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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

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Chapter 11
Data Communications: WANs 1979-1986
Data Networks Become Wide Area Network


11.2   AT&T and the T-1 Tariffs 1982-1984

In 1982, AT&T filed for, and received, tariffs to lease digital data transport services under the High Capacity Terrestrial Digital Facility or Tariff No. 270. AT&T had finally decided to make available to its corporate customers a technology that it had been using internally since 1962 and had been making available to the Defense Department since 1957.[1] To much of the world this decision came as a surprise. But for those in the know, it was inevitable, both because of the overwhelming economics of digital transmission as well as the pressures of market competition.

The basic digital transmission carrier or circuit, known as T-1 (or T1), transmits 1.544 megabits per second (Mbit/s). Channel banks, also called channel service units, interleaved twenty-four 64 thousand bit per second (Kbit/s) sub-channels into the T-1 circuit. The 64 Kbit/s sub-channel, or DS-0 channel, was the then standard voice grade channel; also equivalent to the 56-Kbit/s data circuit with its additional 8-Kbit/s of overhead signaling per channel.[2]    (See Exhibit 11.0 T-1 Circuit with Channel Banks.) In time, improvements in voice compression would reduce the number of bits required to transmit voice to 8 Kbit/s, thus making it possible to transmit 192 traditional analog voice circuits over one T-1 circuit.[3] The effect was to dramatically increase the bandwidth of the existing telephone network – after the investment transforming the analog circuits to digital – and to dramatically reduce the costs of telecommunications. In January 1984, immediately post-divestiture, AT&T began actively marketing T-1 services under the product name Accunet T1.5.[4]  

Exhibit 11.0 T-1 Circuit with Channel Banks


In 1982, when AT&T received Tariff No. 270, digital transmission was a proven technology and available from a growing number of competitors. First there were the Other Common Carriers (OCCs), such as MCI and Sprint, who were aggressively marketing the advantages of T-1 to corporate customers in hopes of taking market share from AT&T. Since they were still building out their networks, they could employ digital technologies immediately, giving them the attacker’s advantage. Second, microwave technologies were making it easy to build communication networks without burying wire, cable, or optical fiber in the ground. There were over forty new Digital Transport Service (DTS) microwave licenses submitted to the FCC by firms wanting to qualify as new common carriers. Third, cable companies, particularly the metropolitan cable operators, were claiming they could provide digital data and voice communication by-pass services; by-pass as in eliminating much of the intra-LATA telephone services from the local Bell Operating Companies. (Intra-LATA services are effectively telephone calls made within one area code – within one central office (CO) switch - and are considered local calls. Inter-LATA calls are long distance calls.) Fourth, corporate customers were learning that other new technologies were making it possible to extend communication networks to reduce costs and increase functionality, such as the claims of the vendors of broadband LANs that their communication networks could carry data, voice and video, encompassing entire campus facilities and by-passing the telephone network.

To obtain the advantages of T-1, corporations required equipment to multiplex their various slow speed data circuits into the T-1 circuits - for AT&T customers that meant into the DS-O sub-channels of the channel banks that connected to the T-1 circuits. That piece of equipment, a T-1 multiplexer, created both wonderful new economic opportunities for the existing multiplexer companies and, in time, dire consequences for those companies that did not act, or respond appropriately.

[1] “All about T1 Multiplexers,” DataPro Research, C35-010-751, July 1986. This publication began DataPro’s coverage of T-1 multiplexers.

[2] “The anatomy and application of the T1 multiplexer,” Data Comunications , March 1984, pp. 186. The first voice digitization was known as Pulse Code Modulation (PCM). The next generation was Adaptive Differential Pulse Code Modulation (ADPCM) that required only 32 Kbits/s.

[3] 8 voice channels per each 24 DS-0 sub-channel

[4] “The anatomy and application of the T1 multiplexer,” Data Comunications , March 1984, pp. 183-195



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