The Partners
Without its partners, Long Lines wouldn't be in business.
For one thing, long distance service starts at the customer's telephone supplied
by an associated company. Then, too, providing good service across the nation and to telephones throughout the world would be impossible without development
of new devices and systems, by Bell Telephone Laboratories and the manufacture
of standard, high-quality equipment by Western Electric.
AT&T, The Parent
AT&T's responsibilities are twofold.
With its Long Lines Department, it is a public utility that interconnects the
territories of the associated companies for long distance and international
services.
With the general departments, it gives advice and assistance to the associated
companies (and to Long Lines as well) on matters ranging from marketing
new services to construction an service improvement programs.
Since the operations of Long Lines have already been covered at some length in
the preceding section, this chapter will describe briefly the AT&T headquarters
organization and the role of the general departments.
AT&T is the parent company of the Bell System. It owns stock in 23 telephone
operating companies in the U.S.--all or a majority of the stock in 21, a lesser
amount in two. (It also has some ownership--about two per cent in Bell Canada.)
It owns the Western Electric Company, the manufacturing and supply unit of the
Bell System. AT&T and Western Electric share ownership of the research
unit--Bell Telephone Laboratories.
AT&T and Western Electric also jointly own Bellcomm, Inc., a company established
in 1962 in response to a request from the National Aeronautics and Space
Administration. Bellcomm's job is to provide technical systems planning,
analysis and engineering for the Apollo project.
General direction of AT&T is in the hands of a board of directors (composed of
not fewer than fifteen members nor more than nineteen) who are elected by AT&T
share owners, at the annual meeting. The board has authority to designate an
executive committee and to elect the following officers: a chairman of the
board, a vice chairman, a president, executive vice presidents, vine presidents,
a secretary, a treasurer and a comptroller. The chairman of the board is the
chief executive officer of the company.
How It Began
AT&T was formed in New York in 1885 to build long distance lines to link
Bell telephone exchanges. It started out as a subsidiary of the American Bell
Telephone Company in Boston. The switch from subsidiary to parent was due to
somewhat complex matters of financing.
From 1887 to 1895, the rate of growth in Bell telephones continued fairly
constant at about 16,000 a year. After that, however, the rate rose sharply. New
expansion called for very large sums of money which American Bell wanted to
raise through the sale of telephone securities to investors.
In 1889 the Massachusetts legislature boosted American Bell's authorized
capitalization to $20,000,000 and in 1894 to $50,000,000. But with the 1894
increase, it required that the additional stock be offered to current
stockholders at a price to be set by the. Commissioner of Corporations rather
than at par value. Stock not sold in this manner would be sold at auction.
The management did not consider those conditions practical. Therefore, early in
1900 the American Bell Telephone Company conveyed its business and property to
AT&T, and the headquarters move to New York was completed in 1907.
Responsibility for long distance service was placed in the Long Distance Lines
Department of AT&T. The name was shortened to Long Lines in 1917.
Getting the Job Done Well
The extent of direction AT&T gives its subsidiaries is not determined by
legal criteria but by the practical consideration of getting the job done well.
Because it results in better service, responsibility for Bell System operations
is highly decentralized. Yet these operations are also highly coordinated. The
staff of the general departments at AT&T works closely with the operating
companies. It gives technical advice and offers recommended procedures.
The cornerstone of all relationships between AT&T and the associated companies
is the license contract. It permits the associated companies to use Bell patents
and provides for unified communications service through a combination of two
services one rendered by AT&T and the other by the associated companies.
It works this way: Each associated company does locally the work that can best
be done locally. The AT&T general departments concentrate on common problems for
example, devising new methods and equipment, that will benefit service wherever
the Bell System operates. Doing work centrally on common problems and making the
results available to all concerned is economical and efficient. It avoids
duplication of effort, prevents waste and speeds progress.
The term "license contract" goes back to the early days of the business when
local companies were first licensed to use Bell telephones. But for years the
contract has guaranteed that the operating companies will get the benefit of
research, financing, engineering and other important services rendered by the
parent company. To reimburse AT&T for these services, the companies pay one per
cent of their operating revenues.
The scope of work done by AT&T's specialists in the general departments is wide.
It covers the entire spectrum of the telephone business--from assistance on
matters relating to employment and the welfare of personnel to studies of future development of
telephone plant. Some activities revolve running AT&T itself; others are
concerned with direct assistance to the operating companies and Long Lines.
