Why is Transformation so Difficult?

In the post WW II era...having the most effective telecommunications network was seen as a critical national security issue.
The transition to electronic switching had a dramatic effect on facilities and skill sets.  With electronic switches, there was still a need for punch-down blocks to terminate the local loop twisted pairs.  The punch-down blocks and the mechanical switches took up one small corner of one floor of the Central Telephone Exchanges.  Thus, there was a large real estate transition that resulted in the smaller Central Telephone Offices of today.  So, at the end of the transition, the skill sets required included wiring technicians, but had changed from mechanical engineering, electrical engineering, and mechanics; to electronic engineering.  Without this tremendous “transformation”, we would not have the all IP networks of today. 

How did it happen?

In the immediate post World War II era, the original AT&T was a vertically integrated monopoly.  The operating companies that provided communications services were fed by Western Electric.  That is, Western Electric produced all the components the operating companies used.  Western Electric, in turn, was fed by the original Bell Labs.  Bell Labs was where the transistor (fundamental building block of today’s semiconductors) was invented.  It had the electronic expertise that resulted in the development of the technology for electronic switches.  Bell Labs built prototypes and showed them to Western Electric.  Western Electric didn’t try to sell the prototypes as products.  Rather, it took the fundamental technology and used it to build a system designed from the ground up to be a product.  The operating companies didn’t have a lot of input.  They were told that, on this date, electronic switches would be available.  On that date, mechanical switches would no longer be available.  And at a certain point, they stopped stocking parts for repairing mechanical switches.  This was not driven by business cases developed by the operating companies.

During this time in Europe, telecommunications services were provided by government postal administrations called PTT’s (Postal Telegraph and Telephone Administrations).  The PTT’s were struggling to recover from the devastation of WW II.  Also, the European Union had not yet taken hold and there was fear that there would be another European war.  So, having the most effective telecommunications network was seen as a critical national security issue.  As a result, each government tried to develop a strong domestic telecommunications equipment supplier and often had partial or complete ownership of it.  Examples include Siemens in Germany and Alcatel in France.  As Europeans rebuilt, they looked to the USA for technology leadership.  So, when AT&T started rolling out electronic switches, the leading European governments directed their domestic suppliers to develop electronic switches and their PTT’s to buy electronic switches, if they could from domestic suppliers, if not from Western Electric.  Again, no business cases.

Many parts of Asia and Africa were also devastated by WWII.  Other parts of Asia, Africa, and Latin America, still employed manual plug-board based switching.  As these regions recovered and developed, they followed the USA and Europe.  So, the pattern was much the same around the globe: no business cases, mandated move to electronic switching.

After the move to electronic switching, AT&T was broken up.  The operating companies are what became Baby Bells and Long Lines; while Bell Labs got broken up into three pieces: Telcordia (now part of Ericsson), Lucent; and AT&T Long Lines.  Then AT&T Long Lines merged with McCaw Cellular and two of the Baby Bells to become today’s AT&T – a quite different organization.  One of the key differences is that it doesn’t own an equipment company.  Meanwhile the PTT’s were privatized.  That is, they became private corporations with stockholders.  However, in many cases, governments retained ownership positions.  Concurrently, the government owned organizations that had produced telecommunications equipment became privatized, with some government ownership of stock.  Then, the equipment companies entered a period of consolidation.  Finally, mainline computer companies such as IBM, HP, Dell, etc. established positions in the telecommunications service provider’s IT departments and a few large software vendors provided OSS and BSS systems.  So, this is the environment transformation faces today.

Are we there yet?

There are several Telcos in Europe and Asia that have made key contributions to efforts that underlie transformation - some of them earlier than AT&T.  But, AT&T, in a way, coined the term and its very senior executives took a leadership role in reporting on progress around transformation in their quarterly and annual reports to stockholders.


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