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

Entrepreneurial Capitalism & Innovation:
A
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.

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

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

STANDARDS
Ch. 9: Creation

INTERNETWORKING
Ch. 12: Emergence

 

 

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

11.4    The Beginnings of “Be Your Own Bell”

The revolution from analog to digital transmission led corporations to install their own private communication networks, or wide area networks, in a phenomenon then known as “Be Your Own Bell.” From the perspective of 1988, Audrey MacLean, once Western Region Vice-President of Tymnet, a leading supplier of value-added networks, remembers the reasons for the emergence of wide-area networks and the motivation to Be your own Bell:

“Suddenly, in the wake of the break-up of the Bell Systems and the confusion that that caused, major corporations decided: communications is no longer simply an operating expense, it's so integral to the communication flow and the information flow in your company that if behooves you, strategically, to take control of that resource. So, for the first time, companies decided:  "Hey, this network is critical to our business operation," and they hadn't thought about it like that before. This happens to correspond with the move towards the introduction of a senior information officer in many of the larger corporations, again recognizing the importance of the technology to their future competitiveness. The other factor that motivated them was the sheer disruption caused by the break-up of the Bell System. They realized they could no longer leave the driving to Ma Bell, and they really had to assume responsibility for this themselves. There was a lot of debate over whether or not you should ‘Be your own Bell,’ and a lot of the more astute end users began saying: "You can talk about whether you're going to Be your own Bell, or not, but in reality, all of us are. It's just some of us are going to do it better than others, so you might as well start now."

The bottom line was that, through a relatively small increase in capital expenditures, usually to the tune of maybe one to two percent of one year's communications budget, you could reduce your on-going facilities charges in the network by as much as six or more percent, which typically came right off your bottom line. In anybody's communications budget, you usually find about 70% of the costs are facilities charges, so when you could have that kind of bottom line impact, the economic incentives alone were compelling, but you add to that the strategic motivations, and there was a very strong movement towards the adoption of private networks.”

As MacLean captures, the early 1980’s represented a significant turning point in the use of computers and communications by corporations. The explosion in the use of computers following the introduction of personal computers, especially the IBM PC in 1981, combined with the attendant rise in use of local area network, LANs, drove the need for data transmission over the traditional voice telephone network. At first these needs were met by creating data communication networks, using modems and statistical multiplexers, or packet-switched value-added networks. But these networks were slow and invariably designed to fit the needs of specific application(s). When high-speed digital transmission became available, the cost savings made possible by consolidating numerous data networks over one “utility” network were compelling. Corporations, by investing in capital equipment, T-1 multiplexers, and leasing digital T-1 circuits, could in effect replace all the switching and transmission they had always acquired from AT&T, but without also absorbing all the overhead and settlement costs imbedded in AT&T pricing. It was not uncommon for corporations to recover all their investment in capital equipment in less than a year from the savings obtained eliminating analog lease line costs. When corporations also consolidated their voice circuits over these early digital networks, they created their own wide area networks (WANs). As the Chief Information Officers (CIOs), or their equivalents, began demanding more sophisticated management tools and product capabilities, the traditional suppliers of data communication products struggled to respond. Entrepreneurs did not. But corporations quickly wanted more than smart products. They wanted to buy systems and have one-stop shopping with single vendor accountability, service and support. Corporate buyers drove quickly drove industry consolidation.