American History 1988
Chapter 175 - 169 Allies

Chapter 175: Chapter 169 Allies

The animosity between MCI and AT&T could almost be described as deep-seated hatred.

When MCI was established in 1963, its business was solely microwave radio relay stations, which had no relevance to telephone services.

But the telecommunications industry was closely linked, so as MCI grew, it began providing voice services to companies that couldn’t afford AT&T’s exorbitant fees.

Plainly put, MCI was poaching AT&T’s market. A few years later, with its strengthened capabilities, MCI began to apply to the Federal Communications Commission for suggested approvals, which are commonly known as licenses.

The FCC approved, but now someone was unhappy.

You’ve been stealthily snatching my market share, and that was just the scraps.

But now with a license, are you planning to compete with me openly?

So, as the market behemoth, AT&T carried on its usual style and sued MCI!

However, before the lawsuit with MCI could be resolved, AT&T got wrapped up in another lawsuit—the infamous "telephone card case."

That’s right, Dean’s first easy money came from using it as a legal recourse.

The "card case" brought a whole new change to the telephone industry: any privately-manufactured equipment that met interface standards could be connected to the telephone network.

This was a welcome surprise for MCI, which was already embroiled in litigation with AT&T.

So, going all in, MCI directly started manufacturing telecommunications equipment and boldly entered the telephone business.

Though AT&T continuously sought to appeal and tried hard to overturn the FCC’s ruling.

But the Supreme Court was already doubtful of AT&T’s monopoly, so the original verdict was ultimately upheld.

Thereafter, MCI’s development was unstoppable: it expanded into the television business and successfully went public in 1972.

Over the next decade, through the acquisition of a series of smaller companies, MCI’s operations gradually spread across North America.

Major corporations like Lockheed, IBM, and General Electric also had intensive business dealings with it.

But during this period, MCI’s legal battles with AT&T nearly never ceased, and their rivalry extended from their core businesses to all associated fields.

Around 1982, AT&T aired advertisements for its long-distance telephone services on television.

The gist was a son calling his mother, and when asked why, he said, "Just because I love you."

Since this isn’t generally a reason for making expensive long-distance calls, the mother in the advertisement was moved to tears.

Then came MCI’s savvy move—they invited the same actors from the AT&T ad to shoot their own version of a long-distance telephone commercial.

In MCI’s version, when the husband asks why his wife is crying, she responds, "I received the phone bill...".

At this point, an announcer’s voice chimes in, "You haven’t said too much, you’ve just paid too much. MCI: America’s most cost-effective long-distance telephone company."

Look at this tit-for-tat advertising, and you can see how fierce the competition was between these two telephone companies.

If this is not enough to illustrate the hostility between MCI and AT&T, then the antitrust breakup of AT&T in 1984 serves as the best evidence of their deep-seated feud.

Why was AT&T subjected to an antitrust investigation? Its own market size is certainly the fundamental reason.

But the direct trigger for the breakup of the Bell System was MCI! It was simultaneously suing AT&T and organizing political groups to lobby on Capitol Hill about AT&T’s monopolistic threats.

Then the Chicago jury ruled that AT&T had to pay MCI 1.8 billion US dollars in damages. Although the former managed to substantially reduce this compensation through appeal, the ruling still caused AT&T immense loss.

Additionally, with the Department of Justice zeroing in on antitrust investigations, AT&T had no choice but to break itself up in exchange for a settlement.

This is the story of the animosity spanning over two decades between MCI and AT&T. It could be said that from MCI’s inception, it was constantly facing oppression from AT&T.

And the main culprit behind AT&T’s self-mutilation was certainly related to MCI’s years of litigation and lobbying.

It is said that there are no permanent friends, only permanent interests.

But this may not apply to AT&T and MCI, as their grudge has lasted far too long.

After hearing a rough overview from Durell, Dean finally understood why Dave would say "When it comes to causing trouble for AT&T, MCI has always been very interested."

Since they are old adversaries and now Byte Company is also contending with AT&T, it and MCI are natural allies.

However, before joining forces against AT&T, Byte Company and MCI must first reach consensus on certain terms.

After all, Teams’ voice feature, when looking at the long term, will indeed impact the telephone business.

"Dean, the voice calling technology of Teams really is a stroke of genius," Dave said, setting down his glass and leaning slightly forward from his recliner.

"Although some of AT&T’s statements are exaggerated, they got one thing right. Teams will indeed have a profound impact on traditional telephone services in the future!"

"Dave," Dean said with a helpless shake of his head, "you know Teams only provides calling services within a company—it can’t even step out of a single company.

We have no intention of competing with traditional phone companies for this part of the market, and the landlines within a company are free as well, aren’t they?"

"No!" Dave looked at Dean and shook his head confidently, "You know I’m not talking about now."

Dean and Durell exchanged glances, then shrugged in unison, signaling Dave to continue.

Since everyone wants to cooperate, it’s best to resolve any potential disagreements in advance.

"As the inventor of Teams, I’m sure you, Dean, understand the prospects of internet telephony technology.

In terms of voice functions, it’s no different from the telephone. The reason it can’t leave a company now is due to hardware limitations."

At this point, Dave picked up a few empty glasses from the bar and spaced them apart.

"These represent independent companies, and right now, Teams is like the red wine in them."

Dave poured some red wine into several glasses, the rosy liquid swaying, clear and sparkling.

"When we make no changes, there is no connection between them. But if we connect these glasses with a straw, it would paint a completely different picture."

Twirling a straw in his hands, Dave smiled at Dean and Durell, "This straw represents the hardware infrastructure that limits Teams from extending its voice services, which you could also see as the traditional phone line."

So? Now, the situation is quite clear. As long as we connect the companies with lines, Teams can replace traditional telephony.

Ironically, the type of lines that can do this is called a network, and America’s largest fiber network, the NSF network, is starting to privatize."

Dave spread his hands innocently, "Look, you don’t have to do anything, just quietly wait.

Wait for the government or various companies to push for network construction on a large scale, and then Teams can naturally march into the long-distance voice calling service."

After his explanation, Dean picked up one of the glasses from the bar and took an unapologetic sip. "Alright, Dave, such a scenario could indeed exist.

But this is just the ideal situation. We could have other competitors, and federal government’s legislation on the network will continue to improve.

In the end, in terms of reliability, traditional telephony has a unique advantage."

"But it’s still a huge market, Dean." This was also the reason for Dave’s visit today, "MCI must ensure it won’t be affected by internet telephony technology in the future."

There it is, the truth of the matter. Compared with AT&T, which is striving to strangle Byte Company, MCI would rather have a share of the pie.

"OK, I think I get your point, Dave," Dean nodded in understanding, "Byte software doesn’t mind collaborating with MCI in this area."

"Good!" Dave was very satisfied with Dean’s attitude towards open collaboration, "I think there’s good complementary space between MCI and Byte Company."

"I believe that, but does MCI have any specific wishes about how to cooperate?" