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SECTION 7 INNOVATION INTRODUCT;rON For the purpose of .this section, the term "innovation" will be taken to mean the introduction and use of new equipment, new uses of equipment,or new services. We are not concerned here with inventions or ideas per se, but rather with· the ability to put inventions or ideas to practical use by the telephone companies or those who wish to interconnect. The principal consideration here is interconnection with the Direct Distance Dial (DDD) network, although some of what is discussed is obviously applicable to the question of interconnection with private lines as well. . The impact of innovation has not been presented as a maj or issue before the Panel, but some concerns have been expressed. It is clear that many of those concerns are the result of interconnection itself and the fact that interconnecting parties and the c;rriers will have to cooperate in some way to reach solutions to problems when their interests do not coincide. The amount and .kind of protection required for the network and the method of providing it tend to change the nature and degree of the problems, but do not solve them. Few, if any, of the problems are entirely technical in nature, although technical factors should be considered in any policy decision. Although the discussions before the Panel have been addressed primarily to problems that might limit innovation, it seems clear that interconnection will have a positive influence on innovation in some cases. The Panel has made no systematic attempt to survey new technology and potential new developments. For our purposes, the material presented to the Panel in response to our inquiries seems adequate. For this reason, the references to new technology and new developments cited below should be considered only as examples of things that are reasonably well understood and which may have some impact in the not too distant future. The incentive to innovate is usually economic, either directly or indirectly, whether it be to provide an existing service at lower cost or to provide a new service. The increasing dependence of the business community on communications in a variety of forms will provide ample incentive for continuing innovation in an era in which technology is likely to advance rapidly. . - 57 -
- 58 - It seems likely that business will want fast response to its communication needs and will want customized services to optimize its own operation, To the extent possib1e,"no technical barriers in the interconnection policy should prevent such" innovation so long as new things are not allowed to interfere with other uses, Neither should technical barriers prevent." telecOmmunication carriers from innovation in the network, where it is in the public interest. BACKGROUND New Techno16gy The development of integrated circuits to the <point where cost and reliability expectations are realized will certainly have an impact on innovation. Existing functions will be performed at lower cost and new functions not practical with older technology will become economically attractive, In addition, it seems likely that in attempts to optimize overall systems (common carrier systems, user systems, or a combination of the two) there may be a tendency to shift functions between different parts of the system. For example, with low cost, small size, and high reliability, there may be future tradeoffs that suggest putting more func- tions in terminal equipment or changing the characteristics of terminal equipment in order to make savings elsewhere in the system. For many years, the trend in transmission technology has been toward larger and larger systems. In the long-haul transmission plant, each new system carries larger numbers of voice-band circuits or equivalent and at less cost per circuit mile. This trend seems certain to continue, using waveguides, perhaps within a decade, and still wider band systems, using optics in several decades. As now understood, these latter systems will likely use digital modulation techniques and will tend to promote more widespread use of digital facilities in the network feeding into those systems. NEW DEVELOPMENTS New· Telephones" The Bell System has indicated that the next generation of tele- phon~s will use active electronic devices to improve transmission quality and to help overcome some of the" technical limitations of loop characteristics.
- 59 - I t will also likely include tone ringing using tones in the voice band. When that telephone is used, customer equipment that is acoustically coupled to the telephone will have to be modified, and inductively coupled devices probably won't work at all. The new telephone is not expected to be in production for several years and will not be in wide- spread use for quite some time. It does, however, illustrate how new system tradeoffs by the carrier could impact on customer-owned equipment. New Data Terminals Very little has been said before the Panel about the character of future data terminal development. This is not surprising, considering the competition in this field. It seems safe to assume, however, that with the ability to interconnect, this will be an attractive field and new ideas may spring from a variety of sources. It also seems safe to assume that terminals will become increasingly sophisticated. In fact, future terminals will most likely be small "computers;' in that logic will be programmable by the user. In such cases, the terminal might be able to match changes in central offices by changes in terminal "software," if a standard interface has been established. The rate of innovation of data users will likely exceed that of the switched network with the largest and fastest-growing segment in the low and medium data rate areas. Digital TransmiSsion The telephone companies are now using large quantities of PCM carriers in their exchange trunking plant. The Bell System version is called Tl. A second system, T2, with more capacity and usable for short- and medium-length toll circuits is under development by Bell. This trend toward systems that carry signals in digital form seems likely to continue through larger long-haul systems. In particular, as noted earlier, the system using waveguide as the transmission medium will be a digital system. The prospect then is toward an increasing percentage of the DDD transmission plant being digital, leading eventually perhaps to a predominantly digital plant. Special digital, networks will likely appear much sooner. In an all-digital DDD long-distance plant, the loading and interference characteristics will be somewhat different from those in the present frequency division analog carrier systems. While one would expect that some of the details of the signal criteria might change, the changes are not likely to be large and, in any event, Will not occur for Some years to come. The availability .of a substantial amount of digital transmission will very likely result in new tariff offerings for digital data services. The Panel believes that protectivecfiteria for: those services should be consistent with the need to protect the specific fa~ilities used.
- 60 - New Switching,' Systems Themoye toward all~digital transmission in the'long-distance plant will lead also tothe'switching of signals in digital 'form. Such switching already exists in special networks like that of Western Union. Since such a switch looks essentially like another digital-transmission link, it would have no additional effect on the criteria for interconnection. In the local or exchange switching plant, the desire to go to solid- state electronic crosspoints'in the switching network has been thwarted somewhat because of the need'to pass the high voltages required for ringing the telephone. This is one example 6f a situation in which the system balance may change with integrated electronics. It may be that by putting a tone ringer and perhaps tone transmission of off;..hook/on-hook signals in the telephone, even at added expense, the resulting impact on the local office, which might then make extensive use of electronics in the switching path, would more than offSet the additional costs, if any, in the telephone. Such tradeoffs could, of course, have a significant impact on inter- connection and the interface between user-owned and carrier-owned' facilities. New Signaling Systems Currently, signaling in the DDD toll plant includes the use of a 2,600 Hz tone to indicate the busy or idle status of trunks. The tariff criteria are set up'to protect this 2,600 Hz signaling system. The future direction of signaling appears to be toward systems that are separate from the voice-band path. Hence, with such systems, the protection 'of 2,,600 Hz will no longer be necessary, but because of the very widespread use of the present system, it will be a significant factor for years to come. NEW SERVICES PICTUREPHONE The Bell System has conducted trials of a switched see-while~you talk service called PICTUREPHONE and has announced that a commercial service offering will be made in 1970. It has also advised'the Panel that inter- connection arrangements will be available at, or soon after, the introduc- tion of the service. This service will have, in addition to the normal audio pair in the loop, two pairs of wire for the video (one for each direction), with a transmission capability approaching 1 MHz. In the digital toll transmission plant, the voice and video will be multiplexed On a 6.4 MB/s bit stream.
- 61 - The system clearly has capability for high-speed data. Since the interconnection arrangements have not been-announced, the Panel has no basis on which to make detailed comments. One observation, however, can be made. The-:audio pair _is used for network-control signaling. The question of interconnection to the-two video pairs should then be 1imited~ in the technical sense, to-transmission and physical-protection criteria. DATA-PHONE 50 The Bell System has recently begun a 50 kilobit service called DATA-PHONE 50. N0 provisions have been made for interconnection and a few parties have suggested that interconnection be allowed. Although the Panel has not studied the characteristics of this service, it sees no technical reason why interconnection should not be permitted, consistent with the final decisions regarding interconnection for voice-band circuits. The use of this service will likely be primarily for computer-to-computer data transmission in load-leveling, national data banks, national network access for remote access users, etc. It will be desired to incorporate into computer communication hardware all automatic functions as opposed to manual functions most used today in voice-band data transmission. OTHER NEW SERVICES Other new services are likely to be offered in a way and form that can only be estimated at this time and which will depend not only on technical factors but also on actions by regulatory agencies. The offerings of the types recently proposed by MCI and the DATRAN service are examples. We have grouped such services under the general heading of customized common carriers. They will, in general, we believe, aim their offerings at the business community and perhaps especially at users of data services,where the rate of innovation will be high. In this connection, we observe that, from a technical point of view, many of them will depend on interconnection with the common carrier. POTENTIAL RESTRICTIONS TO lNNOVATION The need for more information to be exchanged between suppliers and users on the one hand and the carriers on the other was evident in the
- 62 - presentations before the Panel. Users suggested arrangements to the Panel that the Bell System had already provided for, but about which the user i: was unaware. Other cases came up in which the Bell System stated its intent i' to the Panel to provide for connecting arrangements, but that intent was unknown to suppliers and potential userS. Regardless of the procedures finally adopted for providing protection to the network,whether by interface boxes, by standards, or some other arrangement, some method should be worked out to allow for better interchange of information. Some of this will come naturally with time as all parties gain experience with interconnection, but the problem will remain to some degree. Further, it is evident to the Panel that many customer systems have or will have terminal points in independent companies, as well as Bell System territory, and better communication with the Bell System is not sufficient. This issue will be addressed further in Section 9. Questions of Timing Perhaps the most significant question of timing is that of the response time of carriers to new user requirements. Users have