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Entrepreneurial Capitalism and Innovation:
A History of Computer Communications 1968-1988
By James Pelkey

Entrepreneurial Capitalism & Innovation:
History of Computer Communications
1968 -1988
By James Pelkey

This history is organized by three co-evolving market sectors and also standards making.
An overview of the schema is presented in the Introduction.

Ch. 1: Emergence
Ch. 3: Competition
Ch. 5: Market Order
Ch. 11: Adaptation

Ch. 2: Vision
Ch. 4: Arpanet
Ch. 6: Diffusion
Ch. 7: Emergence
Ch 8: Completion
Ch. 10: Market Order

Ch. 9: Creation

Ch. 12: Emergence



Chapter 1  
Data Communications: Emergence 1956-1968
Modems and Multiplexers

1.4   The FCC and Computer Inquiry I 1966-1967

Before 1965, Bernard Strassburg, Chairman of the Common Carrier Bureau of the FCC, viewed the relationship between AT&T and the FCC as collaborative:

"It was truly a symbiotic relationship. The regulated monopoly operated in what was considered to be the public interest and, in turn, was shielded against incursions by rivals and competitors, including the possibility of government ownership." [64]

By late 1966, however, Strassburg had radically rethought his view as he came to understand the importance of computers. He realized users would want to interconnect terminals and computers over the telephone network in ways certain to be resisted by AT&T. In a speech to an audience of computer professionals on October 20, 1966, he declared:

"Few products of modern technology have as much potential for social, economic, and cultural benefit as does the multiple access computer." [65]

Strassburg spoke of the problems of the coming convergence of computers and common carrier communications - telecommunications. He identified the problem of market entry: Who would be allowed to sell what products and services? Did AT&T have the right to monopolize products and services other’s wanted to sell? Strassburg also asserted the FCC’s role as being to support progress:

"The Commission is obliged by the policies and the objectives of the Communications Act to ensure that the nation's communication network is responsive to the requirements of an advancing technology. The Commission has the obligation, the authority, and the means to reappraise and refashion any established policies in order to promote the public interest through an effective realization of the social and economic benefits of current technology." [66]

On November 9, 1966, the FCC, announced the Common Carrier Bureau (CCB) would hold a public inquiry titled: Notice of Inquiry, In the Matter of Regulatory and Policy Problems Presented by the Interdependence of Computer and Communications Services and Facilities (Docket F.C.C. No. 16979). [67] The Notice read:

"We are confronted with determining under what circumstances data processing, computer information, and message switching services, or any particular combination thereof--whether engaged in by established common carriers or other entities--are or should be subject to the provisions of the Communications Act." [68]

Strassburg began seeing the Carterfone case as a way to revisit the foreign attachments tariff. For it was becoming obvious that the prohibition of foreign attachment impeded data processing use of the telephone system and the innovation of communication devices. In Strassburg’s words:

"We used the Carterfone issue and the Carterfone proceeding as a vehicle for revisiting the policy, which was basically a Bell System policy, which had been embraced by the FCC and the regulatory commissions for many generations, against customers, willy-nilly, interconnecting anything they chose to the telephone network, no matter how innocuous it might be unless the item was specifically authorized by the telephone company's tariffs.

Well the telephone company wasn't likely to tariff anything of consequence, so as a result, anytime anybody wanted to promote a piece of equipment and to have it work with the telephone network, they either had to sell it to the Bell System, if they could convince Western Electric and Bell that they had something sellable, or if they couldn't succeed in that channel, then attacking the tariff insofar as the claim was unlawful -- and that the   But that was a very cumbersome process to go through; the administrative hearing and the time and the cost involved that, to a small entrepreneur with a piece of equipment -- it discouraged people.  It discouraged the market from developing, and that's why, I think, the United States was so far behind other countries, in customer-premise equipment there was no entrepreneurship, the entrepreneurship was blunted and discouraged by this institutionalized practice of saying: "You can't connect with us."  In other words, everything that went on had to go on within the Bell System, Bell Laboratories. That was where innovation began and ended."

Not entirely.

[64] Slippery Slope p XI

[65] October 1966 Speech, Jurimetrics Journal, September 1968, pp. 12-18 Knowing he had to educate the Commissioners to the needs of computers, he contacted the Institute of Electrical Engineers (IEEE) to give a series of lectures to the Commissioners. One of the lecturers was Paul Baran, who was known to Strassburg, and as future chapters will make clear, a dominant figure in the history of computer communications.

[66] October 1966 Speech, Jurimetrics Journal, September 1968, pp. 12-18

[67] When interviewed, Strassburg remembered: "I decided that we ought to formalize this thing. We sensed enough ferment out there, or enough concern, to say: 'Well, look we're going to encounter some problems here, and let's get on top of them sooner, rather than later, and for once let a regulatory agency be out in front, rather than trying to shovel up the mess that's left behind."

[68] FCC 66-1004


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