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Rapid Technological Advances Write New Charter for Telecommunications.

To my mind, the new charter of the telecommunications industry is a two-pronged one. i would like to address the legal aspects of the new charter first, and then the technology that is behind this new charter and leading the business into the future.

Where possible, the unfettered operation of the marketplace has been the rule in the economy of this nation since its very beginning. Industries that are regulated, as telecommunications has been in the past, are the exception. Americans like competition, and that's the way we want our economy to work. In its early days, the telecommunications industry was very competitive--so much so that market territory disputes were sometimes settled in a potential customer's backyard by fisticuffs between the linemen from competing telephone companies. Of course that would not do, so the industry and the government worked to develop the system under which we've operated since early in this century up until fairly recent years. under that system, regulation was substituted for competition as the force that operates to ensure that prices are fair and service is widely available and of high quality.

Let me emphasize the word "substituted." Regulation was substituted for competition as the force the nation would rely on to ensure the telecommunications industry serrved its customers properly. There was to be no service competition. That is the way the system worked for many ears, and it worked very well. But in recent years, starting perhaps 15 years ago, the nation began to introduce some competition into telecommunications services, first in terminal business and then in long-haul services.

If we've all learned one thing from the experience of the industry in the past 15 years, it's that regulation and competition don't mix. You either operate the industry with one of them or with the other, but not both. Some very bad things begin to happen when you try to mix regulation and competition. Regulators try to guard against possible cross-subsidies that could hamper potential competitors, but maintain those deemed to be of social value. New businesses may find it easy to enter the marketplace, but then discover they operate at the peril of being wiped out by new actions from the very regulatory system that created their market niche in the first place. Existing telecommunications businesses find themselves hamstrung, unable to deliver the full value of their services to the nation in an economic fashion. It is an unstable situation, and a very undersirable one.

It was fundamentally the desire to find a solution to just this problem that led to the Modified Final Judgment and the breakup of the Bell System. The idea behind divestiture was simply this: separate the local exchange portion of the business, which is considered to be a natural monopoly, from those parts of the business that public policy now says shoudl operate under competition. With such a separation, there can be no more charges of improper cross-subsidy between regulated and unregulated portions of the business, no more uneconomic purchase decisions made because of artificially set prices. It is the best available solution to a very complex problem.

Now we must make it work. Divestiture has taken place. The business has been split into regulated and competitive components. But the job is not finished, and until it is the nation will not receive the full benefit.

Now let me speak of the other prong of this two-pronged charter-technology. In a way, it is technology that has driven events in the legal and regulatory side of the industry, too. Increasingly after World War II and particularly with the expanding of semiconductor capabilities in the 1960s and '70s, the technologies needed to design and operate telecommunications equipment became widely available in the USA. It was thus technology that made it possible for others to enter the once-monopoly marketplace without the necessity of a massive initial invesment.

Today the technology underlying telecommunications is moving so rapidly that we can barely hang on for the ride. The promise we face is tremendous--But so is the task. Let's take a brief look at some of what we've already accomplished and where we are going. Here I am speaking of those basic technologies--what we call the "common technologies"--underlying all those intriguing new products and services that are creating an Information Age. Microelectronics, software, photonics and digital systems are the principal forces involved. Closing In on the Megabit Chip

Mircoelectronics is a technology that after more than two decades of remarkable progress is still advancing exponentially and promises to continue on this path for many years to come. For example, in most of the last 20 years we have doubled the number of components on a chip of silicon, and we're still doing so every year and a half. At the same time, the equivalent cost per transistor has become, 1,000-fold cheaper. Today at AT&T we are producing the 256K memory, a chip the size of your fingernail containing over a half-million components. And we are close to achieving the design of a manufacturable "megabit chip"--one containing a million components.

As a result of such progress we have reached the stage where the capability of a single-chip processor has surpassed that of a mainframe computer of 15 years ago and is now challenging that of today's minicomputer.

What does the future hold for this remarkable technology? We might be only halfway to fulfilling its potential. I see the possibility of our reaching chips containing 100 million components per square centimeter of silicon, and perhaps by the turn of the century a billion components on a chip about the size of today's 20-cent postage stamp. (I might add here that such a chip at that time may cost a lot less than the postage one might need mail that way!) The individual circuits in such chips, by the way, will operate at a switching speed of about 10 picoseconds, a picosecond being one-trillionth of a second.

A similar situation exists in photonics--lightwave communications--in which we are rapidly advancing the technology of the laser that generates the digital flashes of light, the detector that receives them and the ultra-pure h air-thin optical fibers that carry them over great distances. This is another combination of technologies where progress is growing exponentially. An today at Bell Labs we have reached the point where we can transmit via our latest laser and optical fiber one billion bits of information per second over a distance of 75 miles. That's the equivalent of 20 digital TV channels, 14,000 telephone conversations or 100 average-length novels per second.

