The ripple effect of phone deregulation: competition is giving birth to a host of new technologies

Nation's Business, Feb, 1984 by Bob Gatty

The Ripple Effect of Phone Deregulation

JUST OVER a year ago, some of the small business customers of Executone Business Systems of Troy, Mich., were looking for an automated system to keep track of long distance calls for accounting and billing purposes.

"They couldn't stand the typical system price of $25,000,' says EBS President John S. Cosgrove. "They asked if we could come up with something better.'

Cosgrove and his people developed a way to hook up a low-cost personal computer to basic key telephones so that the computer would do this job.

That development led to others. Now a phone can serve as a remote terminal for a personal computer, making it possible for the customer to keep track of billable hours, parts and labor, and many other categories of information, just by keying the data in on the phone.

"The whole point was to make it a simple, low-cost method of inputting information,' says Cosgrove. His company offers a package that includes a Franklin 1000 personal computer, software, video screen, printer, stand and complete accessories, for about $6,000.

Computers and telephones are increasingly being merged, forming new devices that are revolutionizing business communications.

Products now on the market can transmit voice and data simultaneously and perform tasks that once would have required a staff of secretaries and a room full of equipment.

As the race continues to produce the most sophisticated equipment for voice and data transmission, decisions made in Washington are also having an important impact on our communications systems. The court-ordered breakup of American Telephone & Telegraph Company and actions by the Federal Communications Commission are profoundly affecting the communications marketplace.

Under the breakup, AT&T continues to provide most of the long distance service between states and is handling about half the toll calls within states. The 22 local Bell companies have been separated from AT&T and reorganized into seven larger regional phone companies. They handle local service and the balance of intrastate toll calls.

Western Electric Company, the manufacturing unit of AT&T, has been dissolved and its factories taken over by AT&T Technologies, Inc. In addition to manufacturing, that firm handles AT&T's development of equipment and services and its marketing activities.

THE OPPORTUNITY for companies other than AT&T to sell telephone equipment resulted from a 1968 FCC decision that non-AT&T phones could be used on Ma Bell's network. Since then, the telephone equipment industry has grown rapidly.

Annual revenues of the 550 members of the North American Telecommunications Association--manufacturers, suppliers and vendors of non-Bell telecommunications equipment--are expected to rise from $2.6 billion last year to $5 billion in 1987.

Many NATA members expect to sell equipment to the seven regional independent operating companies, which previously used Western Electric phones almost exclusively. One of the regionals, BellSouth Corporation, has said it will buy telecommunications equipment valued at about $200 million from several independent suppliers for marketing through its advanced systems divisions.

NATA President Edwin B. Spievack notes that hundreds of models of advanced phones with features like automatic dialing of frequently called numbers are available from retail telephone stores across the country at reasonable rates--some "disposable' models for as little as $10.

Competition among telecommunications manufacturers is extremely stiff, he says, and an ongoing price war could get worse.

The market is driving technology,' Spievack says, "as the distributor attempts to find something better than his competition. Nobody with any sense is trying to sell a telephone that simply gives you an outside line. More and more, we're selling our equipment as the interface between the telephone network and the computer.'

That is essentially what Executone is doing with its new system for small business, and it is what other firms are doing with systems designed for much larger companies.

THE HOTTEST ITEM on the market today, according to the marketing people at Telecom Plus International, Inc., of Long Island City, N.Y., is the NEAX 2400, manufactured by Nippon Electric Corporation and introduced last September. It will be another year, Spievack says, before other manufacturers are ready to market anything comparable.

Telecom Plus boasts that the 2400 is the only device available "that combines features of voice and data communications, electronic mail, teleconferencing, facsimile, store and forward, and voice messaging in a truly nonblocking system.'

What that means, says John Kondel, director of applications engineering at Telecom Plus, is that both voice and data messages can be sent simultaneously and that as many as 20,000 phones can be connected through the system and work at the same time. Previous state-of-the-art capacity, according to Kondel, allowed for far fewer phones in use before volume caused delays.