The executive department, which consists of the chairman of the board, the
president, the vice .chairman and the executive vice presidents, provides the
top-level administration of the Bell System. It is concerned with broad policies that govern
the System's progress.
Treasury receives and disburses company funds and assists the operating
companies in conducting their financial programs. It also has responsibility for
share owner relations.
The secretary's department is responsible for records management and corporate
secretarial matters. It keeps the minutes and records of share owner, meetings
as well as those of the board of directors, the executive committee and the Long
Lines Department Board, which has overall responsibility for Long Lines
operations.
The marketing and rate plans department studies customer needs for new
facilities and handles general advance planning for getting them into service.
It develops rates for new offerings, and it gives the operating units assistance
on overall sales and servicing work
A description of the work done by most of the other groups is implied in their
names--for example, legal, engineering, government communications, comptroller,
operations, personnel relations and information There are two regulatory
departments: one deals with the government on interstate communications, the
other with agencies that regulate intrastate business.
The Associated Companies
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The 23 associated companies have the Bell System's most direct, most
personal contact with the general public. They are the local telephone operating
units where service for the customer starts.
The local company supplies customers with their telephones. It does the billing
for all types of telephone calls--local, long distance and overseas. It deals
directly with customers in meeting service orders or in solving communications
problems. What's more, it acts as spokesman for the Bell System in its own
territory. So, to a great many people the telephone business means just one
thing--the local operating company.
The associated companies are vital partners. The service they give and their
relationship with customers are essential to the success of the overall
enterprise.
Unlike Long Lines, which reaches out across the nation and to countries
overseas, each associated company concentrates on a particular service territory
within the U.S. mainland. The basic obligation of each company is to see that
its customers have the best possible communications now and in the future.
Local Company Services
The associated companies furnish a wide variety of services some by themselves
and others jointly with Long Lines.
First is local exchange service. This links the telephones of customers in
individual communities.
Customers in these local exchanges make and receive long distance calls. Many of
these calls travel over the associated company's facilities. But those that
cross state boundaries and go from the territory of one company to another are
carried by Long Lines.
Within their own territories, the associated companies provide private line
services similar to those of Long Lines--for example, a telephone network
linking the main office of a company with its outlying plants, or lines that
transmit data from computer to computer at thousands of "bits" of information
per second. They also join with Long Lines to furnish certain interstate
services: carrying radio and television network programs to broadcasting
stations throughout the country, for example.
The Bell System operating companies evolved through natural consolidations and
divisions of earlier licensee and independent operating telephone companies.
Briefly, here is how it came about:
In the early days, telephone service was furnished through agencies licensed by
the American Bell Telephone Company in Boston. But with the expiration of Bell
patents in 1893 and 1894, a large number of independent telephone companies were
organized. Most were in communities that didn't have a Bell agency, although
some opened competing exchanges in the same cities.
This was awkward for customers who had to have a telephone from each competing
company if they wanted to be able to call all other customers. Therefore, many
of these exchanges merged. In some cases Bell bought the competing independent
In others, the independent bought out Bell. (About 2,000 independents now
operate approximately one-sixth of the nation's telephones.)
In 1911 AT&T, which by then had become the parent Bell company, began to
reorganize its operating companies into territorial units. Each associated
company became an autonomous whole, with its own local control and identity.
Today, the size and area of operation of the Bell companies differ markedly.
Geographically, the smallest company is the Chesapeake and Potomac Telephone
Company serving telephones in the 61 square miles of the District of Columbia.
The largest is Southwestern Bell Telephone Company, which operates in Arkansas,
Kansas, Missouri, Oklahoma, Texas and two counties of Illinois a service area of
more than 225,000 square miles.
The companies are organized to meet local needs. While organization varies
somewhat by company, there is an overall similarity.
Each company has its own corporate entity. At the top is a board of directors
composed of businessmen, educators and others familiar with the problems and
needs of the territory. Reporting to the board is the chief executive officer
(president or chairman of the board), who is responsible for the company's
operations.
Under the president are company officers heading a number of departments
comptroller, treasury, secretary, legal, personnel, public relations and revenue
requirements. There also is a vice president who heads the operational functions
of plant, traffic, commercial and engineering.
Many of the companies are divided into areas with an organizational structure
similar to the area setup in Long Lines. At the head of each area, responsible
to the vice president-operations, is a vice president-general manager, or
general manager. The heads of the area's plant, traffic, commercial and
engineering groups report to him. In some companies he also has a marketing
group and a general staff head who handles personnel, public relations and
public affairs in the area. As in Long Lines, the area accounting and legal
heads report directly to the officer in charge of their department at
headquarters but, of course, they work closely with other area groups.
Besides separating responsibilities between headquarters and areas, each
operating department delegates responsibility and authority-along vertical lines
from the top down to the local community level. That makes for greater
efficiency and a closer relationship with the public.
There are many differences between associated companies size, geographical areas
and service arrangements. But in one respect they are all alike: their business
is a community affair.
Each directs its energies toward meeting local conditions and needs. Each plans
and engineers an expansion program that will bring added value to the local
customer. Each must establish rate levels for services that will enable it to
meet the costs of doing business within a particular area.
Like Long Lines, the associated companies are subject to regulation. Forty-seven
state commissions (and city councils in Texas) regulate their activities and
measure their effectiveness in satisfying the communications demands of
customers.
That accountability to customers, to community and to regulatory bodies makes
the companies more than local dealers for a nationwide product or service. Since
they speak for the System to the customer--and for the customer to the
System-each company has a major voice in deciding what line of products and
services will be offered and how. Obviously, the associated companies play an
important part in charting the course of the Bell System.
The Role of Western Electric
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The Bell System's nationwide switched network is a delicately interlaced
arrangement of billions of individual components. These components must be of
high quality and they must work together faultlessly so that anyone can
communicate over the network with anyone else, anywhere, anytime.
That is where Western Electric comes in. As the Bell System's manufacturing and
supply unit, it is responsible for the quality and compatibility of equipment.
And here are the principal ways in which it fulfills its responsibility:
Each year it manufactures more than 50,000 different types of equipment,
including telephone instruments, switching equipment, carrier systems, cable and
teletypewriters.
Western's nationwide purchasing organization buys for itself, for Long Lines and
the associated companies the things it doesn't produce in its own factories:
everything from raw materials and paper to trucks and telephone poles.
Through systems equipment engineering, each of the innumerable components in the
Bell System network is made compatible with all others. An installation group of
trained men go anywhere in the country where their skills are needed to install
switching equipment in telephone central offices.
A nationwide chain of centers handles distribution and repair. Those centers
stock materials and supplies needed by Long Lines and the associated companies.
They also recondition service-worn telephone equipment. Equipment that is
scrapped goes to the Nassau Smelting and Refining Company, a Western Electric
subsidiary, which reclaims large quantities of valuable non-ferrous metals
chiefly copper, lead and zinc.
Western Electric has about 170,000 employees and is the largest single company
in the Bell System. Its total sales are in the neighborhood of $4 billion a
year. Nearly 85 per cent of its sales are to the Bell System. Twelve per cent or
so are to the U.S. government and the remainder to non-Bell and non-government
customers.
Western Joined System
Western Electric is older than the telephone. It began building telegraph
and electrical products in a Cleveland loft an 1869. The name then was In 1882
"Gray and Barton", after two of its founders.
In 1872, after moving to Chicago, it became the Western Electric Manufacturing
Company. With the invention of the telephone in 1876, it evolved as one of a
half-dozen firms manufacturing telephones.
By 1881 new telephone exchanges were opening up and experimentation was under
way on long distance transmission. However, the quality of service varied
markedly. And there was practically no attempt on the part of the different
telephone companies to standardize equipment and methods.
The American Bell Telephone Company (AT&T's predecessor) felt that for the
orderly development of the telephone business, there should be common standards
shared by the people who made telephone equipment and those who operated it.
Since Western had pioneered in manufacturing electrical equipment-and telephone
apparatus as well it was clearly qualified to manufacture Bell telephone
equipment. So, the Bell company acquired an interest in Western Electric and the
first manufacturing contract was signed in 1882.
Western Electric manufactures some items in quantity more than eight million
telephones a year and billions of feet of wire and cable. Others, however, are
produced in smaller numbers to perform highly specialized functions.
Whether the quantity is large or small, Western Electric's primary concern is
maintaining uniformly high quality. And, as the complexity of the network grows,
quality equipment for reliable performance and long life becomes increasingly
important.
Repeaters used in underseas telephone cable, for example, must be built to
perform without maintenance or repair for at least 20 years. Western makes every
component of specially selected materials and assembles the repeaters under
surgically clean conditions. Testing procedures are so elaborate that a computer
is used to keep track of the "life history" of each part.
Another example is a piece of equipment called a relay, millions of which are
used in telephone central offices. They are designed and built to last 40 years.
