred so rapidly and in so many ways that few know of all the prongs now stuck into what was once a nicely-closed pie.

Even though it was published, few took note that in 1984, the departing Chairman of the FCC said in a speech that since the demonopolization of long distance service had been accomplished, the time had come to work on breaking up the local telephone monopoly. Nobody reported that speech, except the general press the following day. It was obvious the Chairman had touched on a taboo of the telephone business.

Despite the fact that the FCC's Open Network Architecture mandate has gone on and continues to move, nobody wants to face up to what it really means: Detaching the dial tone of the local network from the wires of the local telephone company, separating the two such that the dial tone is put on somebody else's transmission channel, or connecting the local telephone company's wire to somebody else's dial tone.

That's not any technological breakthrough. It's been possible for decades. The single thing that made the dial tone and transmission channel inseparable was the lack of "somebody else" being around to do it with.

Well, that's all changed, in more ways than one might think. Let's run through a few of the possibilities that really could happen today ... but for the desire of "somebody else" to take up the cudgel and push the matter into full visibility.

There are some historical backgrounds to the alternatives that may be worth knowing about; these often have roots in history of things the monopoly-era telephone business didn't care too much about. They are generally exemplified in reasons behind the FCC's 1947 and 1948 decisions that opened radio-paging and use of microwave radio to non-Telcos. (That's right, we're here talking of temblors some four decades prior to the eruption of nearly unbridled competition in "the phone business.")

For the most part, the Bell interests had so narrowly focused their business that even though they claimed anything moving information was their birthright, there were numerous items they handled in only the most marginal of ways.

Among these was telephone service to ships in coastal waters, several earlier versions of mobile telephone service, various forms of telegraphy, burglar alarm services and others. For the most part, other firms engaged these markets, particularly in the 65% of the land area of the U.S. covered by non-Bell "Independent" telephone companies, which focused totally on telephone business. In that large territory, almost all non-telephone aspects of telecommunications were provided by private, often local business. These almost all used some form of radio in their business and became known as Radio Common Carriers (RCC's).

We can thus see the roots of the FCC policy of two competing cellular companies in every market reaching back into these RCCs. In fact, McCaw Cellular, one of the larger "non-wireline" cellular operators, was a long-standing RCC in the pre-divestiture era.

In that era of the "natural monopoly," there was more "patching" and "hauling" of dial tone on RCC facilities than ever made official print. Where it was of note, the Telcos treated it as "private," not as a connection of their PSTN to another common carrier. The point was that the only breach in the wall was the connection of "foreign apparatus" at the extremity of the local network; the bond between dial tone and local telco wire remained intact.

The traffic truth was that telcos accounted for less than half of the stations and traffic with boats and aircraft, and as the famous Huber report showed, less than a third of paging and mobile radio operations. Much of that had already extended the "dial tone" into non-Telco hands.

That situation was stable for several decades, but it ultimately did wind up today with dial tone coming from non-wireline cellular carriers and even dial marine VHF shore stations that are now all private.

The "hauling" of dial tone we can readily see today as microwave bypass, but it has also gone a giant step beyond. In a case that no Telco-employed "consultant" will tell about (it's doubtful they have been "trained" on it), Arco Oil Company put in its own private microwave from downtown Dallas, Texas to its corporate headquarters in suburban Richardson, about ten miles away. Arco's reason: Dissatisfaction with the performance levels of GTE of Texas, the "natural monopoly" dial tone supplier for Richardson. The microwave hauled Southwestern Bell dial tone from downtown Dallas to Richardson. To reach Arco, all one did was dial a Dallas number. The dial tone on Arco's PBX was SW Bell, not GTE.

When Arco's "illegal action" was discovered, GTE of course wanted its brother in the cloth, Southwestern Bell to disconnect the dial tone. Both telcos got the Texas utility regulators to order them to disconnect, but Arco is no stranger to court action. Arco immediately went to the FCC, arguing that the dial tone was only incidental to connections containing a high proportion of interstate traffic, which was beyond the purview of the Texas State regulators. The result: The FCC ordered Southwestern Bell to maintain dial tone supply to Arco's microwave channels to Richardson, to provide interstate calling service. GTE and Southwestern Bell appealed, and after several years in the Federal Appeals courts, GTE and SW Bell lost again in early 1990, with but one step left: The U.S. Supreme Court.

It is unlikely that GTE or SW Bell want to risk a Supreme Court decision after the several slaps they have suffered on their way to the Supreme Court; they doubtful would want to be responsible for it becoming wide public knowledge that the "natural monopoly" for a dial tone is really no longer supported by the US government and its courts.

An outfall of this is that if you have the means and desire, you can really carry in a dial tone from wherever you want. That opens a wealth of possibilities. It means that anyone who has the means to provide transmission to your premises can import a dial tone from whatever local telco network they want. The issue to settle is if they can SELL it to you. This portends a boon to independent Telcos located in the hinterlands who want to engage in selling their dial tone to people a thousand miles away. (And if you REALLY understand the true love/hate relation between Bell and Independent Telcos in the US, you'll see that's not a flight of fancy!)

