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Other Carriers Share Market.

Once upon a time a "long distance" telephone call was a Bell System call. There were connections, of course, into "Independent" areas . . . and "settlements". But, basically, "long distance" meant AT&T Long Lines. And no one 20 years ago . . . not even Bill McGowan . . . could have dreamed of the changes that have taken place in the long distance marketplace during these two dynamic decades.

Back in 1959, in its "Above 890" decision, the FCC opened the door just a bit with a ruling on private point-to-point microwave links which established a bandwidth spectrum for use by businesses wnating to bypass the carrier network and provide their own microwave transmission systems.

Actually the specialized common carrier surge of the seventies had its beginning in August, 1969, when the FCC granted the application of Microwave Communications, Incorporated to build and operate a specialized common carrier microwave system between Chicago and St. Louis, the approval coming over the protests of the established common carriers (AT&T, General Tel and Western Union) and after six years of legal hassle. MCI President John Goeken and co-founder Bill McGowan had filed their application for the Chicago-St. Louis service with the FCC in December, 1963!

The "MCI Decision", by a 4 to 3 vote, was a landmark in communications history. Within ten months after that decision, the FCC has received applications from 34 corporations to provide specialized communications services over 40,000 miles of route, most of them on a regional basis only. All told, over 1,9000 applications for new microwave stations were received by the FCC during this period.

The "green light" for the new specialized common carrier finally came in 1970, first in January when the FCC denied the established common carriers' petitions for reconsideration of the MCI decision and then in July when, in the aforementioned Docket #18920, the FCC issued notice of inquiry and tentative rule making covering the specialized common carriers. In May, 1971, after considering written and oral arguments from 150 interested parties, the FCC finally issued its First Report and Order in Docket #18920, giving overall policy approval of the specialized common carrier concept.

Like the Carterfone Decision, this ruling put forth national policy in favor of new entry into the specialized communications field. The Bell System was ordered to provide local connections to the new independent long distance and data transmission carriers and their customers. A month later the FCC was allocating frequencies to the new breed of carriers and, in July, 1971, AT&T and Western Union withdrew their court appeals. Little David had, once again, defeated Goliath!

By August, 1971 MCI was testing portions of its Chicago-St. Louis system and the specialized common carrier race was on.

In our September, 1974 "The Dynamic Decade" Tenth Anniversary Issue, the editors of Communications News cited the "Specialized Common Carrier" area as one of the ten tremendous developments of our first ten years, saying: "Already the specialized common carriers have made themselves felt in the communications marketplace, both thru their own service offerings and also by prompting the established carriers to offer new tariffs . . . from Telpak to Hi-Lo . . to compete with the new specialized common carriers (whose rates are controlled only by "competition in the marketplace", not regulation). Wooed as they are by both the established carriers and the specialized common carriers . . . not to mention the domestic satellite carriers and the "value-added" carriers (like Telenet and PCI with their packet-switching data networks) . . . the big gainers are the communications users with so many fine services from which to choose!"

Ten years ago we tapped three specialized common carriers as "most likely to succeed" . . . Datran, MCI and SP Communications. And we posted odds on three others as long shots . . . Western Tele-Communications (then primarily a broadcasting and CATV program distribution network), George Batche's Texas-based CPI Microwave, and ITT's then brand new United States Transmission Systems.

Our batting average was good. MCI did succeed, perhaps beyond Bill McGowan's wildest expectations. SP Communications sold out to General Tel and survives as the second major carrier, now known as GTE Sprint. And ITT is still very much in the race as "ITT Longer Distance".

MCI and the other special common carriers had reason to sound confident in 1974 because that very year specialized carriers were allowed to connect their private lines directly into telephone company local loops. This made it possible for customers to "dial-up" alternate long distance services from any telephone in the network.

At about the same time a lot of other things were happening that only further opened up the market for the specialized carriers but also gave them some now competition.

In 1972 the FCC expanded the Specialized Common Carrier ruling with the Domestic Satellite (Domsat) Decision, which encouraged non-AT&T companies to provide telecommunications services via satellite. A year later "value-added" carriers were allowed to ofer specialized services not available from established carrier leased lines. Value-added carriers were permitted to lease channels from these carriers and add the "value" of their own computers and software to provide more efficient, error-free data transmission (for example, permit computers of incompatible speeds, codes, or formats to communicate with each other). In 1976 the Commission adopted regulations (Docket #20097) permitting the unlimited resale and shared use of private line facilities.

In 1977, in the now-famous "Execunet Decision" case, MCI and the other specialized carriers got another helping hand, this time from the courts. MCI's Execunet service enabled any subscriber to dial-up MCI's network over the regular local loop and bypass AT&T's Long Lines. Initially the FCC found that Execunet service constituted unlawful application of the authority granted in Docket #20097 regarding shared use of private line services. Upon appeal, the courts rejected the FCC findings and decided that there was nothing in existing regulations which prohibited a specialized common carrier from competing head-on with AT&T Long Lines.

