Tag Archives: AT&T

Politicians Overreact to AT&T-Time Warner Deal

By Paula Dwyer – To understand the folly of blocking this takeover, think back to 1974 to the original AT&T antitrust case, which also began from a fear of vertical integration. Back then, the concern was that a single company controlled all the local landlines and the company that made the equipment.

For sure, AT&T had a monopoly, but it was created and sanctioned by the federal government. All that was needed was a government deregulation order and a green light that it wouldn’t block competitors.

Instead, the U.S. sued to break up Ma Bell.

After eight years of courtroom battles, AT&T in 1982 consented to be broken into seven Baby Bells and AT&T, which could only offer long-distance service. Many mergers later, one of AT&T’s offspring, Southwestern Bell, had acquired four of its siblings plus the old AT&T, and took the AT&T name.

The two remaining Baby Bells joined with GTE and became Verizon. The result is even more concentration than before.

If the U.S. had simply deregulated plain old telephone service, any one of these technologies (fiber-optics, Arpanet, cellular network) could have forced AT&T to adjust or disappear. more> https://goo.gl/XLVsfB

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State of Telecommunications

First, Tom Wheeler, the Federal Communication Commission Chairman, must be congratulated for adroitly navigating the “net neutrality” whirlpools [2] and positioning the FCC as the champion of “fast, fair and open” internet. However, there is a risk that future FCC may stray from the high ideals Chairman Wheeler has defined, and may misuse the newly acquired powers. While the FCC decision has brought regulatory clarity in the marketplace, the underlying causes for the market failure remain.

I wrote in 2006, “Factoring implications of technology in business and economic decision making has not kept up with the increased role of technology in the economy.” The tortuous path the FCC took to reclassify internet as a telecommunication service provides an instructive example of the inadequacy of technology policy decision making.

In 2002 FCC decided that internet was an “information service” [2]. As the Internet usage grew, additional demands were placed on the network infrastructure, requiring acceptable new “codes of conduct” for network providers. Rather than continuing to invest in their existing infrastructure, the telecom carriers were enamored with improvements in wireless technology and invested heavily in it. The FCC obliged by permitting blocking and throttling of services for “network management purposes.” While there was an appearance of innovation and new investment by the telcos, in reality their decisions were driven primarily by financial objectives [2].

Initial internet growth was fueled by xDSL technologies. As the market demand grew cable companies started offering internet. But the FCC classified internet provided through cable networks as “information services.” The piecemeal regulatory decisions by the FCC over the years created absurdities. According to the FCC rules, Broadband was a telecommunication service using xDSL technologies subject to regulations, but an information service without regulations when provided using cable network. Verizon was unhappy that it was being regulated, while its competitor Comcast was not, and challenged the decision in the courts. The court upheld Verizon’s challenge and set aside the FCC internet regulations. The revised FCC decision simplifies and brings clarity and uniformity to Broadband regulations.

A review of history may be helpful to better understand the current telecom market configuration. Even though Graham Bell invented the telephone [2] in 1876, its universal adoption was long drawn out and traumatic. After realizing the potential, the then stockholders, in 1907, recruited Theodore Vail (again) to build an organization to fully develop the potential of the technology. Vail had previously demonstrated his organization skills at the Rail Mail Service. Vail realized that the communication possibilities offered by telephone connectivity made it a “natural monopoly.” Vail’s knowledge and insights helped him reach the consensus to make AT&T a government sanctioned monopoly [2]. In return, AT&T agreed to be regulated. To overcome the negative effects of a monopoly business, AT&T instituted a counter balancing organizational social mission – “a single communication system offering the best possible service.”

In later years, AT&T lost its zeal for the social mission. Along with other political factors, a series of developments resulted in the 1984 divestiture [2] and the current market configuration.

Now, telcos no longer have monopoly markets. And their mission has changed to providing the least amount of service to customers they can get away with maximum financial gain. In addition, Comcast is now the largest Broadband provider[2], with the revised FCC broadband definition. Comcast is enjoying “huge profits.” It is an indication of the high barriers to entry in the Broadband market. One of the reasons for the high barrier to entry is the lack of suitable technology for providing cost effective Broadband.

The FCC regulatory framework is based on the historical AT&T monopoly market conditions, when AT&T was also a leading technology developer [2] with social goals. The resource gaps for much needed broadband technology innovations remain unfilled in the current market configuration.

Financialization in telecom

The normal role for finance in the economy is to facilitate trade and production efficiently. Through these transactions profits are generated. However, due to dysfunctional factors, it can become more profitable to use financial methods to generate profits without trade or production. This abnormal role of finance in the economy is termed financialization.

