Anthony J. Pennings, PhD

WRITINGS ON DIGITAL STRATEGIES, ICT ECONOMICS, AND GLOBAL COMMUNICATIONS

The FCC Helps Business Go “Online”

Posted on | July 16, 2015 | No Comments

The use of computers was starting to become an important tool for businesses by the mid-1960s and with the introduction of timesharing, a communications component was adding value and enhancing productivity. Factories began using data processing to control chemical flows and machine tools and warehouses used them to monitor inventories. Bank branch offices started to use minicomputers to process the day’s transactions and transmit the information to the bank headquarters. These new applications of computer communications were highly valued by the financial industries that were about to apply them in globally revolutionary ways.

The term “online” emerged as a way to avoid the FCC’s purview to regulate all communications.[1] While the nascent computer industry was experimenting with data transfer over telephone lines, it was coming to the attention of the FCC whose responsibility according to the Communications Act of 1934 was to regulate “all communication by air or wire.” The agency initiated a series of “Computer Inquiries” to determine what, if any, stance it should take regarding data communications.[2]

The First Computer Inquiry initiated during the 1960s investigated whether data communications should be deregulated. But just as important, it provided an early voice for the computer users to initiate change in the telecommunications network structure. It was after all, a time in which the only thing attached to the telephone network was a black rotary phone sanctioned by the Bell System. Computer One’s verdict in the early 1970s was to grant more power to corporate users to design and deploy a data communications infrastructure that would best suit their needs. The FCC subsequently created a distinction between unregulated computer processing and regulated telecommunications.

Such a differentiation did not ensure however, the successful growth and change of network services for eager corporate computer users. Computer Two was initiated in 1976 amidst a widespread adoption of computer technologies by the Fortune 500. But they needed to use the basic telecommunications infrastructure that had been largely built by AT&T. Although AT&T’s Bell Labs had invented the transistor and connected SAGE’s radars over long distances to their central computers, they were not moving fast enough for corporate users. The Bell telephone network was preoccupied with offering universal telephone service and did not see connecting large mainframes as a major market, at first.

Their hesitancy was also the result of previous regulation. The Consent Decree of 1956 had restricted AT&T from entering the computer business as well as engaging in any international activities. The FCC’s decision at the conclusion of the Second Computer Inquiry allowed AT&T to move into the data communications area through an unregulated subsidiary. However, the ultimate fate of domestic data communications would require the resolution of a 1974 antitrust suit against AT&T. In 1982, the Justice Department’s Consent Decree settled against the domestic blue chip monopoly and broke up the company. This action had a dramatic influence on the shaping of data communications and the Internet until the Telecommunications Act of 1996.

In retrospect, Computer One and Computer Two determined that the FCC would continue to work in the interests of the corporate users and the development of data communications, even if that meant ruling against the dominant communications carrier.

Notes

[1] See Schiller, D. (1982) Telematics and Government. Norwood, NJ: Ablex Publishing Corporation for background on the word “online”. p. 22.
[2] The Communications Act of 1934 was one of the last of the New Deal reforms.

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AnthonybwAnthony J. Pennings, PhD is the Professor of Global Media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. He also taught at Victoria University in Wellington, New Zealand and was a Fellow at the East-West Center in Honolulu, Hawaii during the 1990s.

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    Professor and Associate Chair at State University of New York (SUNY) Korea. Recently taught at Hannam University in Daejeon, South Korea. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, media economics, and strategic communications.

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