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Chapter 2

Chapter 2 . External Influences on Telecommunications in the Enterprise. 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 .

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Chapter 2

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  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 • AT&T formed to interconnect Bell franchised telephone companies • Would not connect to other companies • AT&T would buy out non-Bell companies

  6. Key Regulatory Events

  7. 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 AT&T’s unfair trade practices, U.S. government forces them to get approval before taking over smaller companies • Allow non-Bell companies to connect to AT&T long distance network

  8. Key Regulatory Events in the U.S. • 1921 - Graham Act • AT&T 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 AT&T • AT&T refused • Hush-a-Phone won in court • Settled on appeal in 1956 • Opened door for other companies to add TELEPHONE DEVICES to telephone network

  11. Key Regulatory Events in the U.S. • 1949 - AT&T Consent Decree • AT&T sued by U.S. Dept. of Justice for violation of Sherman Antitrust Act • Government wanted AT&T to get rid of Western Electric, its manufacturing group • Result • Settled by consent in 1956 • AT&T kept Western Electric • Bell companies restricted to telephone business • Unintended result: AT&T 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)

  13. 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 • Today’s major players include Scientific Atlanta, AT&T, 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

  14. Key Regulatory Events in the U.S. • 1982 - Modified Final Judgement (MFJ) • AT&T seen to be slow in adopting new technology and in meeting business customer needs • Stated that AT&T 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 AT&T could offer enhanced services, but must agree to Open Network Architecture (ONA) • Independents exempt from FCC order

  15. 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 (AT&T, MCI, Sprint) could provide local service • Telephone companies could provide cable service

  16. 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

  19. 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 AT&T 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 AT&T • 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

  24. Original BOCs and RBOCs

  25. BOCs and RBOCs in 2000

  26. Services Offered by RBOCs • RBOCs provide local phone service in their areas using original AT&T network with upgrades • Conduct business through BOCs • RBOCs pursued new opportunities • Ameritech invested in New Zealand’s 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

  27. Independent Phone Companies • Many independents exist that were never part of AT&T • Were not subject to Consent Decree and the restriction on local/long-distance service that RBOCs and AT&T had • Often were small

  28. 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

  30. 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: AT&T, 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

  31. LATA Example

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

  33. 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

  34. 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)

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