An ordinary telephone call involves the operation of about 1,200 relays. If just
one should fail, the call wouldn't go through.
In the U.S. today, there are well over 100 million telephones, all
interconnected. The network must be ready to provide any one of some 5 million
billion possible connections. That, of course, demands a high degree of
reliability.
While building quality into Bell equipment, Western keeps finding ways to keep
costs down and, in some cases, to make reductions that amount to savings of
millions of dollars each year. These efforts, directed at all phases of
Western's operations, contribute substantially to the Bell System's ability to
maintain reasonable rates.
The battle against costs involves both cost avoidance and cost reduction. Cost
avoidance applies to new products. The goal is to introduce them with the
greatest economy. That requires the help of the Bell Laboratories in efficient
and economical meshing of design, materials and the processes of production.
Cost reduction begins after the product goes into manufacture.
Cost avoidance and reduction stem from a variety of sources. They might come
from a new welding technique, or development of a new telephone wire. Other
kinds of innovations such as vertical storage facilities, automatic conveyor
equipment and increased use of computers also lead to lower costs.
Western's efforts to achieve the lowest possible costs also apply to the job of
purchasing supplies. It buys from more than 45,000 suppliers each year. It
trains a group of buying specialists who can concentrate their skills on various
kinds of products. The specialists save money, for example, by devising better
order techniques, stimulating competition by cultivating new sources, and
suggesting substitutions of materials or design changes.
To take full advantage of today's electronic components, the manufacturer must
translate them into hardware of satisfactory reliability at practical costs.
Thus, there is close collaboration between Western Electric and Bell
Laboratories. Their teamwork helps the Bell System meet the increasingly
stringent technical requirements of telephone equipment and the mounting
pressure for speed.
As part of its search for new and better ways of serving the Bell System,
Western Electric has an engineering research center near Princeton, N.J. From
this center have come economical methods of manufacturing extremely small,
complex components, such as transistors and thin film circuits. It was at this
center, too, that the first industrial application of the laser piercing diamond
dies for wire drawing was developed by Western Electric engineers.
A highly important Western Electric service is to provide the government with
engineering and other assistance in connection with communications networks for
defense and space activities. For example, Western Electric was prime contractor
for the Army's Nike Ajax and Nike Hercules missile systems.
Western also was prime contractor for the basic network of ground-tracking and
communications stations for the government's man-in-space program. Other
assignments have included the construction of the
DEW Line across
the Arctic, the White Alice communications network in Alaska, communications
network for the Ballistic Missile Early Warning System (BMEWS), and two private
line government telephone networks, Autovon and the Federal Telecommunications
System.
Through its subsidiary, the Sandia Corporation, Western Electric manages
laboratories on a non-profit basis for the Atomic Energy Commission-- in
Albuquerque, N.M., and Livermore, Calif. Those laboratories are engaged in
research and development in the ordnance phases of nuclear weapons. Sandia also
is responsible for investigating non-military applications of nuclear energy,
such as auxiliary power for spacecraft.
Western Electric's overall contribution as a partner in the Bell enterprise is
twofold.
First, it produces high quality, compatible equipment. That equipment, stocked
at strategic locations across the country, enables Long Lines and the associated
companies to give good service. And in case of catastrophe in any part of the
country, men and materials can be rushed from the nearest distribution house to
get service quickly back to normal.
Second, Western also concentrates on keeping its prices down. Long Lines and the
operating companies don't have to buy from Western. But the bulk of what they
need does come from Western Electric because they get more for their money. That
helps the operating units to provide service that is low in cost.
In both instances, it's the public that benefits.
Research At Bell Laboratories
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Bell Telephone Laboratories is one of the largest and most experienced
industrial research organizations in the world. Moreover, it is one of the Bell
System's best assurances that telephone users get economical, dependable and
constantly improving communications.
Many products of development at the Laboratories are visible to customers for
instance, different kinds of telephones and pay booths. Others are less visible
like the components in coaxial cable and microwave systems that make
communications service possible. And still others concern developments everyone
takes for granted but doesn't necessarily associate with the Bell System. Sound
motion pictures and television transmission, to cite two examples, came out of
Bell Laboratories.
To meet today's big challenge in research and development, Bell Laboratories
employs more than 15,900 people: scientists and engineers, technical assistants
and administrative staff.
Bell Labs has more people with advanced academic degrees than any other private
business in the world. Many degrees have been earned through the company's
graduate study programs in science and engineering, which are carried out in conjunction
with various universities.