Financialization is “an economic, social and moral disaster: net disinvestment, loss of shareholder value, crippled capacity to innovate, destruction of jobs, exploitation of workers, runaway executive compensation, windfall gains for activist insiders, rapidly increasing inequality and sustained economic stagnation.” [2]

Financialization in the telecom industry has become a destructive force. “AT&T and Verizon say 10Mbps is too fast for “broadband,” 4Mbps is enough” is the best indicator yet of the depth of financialization in telecom. Providing better services will severely limit telcos financial engineering activities. It’s ironic coming from the heirs to the legend built on the promise of providing “best possible service.”

It seems telcos no longer consider it their business to provide services their customers need, illustrated by these reports:

Now, contrast it with how other industries are operating, for example, utilities, auto, or computing. Here are some highlights:

Loss of direction by dominant communication providers has negative cascading effects on the industry. It has decimated a once thriving telecom technology supply chain. Nortel is no more [2, 3]. Alcatel-Lucent “has not earned any money 2006-2013” [2, 3]. Motorola has shrunk dramatically [2, 3].

With all these things going on, one would think that there would be an earnest effort to find out what is wrong. Instead, the preoccupation in the media and industry is with “net neutrality” confusion, which the FCC Chairman summed up: “the idea of net neutrality has been discussed for a decade with no lasting results.”

Maybe AT&T should fully divest from the communication industry

AT&T, by vigorously pursuing innovation, developed a patent to help manage the people who are not using the networks properly. The invention is currently a patent application to better manage “bandwidth abuse” [2, 3].

This is interesting at many levels. First, you would expect inventions are to help improve the use of networks, and not limit its use. Or, maybe, AT&T has very good ideas as to what are the “good uses” of networks, and what are the “bad uses.” And their self-appointed role is to make sure everyone’s “good behavior” regarding networks.

However, for the Internet as the emerging media for communications, the real controlling issue is First Amendment Rights [2, 3, 4, 5]. If the United States is to adhere its founding principles, then it is clearly outside the purview of commercial interests of AT&T.

This also creates interesting dilemma. For example, if Verizon or Comcast were also interested in correcting their misbehaving users, will they be infringing on AT&T’s patent? (assuming the patent gets granted) And they would be required to pay royalty to AT&T?

AT&T in its current incarnation is clearly motivated by financial profits, as explained by CEO, Randall Stephenson. It is worth pointing out that AT&T became the legend and most admired company in its glory days not by pursuing profits, but high ideals. Theodore Vail, who architected its growth, developed a “strategy to achieve a single communication system offering the best possible service,” subordinating the maximization of profit. And there was a vigorous campaign about “One policy, one system, and universal service,” to help implement a unified, coherent national network policy. The result was, at its peak, AT&T employed more than 1 million people, admired by all, and affectionately called Ma Bell.

Now, AT&T’s network assets are not helpful for maximizing financial profits to match the “financial games” by the innovators in the financial industry. For example, to create and dominate a whole new market like the CDS (credit-default swap). Or, the clever trades by Blackstone.

There is a clear solution for the conundrum AT&T finds itself in. AT&T should fully divest from the communication industry, and concentrate wholeheartedly in financial operations. Then, they would be able to beat JP Morgan, Goldman Sachs et al. at their own game.

What is strange about the telecom industry?

The FCC has unanimously voted to allow AT&T to conduct trials to turn off the phone network. It must be puzzling, at least to those who are unfamiliar with telecom industry inner workings. In normal markets, you hardly ever have such debates. For instance, there is no public debate as to how jet engines or future light bulbs are to be designed — even though everyone uses them. GE and Rolls-Royce introduced major enhancements without most people even noticing them. New light bulbs pack major innovations and plug into the old sockets, without any accompanying brouhaha. What is different with telecom?

The short answer is the Internet. Because the Internet has become everyone’s everyday tool, the dysfunctional behaviors in the telecom industry have become a matter of public debate. Anyone who uses Facebook or Twitter seems to believe that they have a say in the way the networks are to be designed.

For the long answer, you have to go back into history. Years of litigation resulted in the divestiture (break-up) of the AT&T in 1984. Bell Labs [2, 3] was the final authority on networks at that time, when, the Internet was in its infancy. The predominant network being the telecom (phone) network. One side effect of the divestiture was the dissipation of the technology know-how and knowledge, accumulated over a century, in the Bell Labs. The reconstructed Bell Labs is regaining its moorings only now. While the Bell Labs was in decline, the Internet as its protagonists were rising in prominence, culminating in the Dot-com bubble.