We see lightwave transmission systems of such capacity, and greater, reaching out and linking up with fiber in the local exchanges, in local-area networks and in new buildings--bringing tremendous information and communication capabilities into homes, offices and factories. in fact, this is already beginning to take place.

Do we need such advanced technology? Yes, and for a number of reasons. Any new charter for telecommunications that envisions our dealing with the future needs for data and video communications as easily and gracefully as our telephone system handles voice communications is expecting--no, demanding--that such imcroelectronic and photonic capabilities be developed. And along with the hardware must be the necessary software, both to design and produce systems of such enormous complexity and to provide them with the "intelligence" to guide them--to store and process the millions, perhaps billions, of bits of facts and instructions they work on.

Such demands are increased, I think, by the need to place all this technology and its many benefits at the disposal of relatively untrained operators, like me and perhaps you. We want "friendly" technologies. We want to be able to use them easily. And we want to be able to communicate with these machines as well as through them. We want to be able to use their tremendous powers of memory, computation, information processing and speed to enhance our own thinking and skills, to link us to the collective intelligence of others and to allow us to control other machines accurately and remotely, whether it is a kitchen appliance across town or a factory across country.

To accomplish all this will require the new logic and memory power we can develop for microelectronics, together with the transmission capacity we can develop for lightwave technology.

Now, let's look at what's at stake here. And I think you'll agree that the stakes are very high.

First, I think we see that in talking about the future of telecommunications we are talking about what is already a very large and influential sector in the American economy and social structure. But as this business grows--as it reaches out, links up with and incorporates many of the new information services--it becomes a business of incredible impact on all sectors of the economy. Its effects will be seen in our offices, factories, schools and homes. And this has only begun to happen.

This situation should not be viewed only in domestic terms. For the same time that we have been working on these technologies, others around the world have too, and some with considerable success.

The effect of this is two-fold. As the technology has spread overseas it has opened up new markets for telecommunications and information services. It has, at the same time, created very capable competitors anxious and able to penetrate the large and growing market here. Huge Global Market

Thus, in addition to the domestic impact, we must also consider what's at stake in terms of our global competitiveness and leadership. Here I think we must recognize that the global market for telecommunications equipment alone is now about $60 billion and expected to exceed $90 billion within the next five years.

The US has a very large stake in what takes place in that market for two reasons. One, we are the largest part of the market and open to imports from Japan and several Asian and European countries, many of which make fine equipment and are aggressive in their marketing is growing on the whole at about eight percent per year and with a huge potential still ahead. Therefore, it is obvious that any country whose telecommunications industry does well in this very competitive arena will have a strong position in world trade. We cannot afford to do otherwise.

In addition, one must consider we are really talking about far more than telecommunications alone when we speak of the Information Age with all its related microelectronic and computer products and services. Here the stakes run into the hundreds of billions of dollars and have a significant impact on other industries in virtually every sector of the economy. So we must do no less, as an industry and as a nation, than to excel in this very important technological enterprises.

Now, if you agree that as a nation we have a very high stake in what takes place in telecommunications, perhaps you'll agree that as individuals we also have various takes. And I think it's particularly true of us as engineers, regulators, educators, leaders in industry and government, and even as concerned citizens.

What are some of the things we should be concerned about--and take responsibility for?

First, I believe it's essential for those of us directly involved in the technology of the business to assure its continued high reliability and dependability. At AT&T, and what used to be the Bell System, we have taken great pride in the outstanding record of reliability of the national telephone network. That network is an incredibly complex system reaching more than 180 million telephones and allowing a customer to access any one of some six million billion possible connections. It is run by switching machines--computers--designed to operate trouble-free for all but two hours downtime in 40 years.

This kind of reliability must not only continue, and on the part of all those newly entering this business, but it must become a factor to be considered as we broaden telecommunications to encompass the new information services.

At the same time, as I indicated before, we must consider the need for improved usability--for a better human interface with these increasingly complex machines and systems. Their acceptance by people, and therefore their market, will grow only to the extent that we can make them easy to use as well as affordable.

In sum then, the country does have a new charter for telecommunications, one that involves all of us. It will affect all of us--and the future of our country. Thus it is, and will be, an important part of US technology policy for 1984 and years to come. But policies are only as good as their implementation. We have to work to pursue this one, to carry out its intentions, to make it work. The stakes are high. The outcome is crucial. We must succeed.
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Author:Ross, I.
Publication:Communications News
Date:May 1, 1984
Previous Article:Divestiture Requires That All Perform on a Higher Level.
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