Orwell's Revenge (35 page)

IBM's punch card case
went up to the U.S. Supreme Court. In the end, IBM was forced to open the door to its market one small crack. A subsequent round of antitrust litigation,
settled in a 1956 decree, required IBM to divest part of its card manufacturing operation. In a short opinion handed down the same year, a federal court of appeals threw out the FCC's ruling in the
Hush-A-Phone
case and affirmed “the telephone subscriber's right reasonably to use his telephone in ways which are privately beneficial
without being publicly detrimental.” In 1969, the scarcity rationale for regulating radio waves was embraced chapter
and verse by the U.S. Supreme Court.

•  •  •

The genius of capitalism, as Lenin might have said, is that it develops its own rope, for hanging and other purposes. Even in the shelter of its anointed monopoly, the monstrous Bell System remained a for-profit enterprise. If it provided better, faster, and cheaper service, its revenues and profits would grow. The company had been founded on
technology, and technology had remained its strength. In time, Bell would establish the greatest peacetime scientific research program the world has ever known, at Bell Laboratories in Murray Hill, New Jersey. Bell set its scientists in pursuit of better telephones, better networks, and better switches. The pursuit would span radio, then broadband communications, then telephone exchanges, and would end finally where the industry had begun: with the telephone box, which would come to be called a computer.

Bell had been barred from the radio broadcast business in 1927. But not all radio waves spread out like ripples on a pond. At sufficiently short wavelengths, radio signals move in straight lines, like beams of light. It became clear early on that electromagnetic waves, especially at higher frequencies, had enormous capacity to carry information accurately over long distances, at the speed of light. The broadcasters would push their way up the radio spectrum and by the 1950s would be transmitting the considerable volumes of information required for television. Telephone companies, especially Bell's long-distance arm, needed equally high-capacity (broadband) transmission systems, but systems that could operate over much larger distances, more securely, and more reliably.

Bell Labs began to investigate wave-guide transmission in 1931. The idea was to use the vast transmission capacities of high-frequency airwaves, but confined in ducts to maintain signal quality and ensure secure, point-to-point transmissions. By 1934, other researchers had developed a variation on the same idea: the coaxial cable, a copper sheath with a wire running down its center. “Coax,” it turned out, could carry huge amounts of information with low attenuation. Within two years, Bell had installed its first coaxial cables in New York. Coax would supply many of the high-capacity trunks of the telephone network until the end of World War II.

Meanwhile, researchers at Bell Labs were laying the foundation for a second broadband technology: microwave. Harold T Friis and his colleagues developed the horn-reflector antenna, now a standard fixture on microwave towers. Unlike their longer-wavelength cousins listed on the dial of any car radio, microwaves—short-wavelength radio waves— travel in straight lines and can be accurately focused. Because of their comparatively high frequency, microwaves can also carry far more
information; even early systems were designed to carry up to 1,000 voice circuits. Their final advantage for long-distance transmission, especially in rural areas, was also the most obvious: microwave towers could be placed twenty or thirty miles apart, and a single license from the FCC could substitute for the cumbersome process of obtaining rights of way over the entire span. By 1959, microwave systems comprised 25 percent of
Bell's long-distance network.

Coax and microwaves would transform more than the telephone industry. John Walson, Sr., of Mahanoy City, Pennsylvania, recognized that coaxial cable was the perfect medium for connecting homes in rural areas to a large master antenna. He began work on his first “community antenna”
television network in 1948. Others took up the idea. Antennas were placed on hilltops, on tall buildings, and on masts. Distant signals were picked up and piped to viewers over coaxial cable. Before long, antenna operators began using microwave systems to beam in television signals to the master antennas from still farther afield. Thus, almost without design, cable television was invented. By 1955 there were 400 such systems in operation, serving 150,000 subscribers.

Still other Bell Labs scientists were leading research in yet another sphere. The technology of telephone exchanges had languished for some years after the first electromechanical switches began to be used. (As late as 1951, operators were still being used to connect almost 40 percent of
domestic long-distance calls.) In 1936, when Orwell was publishing his third book,
Keep the Aspidistra Flying,
Bell Labs' director of research first discussed with physicist William Shockley the possibility of creating electronic telephone exchanges. Electronic switching, however, required a better amplifier than the vacuum tube technology. While each triode vacuum tube was capable of operating as a switch in a telephone exchange, an exchange needed thousands of such switches; tubes used too much power, and generated too much heat, to be packed together in the numbers required. Shockley and his Bell Labs colleagues Walter Brattain and John Bardeen set off in search of something better.

They found it in 1947, as Orwell was completing the first draft of
1984.
What they found was the transistor. A Nobel prize followed in 1956—the same year as the
Hush-A-Phone
ruling, the same year that
IBM agreed for the second time to let others into the punch card business.

The transistor, like the vacuum tube it displaced, was a compact, energy-efficient switch. Switches are the heart of a telephone exchange, for it is by opening and closing an appropriate set of switches that a single continuous line is created between Romeo in San Francisco and his Juliet in New York City. Switches are also the heart of a computer: by shifting on and off like beads moving on an abacus, switches can keep track of numbers, and numbers can keep track of everything. The first-generation computers in 1956 were still monstrous devices built around huge racks of vacuum tubes.

The new transistor soon came to the notice of Jack Kilby, an engineer who had been designing compact systems for hearing-aid companies. In 1958, Kilby moved to the Dallas headquarters of Texas Instruments and had a brainstorm. Transistors were being made on silicon by then. Why not make resistors and capacitors too on the same medium, and thus manufacture entire circuits all at once, in one process,
on one substrate? Why not, in other words, manufacture an “integrated circuit”? Robert Noyce, another alumnus of Bell Labs then working at Fairchild Semiconductor, soon radically improved on Kilby's design. In 1968, Noyce and a colleague set up their own new company, Intel. Intel would eventually become master of the microprocessor, the computer on chip, which—like the audion before it— would fundamentally transform all of telephony, computing, and broadcast.

•  •  •

When microwaves, satellites, and developments in computers, radios, modems, fax machines, telephone handsets, and all the other varied progeny of the transistor began to make new competition feasible in the 1950s, the competitors arrived, first in ones and twos, then in legions, demanding permission to provide equipment and services around the periphery of the Bell empire.

At first Bell responded along the familiar
Hush-A-Phone
lines. By the 1960s, however, the pressure from the market had grown too intense for the FCC to ignore. Slowly, grudgingly, the FCC retreated from the
Hush-A-Phone
mind-set and began authorizing all forms of electronic terminal equipment on private premises. Beginning with its
Carterfone
ruling in 1968 and ending in the late 1970s, the FCC eliminated all “foreign attachment” prohibitions from Bell's tariffs. Standard interfaces between customer equipment and the network were established. With the FCC's belated acquiescence, the market had won a historic victory over the monopoly. The way had been opened for a complete line of competitive products that would interconnect with the network on customer premises. To put the matter in Orwell's terms, it was now official Ministry policy that Bell would create, maintain, and support “loose ends and forgotten comers” on its network. The network now had something that it had not had before: jacks that any humble citizen could plug into, or disconnect from, without a by-your-leave from Bell or the FCC.

Virtually everything that was to follow in the dismantling of the Bell monopoly was a replay of
Carterfone,
a process of creating new “loose ends” on the network, new interfaces for the market. It required two more decades of regulatory and antitrust handwringing, but the rules permitting foreign attachments to the network created the market for enhanced services as well. If customers could connect their own telephones and answering machines to the network, private entrepreneurs could connect their own electronic publishing, data processing, voice mail, or dial-a-porn services too. All of these services simply involved connecting new equipment or new people to the existing wires.

Competing long-distance services developed in exactly the same manner. In the 1940s, long-distance service was provided exclusively over wires, and the same basic economics that seemed to preclude competition in local service applied equally to long-distance service. The development of microwave and satellite technologies radically changed that picture, making competition both practical and inevitable.