This is critical because the technologies, vocabulary, and principles underlying the telecom networks and the Internet are as alien as the German and French languages, even though the telecom networks and the Internet are an inseparable mesh.

The concurrent decline of the telecom stakeholders and ascent of the Internet stakeholders resulted in the neglect of telecom infrastructure and the underlying products. In fact, the primary suppliers (Nortel and Lucent) for the North American telecom networks are no longer viable business entities — Nortel is no more, and Lucent merged with Alcatel. The net result is cost of operating the telecom networks has been increasing, while the number of customers using voice components of the telecom networks have been declining. AT&T, therefore, wants to replace the voice telecom network with the Internet.

But the problem is that the Internet is not an exact replacement for the telecom networks for voice services. The best example is the 911 emergency service. The result is the convoluted public debate we are witnessing.

Texting has been suggested as replacement for the 911 service. However, this is not a good substitute. Dialing 3-digits — 9, 1, 1 — and speaking on the phone are simple to perform. But texting is not that simple — among the reasons are lack of uniformity of operation among devices, and the option for alphanumeric data.

A better solution is a mandatory “Alert Button” on all messaging devices, including phones, smartphones, tablets, dashboards, remote controllers, radio/TV receivers, wearables, keyboards, game consoles, door openers, and connected devices. The Alert Button could internally send text messages. In addition, with Alert Button, implementing different types of Alerts, in conjunction with GPS, will be trivial. Different types of Alerts, such as medical, fire, disasters, rescue, roadside assistance, burglary/intruder, equipment failure, threshold alarms, diagnostics, operating parameters, and other types could be easily implemented. This has the potential to create market for a whole new class of Alert devices and services, similar to the pagers used in the past.

Another issue missing in the debate is “transparency.” What are the goals of the trials? What are the objectives? How the results of the trials will be evaluated? And how the decisions will be made?

AT&T is more interested in cost savings than network operations

English: Avaya ERS 8600.

English: Avaya ERS 8600. (Photo credit: Wikipedia)

By George Mattathil – AT&T CEO Randall Stephenson says, “The really big numbers come when you get really close to turning off the switch on the old legacy TDM infrastructure. There are significant network and IT costs involved in sustaining those products and you don’t turn the lion’s share of those off till you take that last product out of service.”

It seems primary preoccupation at AT&T is not how well they can operate the networks, but how much money they can save. Current thinking is a continuation of the past decision to keep the then profitable long distance business and spin-off valuable technology (Lucent, Avaya, Agere) and access networks (Baby Bells.) Service quality, reliability and performance are being sacrificed for the sake of financial profits. Such flawed thinking is a common problem.

It is possible that AT&T is not really driving this effort, but the government. That would explain the series of illogical past decisions by AT&T.

Proceeding with the all-IP plans will result in a network system that is less than optimum. Past neglect of a fully developed rail network [1, 2, 3] has resulted in the less than optimum current transportation system in the US.

If the FCC agrees with AT&T plans, get ready for a sub-standard network infrastructure with reduced service features and performance.™¦

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AT&T Explores $100B+ USD Deal to Acquire Vodafone’s European Operations

By Jason Mick – AT&T Inc. (T) and arch-rival Verizon Communications Inc. (VZ) (who owns the Verizon Wireless brand) together own over two-thirds of the U.S. mobile market.  Neither company appears to be budging, posting growth — but only small subscriber gains at the expense of smaller carriers.

The deal would be crafted to give America‘s second largest carrier control over the Vodafone units that operate in the most lucrative mobile market region outside of the U.S. — the EU. AT&T would look to finance the bid, in part, by offloading units of Vodafone outside of Europe to other carrier superpowers, who would help pay for the massive deal. more> http://tinyurl.com/orr73vd

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We’re About to Lose Net Neutrality — And the Internet as We Know It

By Marvin AmmoriNet neutrality is a dead man walking.

That’s where we are today €” waiting for the most powerful court in the nation, the DC Circuit, to rule in Verizon‘s case. During the case’s oral argument, back in early September, corporate lobbyists, lawyers, financial analysts, and consumer advocates packed into the courtroom: some sitting, some standing, some relegated to an overflow room.

