1970-Present:The Modern Telephone Network

Digitalization of the telephone network sowed the seeds for a second government action against AT&T. The appearance of standardized digital carrier systems in the 1960s had blown apart Vail’s justification of a natural monopoly based on incompatibility.

Round two of the antitrust wrangling with AT&T commenced in 1974. Although distracted by legal battles with the Department of Justice, AT&T remained the dominant telecommunications carrier. In the 1970s, AT&T pioneered fiber-optic transmission, beginning with an experimental system in Chicago that could carry 672 voice channels on a single strand of glass.[4]

Legal struggles concluded in 1982. AT&T retained businesses that operated in competitive marketplaces, namely long distance, Bell Labs and other R&D centers, and Western Electric. The Regional Bell Operating Companies (RBOCs), which were formed from AT&T’s local exchange assets, continued to regulate local telephone service as a natural monopoly. After a long preparation period, AT&T split off from the RBOCs on January 1, 1984, in a momentous event known as divestiture. T1 had been used as a trunk line in the AT&T network for many years, but it was only after divestiture that T1 became a tariffed service that could be ordered by customers.

The Problems with T-carrier

Problems with the T-carrier hierarchy stem from one simple fact: T-carrier systems were designed for AT&T’s voice network. They can be used to transport data, but the adaptation to this use is not always a clean one.

Voice systems do not have the same requirements for operations, administration, maintenance, and provisioning (OAM&P) as data applications do, and the T-carrier hierarchy does not have enough overhead for even simple management tasks. For signaling purposes, the T-carrier system initially depended on robbed-bit signaling, which significantly diminishes data throughput, as we will see later.

Because T-carrier was developed by AT&T at Bell Labs, it is not surprising to note that Western Electric was the dominant manufacturer of T-carrier gear. While this may have been fine in the single-vendor/single-provider world that existed prior to divestiture, it was not adequate for the post-divestiture world. After divestiture, it was common for the ends of a T-carrier link to be under the control of different organizations, each of which had preferred vendors. AT&T had a simple answer: everybody could continue to purchase Western Electric equipment.[5] Research into solutions to the T-carrier’s problems led to SONET, ATM, and the dreams of broadband ISDN.

The Rise of Data and the Internet

At this point, the story passes from the realm of history to a period too recent to have been judged by history. One signal event did recently occur: the early 1990s saw an explosion of data traffic with the rise of the Internet. In 1996, AT&T estimated that the telephone network carried more data traffic than voice traffic! Demand for data pushed the standard business-class connection from 56 kbps to T1.

T1 circuits are expensive, and the ordering and installation process can be ponderous. Many of the alternatives require either dense population concentrations or nearby fiber-optic facilities. While this is the case in major metropolitan areas, most of the country lags behind. In remote areas, T1 is the next available speed up from ISDN. T1 is also flexible enough to provide dial-in service for ISPs. Large ISP POPs use ISDN primary rate circuits to deliver the necessary density of incoming dial-in circuits. For many of these reasons, T1 circuits will be with us for quite some time to come.

[4] This capacity is the equivalent of a T3, but is not a T3. No method for sending T3 signals over fiber was ever standardized.

[5] I doubt this was well received by anybody, except perhaps AT&T shareholders.

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