Evolution of Cable Versus Incumbent Phone Companies

The convergence of voice, data and video services has created the need for many companies in the communication industry to change their strategic directions in the United States as well as in the rest of the world.

Too many people really don't know the history of how all the network infrastructure developed in the United States and because of that, many have blurred visions of how it should be strategically developed today. Phone companies that were established a century ago with only voice services were well-entrenched in different markets and had monopolies on the territories they served.

With the advent of basic cable TV companies in the 1970s, the scope of communication services evolved. The concept of network services expanded to voice, data and video.

It is important to understand the history of how the networks developed independently and the relatively recent competition between the incumbent network carriers (the phone companies) and the cable (TV) companies.

Going back several decades, there was a huge difference between the incumbent telecommunications carriers (the Bell System and the independent telephone companies) and the early cable companies in the late 1970s to early 1980s before the divestiture of AT&T and the Bell System in 1984.

The Bell System was in the communications business, including transport. It was a monopoly of twenty-two operating companies (including New York Telephone, Ohio Bell, Illinois Bell, Pacific Bell, etc.) as well as AT&T Long Lines, Western Electric (the manufacturing arm of the Bell System) and Bell Telephone Laboratories (the research and development division). There were also about 1,000 independent phone companies scattered across the United States servicing mostly rural areas, which the Bell System also had to interconnect with.

Before the Divestiture of AT&T in 1984, the public network was called the Direct Distance Dialing (DDD) Network. Now, it is called the Public Switched Telephone Network (PSTN).

Back in the late 1970s, the DDD Network was comprised of step-by-step mechanical switches, electro-mechanical (#5 Crossbar) central office switches and digital processors (#1 ESS -Electronic Switching Systems, #2ESS, #3ESS, #4 ESS (for the Toll network)). Any new digital central office technology or other network infrastructure element had to be backwards-compatible to any existing analog technology that was already in the network.

That was a huge design requirement and also sometimes a big obstacle because the whole phone network, including independents, had to be compatible with older analog technology because they could not all be upgraded at once. The network was comprised of copper, coaxial cable, microwave, and satellite transmission media. Fiber optics was just beginning to be tested as transmission media. Copper was the transmission media used to connect to the subscriber and everything had very structured definitions and strict interfacing standards.

Any data transmission was set up to travel across analog telephone lines and modems which modulated and demodulated digital signals into analog signals to send across transmission lines had to be used.

When the Bell System started to digitize the public telephone network (switching it from analog to digital carrier signals) they started with the top of the network hierarchy and worked downward to the central offices. (Think of the public network as a big pyramid with 9 regional offices on top and 1000s of central offices on its base. There were five levels of offices in the hierarchy.)

Early commercial Digital Data Services (56Kbps digital point-to-point services) were only available on certain routes between certain cities in the early 1980s. You could get DDS services between certain large cities, but not every city. The goal was eventually to get the network digital (voice, data andvideo) out to everyone – both residential and commercial customers.

Modems would be replaced by DSUs (Digital Service Units which only synchronized the digital signal to the network clock and did not modulate it from analog to digital.)

On the other hand, early cable companies in the United States at that time had a very different view of what business they were in. They were in the entertainment business. They did not perceive themselves as communications carriers, nor the Bell System as their competitors. Their infrastructure engineering reflected that and their basic transmission media was coaxial cable to the subscribers’ premises.

Many analysts today do not realise that the cable companies were not concerned about interconnecting, nor being backwards compatible with any other company. Each cable company was an island of technology and they designed their network infrastructure to deliver video only. They did not even think to deliver voice or data until much later.

Early cable executives looked at themselves as part of the entertainment industry, not as part of the communications industry. That was a huge distinction in how they set their strategic direction as well as their physical network topology.

Today’s public networks need to support voice, data and video as well as provide wireless connectivity to a growing number of smartphone devices. Bandwidth demands have outstripped the traditional network infrastructure design specs and there needs to be some serious additions to existing networks as more and more video applications are utilised.

One fact has been determined, it much easier to build a new network where a pre-existing one does not exist. It takes more time to build one where you have to interconnect and interface with older technology.

Strategies will be different depending on the state of the network infrastructure. The one strategy that will be common is the one that dictates the strategic direction for moving commerce towards global competition.

A country that does not have a longstanding copper-based network infrastructure can leapfrog into a state-of-the-art network by adopting new wireless infrastructure like WiMAX or LTE (Long Term Evolution) with a fiber optic backbone network.

CARLINI-ISM: Networks are a critical layer in a country’s platform for global commerce.

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