Initially, the pressure for competition came from large businesses, which sought to build microwave links solely to satisfy their own private communications needs. Then, in 1963, a small startup firm, Microwave Communications, applied to the FCC to construct a microwave line
between St. Louis and Chicago. MCI told the FCC it would
offer business customers “interplant and interoffice communications with
unique and special characteristics.” In fact, what MCI had in mind was head-to-head competition against Bell's long-distance operations.

Other MCIs came clamoring at the FCC's door, and the commission came under intense pressure to establish general conditions for entry by new long-distance carriers. In 1980 it formally adopted an open entry policy for all interstate services. It was
Carterfone
again, but this time on what engineers call the “trunk side” (as opposed to the “line side”) of the local exchange.

Then, with almost no warning, a new generation of radio services burst on to the scene. When it first allocated frequencies for land mobile services in 1949, the FCC granted separate blocks to telephone companies and to “miscellaneous” or
“limited” common carriers. The commission consistently maintained this procompetitive policy thereafter. When it began to issue cellular telephone licenses in the early 1980s, the FCC allocated two licenses for every service area, prohibited any licensee from owning a
significant interest in both licenses, and thereafter encouraged the development of other radio technologies capable of providing directly competitive services. Most important, it required all landline telephone companies to provide unaffiliated mobile concerns with interconnection equal in type, quality, and price to that
enjoyed by affiliates. Thus, a third set of loose ends to the network was created, this time at the interface between the traditional and still dominant landline telephone company and the new, much more competitive radio carriers.

Developing at the same time was an eclectic array of new telecommunicating exchanges and devices. Before the advent of the transistor, both computers and telephone exchanges had required large, cumbersome, costly, custom-configured, labor-intensive centers. With the new electronics, much more powerful telephone switches and computers could be built into more compact and reliable units—minicomputers and “private branch exchanges,” which, as small, privately operated telephone exchanges, are telephony's equivalent to the desktop computer.

Larger institutions—hospitals, universities, corporate headquarters, and so on—had once relied on a few centralized mainframes to do
their computing, and on “Centrex” services handled through public telephone exchanges, even for internal telephone calls. Now these same functions could be—and rapidly were—located in stand-alone units on private premises. Competing manufacturers of small, private exchanges and minicomputers proliferated. By the late 1970s, even Bell was systematically downgrading Centrex service and migrating its larger customers to private exchanges.

This dispersion of electronic intelligence created a host of new centers, held in private hands, capable of communicating by wire, and in need of connections to do so. As had happened almost a century earlier with the rise of the telephone itself, the new talking boxes created new demand. What was critically different about the new-generation local exchanges, whether true private exchanges or communicating computers, was that they were owned and controlled not by a small number of quasi-governmental, monopoly telephone companies but by a larger number of private, competitive institutions. For the most part, these private owners welcomed competitive bidding for their telecommunications needs. The telephone had created the original demand for a telephone network almost a century before. Now a new generation of transistor-based electronic equipment in private hands was creating demand for the kinds of competing long-distance services that MCI proposed to offer.

At the same time, the transistor was also fulfilling its original mission, which was to transform the public telephone exchange: a new generation of electronic switches was deployed in the 1960s and 1970s. These switches were far more efficient, powerful, and flexible than the old switches they replaced. They could support levels of interconnection—and thus offer customers a variety of choices—that would have been prohibitively slow, complex, and unreliable in the days when switching was accomplished by human operators or electromechanical devices. As MCI built up its business in the 1970s, the company resolved to carry competition back up the network—to compete not just in connecting private computers and switches but also between the public exchanges operated by the Bell and other public telephone companies. The capabilities of the new electronic switches made that aspiration quite realistic; as every telephone user knows today, such switches can be programmed with databases to route
traffic automatically, Hatfield's to Bell, McCoy's to MCI, effortlessly and invisibly whenever either places a long-distance call.