found that arrangements ,that are nominally available are not actually readily available in all Bell System companies when they want them and not available at all in some independent companies. This is inevitable in the initial stages of a change as significant as interconnection. Nevertheless, many people feel that the carriers will not be able to respond rapidly enough with new protective arrangements and that they could innovate faster if they included the protection in their terminals. They could then make it available on their equipment regardless of the location or company. A second question of timing has to do with the changes in the carriers' system that might make user equipment obsolete. The Bell System has expressed concern that if a user has just purchased new equipment, he will be reluctant to accept a change in the telephone system that would require substantial change in his equipment. Several users, especially those in fast-moving fields like computer communications and those who have historically interconnected with the carriers' private lines, suggest that the rate of innovation in the DDD network will pose no problem to them ⢠⢠Questions of Cost An important cost question from the suppliers point of view is the cost of a new connection arrangement for some new service or use he may want to offer. If he included the protection in his own design, he would be able to determine the total cost himself. If he must wait for a carrier tariff, the total cost of his serVice will be 1lncertain until the tariff is filed. â¢
- 63 - Another criticis~·ofthe·presentarrangement is that suppliers fear that the carriers can co~peteunfairly because,in.their opinion, the added protective box makes cusnomer-owned systems ~ore expensive and less reliable than co~parable carrier;"'ownedsystems. The Panel. recognizes that the question of actUal overall cost is a comp Lex one and has made no.evaluation of costs, including those of administration, etc., as they relate to different·approaehes~ Section 6 discusses s~e of the general cost tradeoff areas in greater detail. Restriction of Use Present connection arrangements are on a per line basis·and are tailored to a specific te~inating arrangement. Some users may want to use a line for one purpose at one time (e.g., during the day) and something else at another time (e.g., during the night). This argues, in their opinion, for an arrangement that is physically a part of the te~inal rather than the line. The Bell System has agreed that· this may be possible using carrier-owned protective devices integrated into the customer equipment. In a different vein, the carriers point to a potential use of characteristics of specific designs in the network that are incidental to its normal use and that may be different in subsequent generations of equipment. An in·terconnecting arzangeaent that takes advarrtage bf such arrangements may unknowingly be made obsolete by new designs. An example brought before the Panel involved the use of single tones produced by pressing two touch-tone buttons simultaneously. The new integrated circuit version of the touch~tone generator does not produce the single tone since that feature was only incidental to the original design. SUMMARY OF ISSUES AND CONCLUSIONS The carriers have said that widespread interconnection will tend to impede innovation in the network, because, among other things, users will tend to op,pose changes by the carriers that make the users' equipment obsolete or require it to be modified. They have also said that direct interconnection without carrier-owned interconnecting arrangement will further impede their innovation because it removes the carrier-controlled buffer with known characteristics between the network and the interconnected equipment. So~e users, especially the large ones·and those in fast=oving fields such as computer time-sharing, have expressed the opinion that, with the necessarily deliberate rate of innovation expected in the·network, there will be no major problems in keeping up with network innovation. They do
- 64 - not agree with the carriers' concerns regarding the need for a carrier- controlled' buffer. Some suppliers of equipment and services have ' expressed the op~n~on that the presence of.the carrier-owned interconnecting arrangement will impede innovation onthe'user side of the interface,.wh.are the goal is to optimize.theusers'.systemor use of equipment. Further, and perhaps more importantly, they question the ability of the carrier to respond rapidly enough to new situations in which new interconnection arrangements are required. While data on which to base tonclusions are limited, it is the opinion of the ~anel' that: 1. The advent of widespread interconnection itself, regardless of how it !s implemented and controlled, may indeed have some effect· on the rate of innova- tion by carriers, suppliers, and users. In.some cases, it may impede innovation in the network and, in other. cases, it could conceivably promote innovation because of the pressures of demand from users. It will certainly tend to increase the rate of innovation by suppliers and users. 2. The introduction of a certification program for direct interconnection will not significantly restrict carrier innovation if there is effective information exchange between-C;arriers, suppliers, and users. On the other hand, the suppliers and users will have more freedom to innovate. 3. balance, under the certification program, On innovation in the overall system by carriers and users of interconnected equipment is likely to increase.