The technical staff covers just about the entire spectrum of science and
engineering. It includes highly trained electrical engineers, physicists,
mathematicians, chemists, mechanical engineers, statisticians, and metallurgists
-
together with specialists in electronic computers, acoustics, psychology,
crystallography, and many other fields. The work leading to the creation of the
finest communications equipment and systems is complex and far-reaching. It
calls for a team effort by experts in almost every technical discipline.
Bell Laboratories work is channeled into four broad areas: research and
fundamental development, systems engineering, specific design and development,
and Business Information Systems (BIS). Another important task is in government
projects. Here, Bell Labs acts as a research and development subcontractor to
Western Electric.
RESEARCH:
The basic job here is to come up with new knowledge-extending the frontiers
of science, thinking and creating, discovering new principles and proposing new
theorems. The purpose of this search is to gain the knowledge and understanding
essential for developing new communications systems and facilities.
The search may provide new information on known phenomena, such as
superconductivity .... or discover something: entirely new, such as the
transistor effect. Research at Bell Laboratories is usually unscheduled and
unprogrammed but always in areas of interest to communications. And it is
accomplished in academic-like surroundings conducive to creative achievement.
SYSTEMS ENGINEERING:
People in systems engineering are responsible for the overall planning of
communication systems and the development projects needed to realize these
systems. They integrate the knowledge from the operating companies, Long Lines,
AT&T general departments and research and development to make sophisticated
studies, which outline broad objectives, technical plans, and economic and
reliability factors.
Systems engineers are not specialists in a single, narrow field. They must have
a thorough understanding of the entire telephone network, and they must be
familiar with the many facets of current research and development projects.
DEVELOPMENT AND DESIGN:
Here, the dreams, ideas and results of scientific inquiry are converted into
reality. This is the largest of the four groups, employing the talents of more
than two-thirds of the technical staff.
Development and design engineers produce working laboratory models and designs
for a new product or a new service or system with an eye on the requirements of
its manufacture at low cost. Western Electric is a partner in the undertaking
long before full production begins. Pre-production models are carefully tested
before the design is accepted.
BUSINESS INFORMATION SYSTEMS:
A relatively new concept in communications now being developed at Bell Labs,
BIS may change administrative operations of the Bell System more than any such
development in recent years. The goal is to enable Bell companies to manage the
flew of business information more effectively by combining the latest in
electronic data processing technology with modern communications facilities. BIS
will help the telephone operating companies do a better service job, because it
will further mechanize traditional methods of record keeping, information
handling and administrative procedures.
Bell Laboratories is made up of 17 laboratory locations of various sizes. Three
of its largest installations are in New Jersey at Murray Hill, Holmdel and
Whippany and a fourth is in Illinois.
Research and fundamental development are centered at the Murray Hill Laboratory,
which is also the site of the company's administrative headquarters. The Holmdel
Laboratory is devoted chiefly to development of communications equipment. Bell
Labs people at Whippany work almost exclusively on government projects. And in
Naperville, Ill., they handle the development of electronic switching systems
and equipment. In addition, Bell Laboratories groups work side by side with
Western Electric at seven plant locations; other groups work at the White Sands
Missile Range in New Mexico and Kwajalein Island in the Pacific to help carry
out testing programs for defense projects.
In Bell Laboratories search for new and better ways of communicating, there are
times when a project dies on the drawing board. But there are also times when
the search leads to a breakthrough as important as the transistor.
Invented at Bell Laboratories in 1948, the transistor revolutionized the
electronics industry by making possible reduced costs and increased component
reliability. Transistors are used just about everywhere in homes, banks,
automobiles and factories. In Long Lines, the transistor is a key component in
many kinds of equipment, from systems for switching long distance calls to
high-capacity ocean cables. It also is an essential element in providing
satellite communications.
Many other Bell Labs advances have benefited Long Lines operations and customer
service, including a steady stream of improvements in microwave and coaxial
cable systems.
Something now under study which holds great promise for the years ahead is the
laser. This is a system that will enable communications signals to be
transmitted over a beam of light. Bell Laboratories has been working on many
elements involved in laser communications, including methods to guide and
control the laser beam.
What will come in the future from Bell Labs is anybody's guess. Research leads
its scientists into many fields and down many paths from the plastics used for
telephone instruments and cables, to studies of the human voice.
One thing, however, is certain: the Bell System's customers will profit from the
continuing search at Bell Laboratories.
NEXT CHAPTER:
Looking Ahead