Once the court voids the nondiscrimination rule, AT&T, Verizon, and Comcast will be able to deliver some sites and services more quickly and reliably than others for any reason. Whim. Envy. Ignorance. Competition. Vengeance. Whatever. Or, no reason at all. more> http://tinyurl.com/qj5ulvz

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An illustration in market disconnect

Lucent Logo, bearing the "Bell Labs Innov...

Lucent Logo, bearing the “Bell Labs Innovations” tagline (Photo credit: Wikipedia)

By George Mattathil – Forbes article, “How AT&T Can Go Shopping In Europe And Keep Its Credit Rating” by Maggie McGrath, provides an illustration how the financial markets are disconnected from reality and creates havoc with real businesses.

AT&T no longer has any competitive advantages, except its ability to borrow huge amounts of capital from financial markets. For starters, AT&T is not the company what most people think it is. Financial wizardry has reduced it to “at&t.”

Financially driven decision-making started at the original-AT&T with the decision to keep the then profitable long distance business and divest the technology (Lucent, Avaya, Agere) and the customer-connecting access networks (Baby Bells.) AT&T then followed it by another disastrous decision to buy TCI cable network, since it no longer had customer-connecting networks. As the original fantasies did not materialize, AT&T was forced to spin off the cable business to Comcast, and lost billions in the process. The result was one of the reconstituted Baby Bells, SBC, bought AT&T and renamed itself as the current ‘at&t’.

SBC had been mirroring the original-AT&T financial strategies for maximizing earnings — such as downsizing, shutting down research, not investing in network upgrades, etc. As an example, after the acquisition of Pacific Bell by then SBC, market leading research activities at Pacific Bell were terminated.

Current ‘at&t’ financial wizardry is based on customer-connecting networks of the constituent Baby Bells of past SBC.

Vodafone, in turn, benefited from Verizon’s financial wizardry. An estimated $20 billion investment by Vodafone in Verizon Wireless has turned into a $145 billion payback.

Seems the success of network operators is not based on how well they run their network operations, but how much they can borrow — a lesson learned probably by watching how Washington operates!

Impact of the financial wizardry by network operators is not limited to news generation, or even contained within their respective organizations. Network being a key enabler for economic activity, the costs and pain of network operator missteps are distributed to their customers and the entire economy. But the financial benefits from the wizardry are seldom shared, except, may be, as increase in share price.

Another impact, not easily identified, is the current turmoil at Alcatel-Lucent. AT&T used to be a major Lucent customer. But plans to migrate their infrastructure to VoIP (Voice-over-IP) make the current infrastructure and major Alcatel-Lucent product lines redundant. This has made it necessary for Alcatel-Lucent to reorganize their business operations. And placing a question mark on its future.™¦

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Telcos need to stay away from financial wizardry

English: Nortel IP Video Phone 1535

English: Nortel IP Video Phone 1535
(Photo credit: Wikipedia)

By George Mattathil – Forbes article, AT&T-Backed Report Prompts Question: Should The U.S. Get Rid Of Phone Lines? by Elise Ackerman, takes a refreshingly accurate take on the issues involved — rarely seen in the mainstream media.

When evaluating the phone networks, explosive growth of IP-based video traffic is “not particularly relevant since video is not an alternative to phone calls.”

There are three primary data types – voice, data, video. Each has its own unique characteristics, and cannot substitute another. Developments in digital technologies allow transporting voice, data and video over packet networks. As the article points out, correctly, that is not the same as deciding how best design networks — illustrated with an example.

We have cars, buses, trains, airplanes, ships, spacecrafts, etc. for different modes of transportation. But nobody argues that we should build flying cars to replace all modes of transportation. Networks should be build in the same manner. Different data types have different performance requirements, and build networks to best meet those needs.

The unthinking affinity for the Internet is an after effect of the dot-com-bubble. One side effect of the bubble was the Telecom Meltdown and dissolution of Nortel and Lucent as the de facto telco technology providers. This has placed the US telcos in a pickle, as the telco systems with innovations and ingenuity spanning more than a century, since Alexander Bell made the first phone call in 1876, cannot be replaced easily.

Financially driven decision-making started with the original-AT&T decision to keep the then profitable long distance and divest the technology (Lucent, Avaya, Agere) and the customer-connecting access networks (Baby Bells.) AT&T followed it by another disastrous decision to buy TCI cable network and spinning it off to Comcast, losing billions in the process. The result was one of the reconstituted Baby Bells, SBC, bought AT&T and renamed itself (current at&t.)

As Steve Denning points out, it is high time telcos realized that their mission is building and operating networks, and stay away from financial wizardry — which has cost them dearly.™¦

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