How The Bells Stole America's Digital Future

Part I
How the Bells Stole America's Digital Future

The Bells Have Repeatedly Failed to Deliver on Promises of Network Upgrades

Since the mid-1980s, every Regional Bell Operating Company (RBOC) has promised massive deployment of advanced interactive networks. First, the widespread availability of ISDN was promised but never delivered. Then, by the early 1990s, the Bell companies had committed to spend billions of dollars to deploy fiber optic networks, replacing the older copper wire network that is still in use today. By now, 44 million households should have access to high-speed advanced networks capable of delivering interactive two-way video and super-fast connections to the Internet. The Bells initiated these plans; regulators did not foist them on the companies. In many cases, the companies made broad and ambitious promises to regulators and consumers in exchange for relief from important pro-consumer regulations. The promises are documented in the Bells' annual reports, press releases and state regulatory filings. These documents show a clear and longstanding pattern of promises made but never fulfilled. Promises that convinced regulators in many states to reduce their regulatory oversight and allow the Bells increased financial incentives. The story starts with ISDN, the Bells' first poster-child of failed deployment.

ISDN: It Still Does Nothing

Integrated Service Digital Networks, commonly referred to as ISDN, was the first example of the Bells' unfulfilled promises. As far back as the mid-1980s, the companies promised to widely promote and deploy ISDN. The basic claim was that this digital technology was, in effect, a revolution in the making. For example, Southwestern Bell claimed in 1986 that:

"At the forefront of new technology is ISDN. Scheduled for commercial availability in 1988, ISDN will revolutionize day-to-day communications by allowing simultaneous transmission of voice, data and images over a single telephone line. With ISDN customers will have the potential to access videotext, (online services) telemetry, alarm services, sophisticated calling features, teleconferencing much more economically than they can today."[6]

Although the service never materialized, the Bells continued to promise to deploy ISDN well into the 1990s. Ameritech, for example, claimed that ISDN speeds information:

"'The ISDN link multiplies, by more than 40, the speed with which information can be transmitted,' says Illinois Bell's Bill Kallmyer, senior marketing operations manager. 'This results in higher productivity and lower on-line charges for consumers.' Kallmyer says ISDN is available to single-line customers as well as larger firms."[7]

These promises, made by all the Bell companies, are legendary. Many involved the wiring of schools and libraries. For example, Pacific Bell's Education First program was supposed to have wired all of California's schools with ISDN by 1996:

"Pacific Bell Helps Bring Schools On-line. As part of a continuing commitment to education in California, Pacific Bell has launched 'Education First,' a $100 million program to connect the state's schools to the communications superhighway. By the end of 1996, all of the nearly 7,400 public K-12 schools, libraries, and community colleges in Pacific Bell territory will have access to the company's Integrated Services Digital Network (ISDN), which enables simultaneous transmission of voice, data and video signals over a single telephone line." [8]

In ISDN, the Bells promised a product they knew they could not deliver. In 1993, NYNEX put forward a vision of telecommunications service that promised ISDN would be there "when business wants it, as much as it wants."[9] To demonstrate the disparity between myth and reality, compare the NYNEX promise to the real-world experience described by James Gleick, a NYNEX customer who helped start the Pipeline Internet service. NYNEX promised:

"Private-line service as quick as a click: bandwidth where a business wants it, when a business wants it, as much as it wants, for as long as it wants. That's the value of NYNEX Enterprise Services, a set of new networking tools that bring unprecedented flexibility to private-line voice data and video systems."[10]

But when James Gleick tried to order the service, here is what he experienced:

"I have visited the advanced telecommunication research laboratories and have seen what technology can bring; ISDN, which promises to turn ordinary phone lines into high-bandwidth carriers of pictures and videos. I've also visited the local telephone company and seen what technology can't bring. I've tried to order this very service. I have a 14-page, four-color brochure! 'NYNEX ISDN Primary Service. For more efficient voice, data, image and video...' The Pipeline's order has been floating about for months. Our sales representative says he wrote it up three times, and each time the system bounced it back. I have a phone number for an ISDN specialist inside NYNEX, but he doesn't seem to have voice mail. The Pipeline is not alone. The large, private on-line services, too, rely on more or less the same graying telephone technology, not ISDN."[11]

The Bells were never particularly enthusiastic about actually deploying and promoting ISDN. Because ISDN is a switched service, the more people use it, the more the Bells would have to invest in switching and, possibly, inter-office transmission facilities. For this reason, over time the Bells' focus moved away from what ISDN could do for consumers, to the percentage of consumers to whom ISDN was, in some sense "available." (Based on the placement of some minimal equipment in a central office or the installation of appropriate software.) But the Bells made virtually no practical efforts to promote the use of ISDN, and indeed, by imposing high installation costs and time- and distance-sensitive pricing, actively discouraged its use.

Things were not much different out West, where Southwestern Bell and Pacific Telesis made similar promises in the days before SBC was the holding company for both of those Baby Bells. Southwestern Bell made this promise:

"At the forefront of new technology is ISDN. Scheduled for commercial availability in 1998, ISDN will revolutionize day-to-day communications by allowing simultaneous transmission of voice, data and images over a single telephone line.
...
With ISDN customers will have the potential to access videotext, telemetry, alarm services, sophisticated calling features, teleconferencing much more economically than they can today."[12]

Two years later, Pacific Telesis boasted that ISDN would help California compete in the 21st Century's global economy:

"To accommodate growing voice and data traffic we've nearly completed digitization of Pacific Bell's interoffice circuits. By testing and implementing advanced technologies like ISDN–which will allow customers to transmit digitized voice, text, video and graphics simultaneously over ordinary Pacific Bell lines–we're preparing California to compete in the 21st Century global economy."[13]

But these services were never fully rolled out. Instead, in the 1990s, the Bells decided that they would create another revolution–the information superhighway. And once again, some of the companies tied the promised technology to regulatory concessions. Arguing that they needed to recover their past investments quickly in order to finance the deployment of fiber optic networks, the Bells convinced some state regulators to let them accelerate depreciation of their existing networks. Then they used their increased cash flow to subsidize their unregulated operations.[14] California's experience, described below, is one example.

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