Who would sell this dial tone? The first moves have already been made in England, where instead of simply demonopolizing long distance, the government authorized a "duopoly," permitting England's globe-spanning Cable & Wireless to establish Mercury Communications to provide local dial tone as well. Mercury has done so in more than one way. In the major cities, Mercury immediately pulled fiber into abandoned steam pipes and used Northern Telecom's telephone network architecture and equipment to pop electronic exchanges in service with a speed most telephone people would not understand.

The Mercury network was operational almost overnight, in typical telephone capital plan terms. And, Mercury offered services that British Telecom hadn't thought of, like Centrex, intrinsically available in the NT equipment, but not in BT-controlled designs, even the fabled System X. In less-dense areas, Mercury used existing technology to use vacant capacity in cable TV systems to reach telephone subscribers. The latter method has been slow to expand, but not for technical limits as much as economic disagreement with the cable operators.

The implication for the U.S. is obvious: Your local cable TV company has the transmission plant in place to become the "other phone company in town." The technology to get telephone channels on the present coaxial cble plant exists; there is no need for a "fiber rebuild" to handle the need. Existing unused capacity in many US cable TV systems offers in the order ot 50,000 lines of capacity in every cable passing every building. The "fiber" story is chanted by Telcos, because they need fiber to get their capacity up to be able to compete in wideband data and television carriage. Adding fiber to the cable TV systems is just a convenience and modernization to their plant. In fact, in many disparate areas of the nation, cable TV companies have quietly sold telephone and data channel capacity for years, some even interconnected between cable companies for distances in excess of 100 miles, and channels up to T-1 digital rate. Again, these are not applications stories your Telco-paid "consultant" is likely to tell you about, but they are not secret nor are they illegal. Carrying a dial tone down them is no great technology problem at all.

Another front of the attack on the "dial tone monopoly" exists in the buzzword "co-location" now being raised more loudly by another new form of competition to the local Telcos, the Alternative Access Carriers. The AACs are typically local fiber optic network providers such as the Metropolitan Fiber Systems now building in more than 20 cities around the nation, with nearly parallel competition from Teleport Communications in most of the same cities, while there are a number of unpublicized regional local fiber companies, like Florida's Intermedia Communications. Williams Telecommunications Group headquartered in Tulsa, OK seems to be making moves to acquire some of these firms and as well build some plant of its own in cities.

Another aspect of this incursion into the "local monopoly" may come from MCI, through its acquisition last year of the local facilities of Western Union Telegraph nationwide. My own work led to discovering miles of brand new Western Union conduit in the streets of Los Angeles late last year prior to the MCI purchase, while another recent revelation was discovery of *wooden* WUTCo conduits in Oklahoma City recently. All this is now MCI property, and its purpose is obvious; MCI's intent to use it is not yet so obvious.

The AAC segment is following MFS's lead to get local Telcos ordered to permit interconnection of their channels to user premises to Telco dial tone.

But, they have no need to wait for that. They can just as well import dial tone from wherever they want, for VSATs already make that practical. In fact, if the U.S. can get cheap computer data entry performed on Caribbean islands by VSAT link, what is there to prevent U.S. AACs from importing cheap dial tone via VSAT from them as well? Probably nothing, if anyone really looks into the possibility.

And, most recent, we have alternative space-based potentials. Motorola's IRIDIUM is but one, and has recently been well-publicized and described. Less public is NASA's Personal Access Satellite System (PASS), which proposes to use techniques rather well-developed by the military for acquiring and tracking on geosynchronous satellites. PASS focuses on developing use of the 35 gigahertz portion of the spectrum where enormous dish gains are possible with 0.3 meter (12 inch!) dishes and tiny transportable earth stations, offering megabit-sized data streams to even the remotest of locations. Both IRIDIUM and PASS propose use of satellite "crosslinks," the satellite term for having the switching network in the sky with direct trunklines between satellites. So, you could readily be in Detroit but getting your dial tone from Auckland. In fact, what's to say there can't be a "virtual Centrex" located in satellites, so the "global corporation" can have a "global Centrex?"

In this context of our ability to get a dial tone from anywhere at a cheap price, does it really seem so strange that we do it? The technology for much of it is already in hand; some of it has really already been used, and all of it is so close to accomplishment that we will be doing it soon.

The largest obstacle is not in technology at all; it is in people's emotions and in vested economic interests of an industry that faces threats many of its most endangered species participants cannot even understand: America's local "natural monopoly" telephone companies.


(Historical afternote: One way to understand the way in which the "natural dial tone monopoly" has been fabricated and ingrained into minds in the U.S. is to read a book on the non-Bell "independent" telephone industry. This history has been documented several times this century, and the latest is titled, "The Spirit of Independent Telephony," by Charles A. Pleasance, 1989, ISBN 0-9622202-0-7.

It indexes 37 U.S. cities that once had independent telcos competing with Bell, and I know of others that had multiple independent Telcos, some until after WW II. This history will surprise some when they learn that the Independent telcos even tried to form a non-Bell long distance network; one that Bell interests finally quashed with the formation of AT&T's Long Lines "department," really a shadow company that built the long-distance links and pooled the money collected for long distance calls. The point here is that the "natural monopoly" concept for dial tone is a fabrication that may have made sense in 1913, was driven home by vested interests, and today is obviously a dinosaur running out of food.)