In 1980 the FCC handed down the "Resale and Shared Use Decision" which allowed unlimited resale and sharing of all interstate telephone service, including Bell System MTS and WATS services. This decision let anyone buy long distance service and retail it to end users.

Today the "specialized carrier" marketplace is one of the most exciting ever seen.

Altho AT&T still has 95 percent of the long distance market . . . with MCI having 2.5 percent, GTE Sprint 1.5 percent, and all others one percent . . . the competition is fierce and new developments are occurring almost daily.

Paul Henson's United Telecommunications jumped into the market in June, acquiring United States Telephone through a stock swap valued at more than $70 million.

Two months earlier ITT Longer Distance more than doubled the size of its existing transmission network by linking its microwave transmission network with a similar network owned and operated by the Times Mirror Microwave Communications Company of Austin, Texas, a wholly owned subsidiary of the Times Mirror Company. The agreement will provide ITT with coast-to-coast terrestrial transmission capacity and reduce its dependence on leased satellite circuitry to serve the West Coast and Midwest. ITT will lease capacity on the Times Mirror network for a minimum of 10 years.

In a very interesting development, Bell operating companies are getting into the long distance battle with the former parent company! On July first, Cincinnati Bell announced the formation of Cincinnati Bell Long Distance, leasing long distance lines and equipment from Cincinnati Bell to provide the service. Denver-based US West, Pacific South and Bell South are all angling for Congressional or court approval on plans to get a piece of the long distance pie.

General Tel has announced plans to spend one billion dollars in 1984 on its long distance services . . . GTE Sprint and GTE Satellite. GTE Sprint this year passed the one million mark in customers served. "Our network capacity", says GTE's Allan Rayfield, "will expand dramatically with three satellites scheduled for launch in 1984 and two more in 1985, as well as through expansion of terrestrial facilities including fiber optics and microwave radio."

"What is happening, and it's coming in a rush, is that the cutting-edge user will be using everything we have to offer," said MCI Chairman Bill McGowan. Within a few years MCI hopes a businessman beeped with his MCI pager will be able to call the office long-distance with his MCI card, pick up an international message left in MCI Mail and then chat with a fellow worker driving through Chicago in a limousine on the MCI cellular radio phone. MCI projects the domestic long-distance market will double in size, to $80 billion by the end of 1987, with MCI gaining a $6 billion share of the prize.

Reacting to all this competition, AT&T has launched a promotional program of its own that gives 80 million residential customers credits toward buying 50 different products and services. By making $15 to $300 a month in long-distance calls, customers can win reductions on Polaroid cameras, airline tickets, nights in a Howard Johnson's motel, and, if they talk enough, $500 off on a Toyota truck. The AT&T plan is aimed at helping the company hang on to its dominance of the $45 billion long-distance market in the United States.

In an interesting twist, several of AT&T's regional holding companies are using . . . or thinking about using . . . services of the specialized common carriers! MCI is providing or has bid to provide long-distance phone service for Bell companies including Nynex, Ameritech, US West, Southwestern Bell and Bell Atlantic. Ameritech confirms that it leases circuits from MCI for some calls between Ameritech offices within its five-state region.

A spokesman for GTE Sprint confirms that "we're talking with a great number of Bell operating companies and some of them are already our customers."

A spokesman for Mountain Bell, a unit of Denver-based US West, said "We are in a post-divestiture atmosphere and, like any large corporation, are seeking ways to cut our costs while maintaining a high standard of quality." Mountain Bell is experimenting with long-distance service from Allnet Communications Services, MCI and GTE Sprint!

As we go to press with this special section, the long distance battle was really heating up. First in Charleston, West Virginia . . . then in Alameda, California . . . and then in two areas in Chicago, Illinois . . . all phone users will be offered a choice of long distance services!

Lots of wining and dining is going on to woo important customers in these areas . . . and high-power ad programs featuring expensive, big name spokespersons such as Cliff Robertson for AT&T and Joan Rivers for MCI are filling the air waves and newspapers nationalwide.

A sign-of-the-times is the "Choose-A-Carrier Charge-A-Call" public telephone on which users can choose any one of nine carriers for their long distance call. Simply by pushing a button they can choose among: AT&T, First Phone Link, Western Union, ITT, US Tel, MCI, SBS Sky-line and GTE Sprint!

It's a war!
COPYRIGHT 1984 Nelson Publishing
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Copyright 1984 Gale, Cengage Learning. All rights reserved.

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Publication:Communications News
Date:Sep 1, 1984
Previous Article:Carterfone Changes Our World.
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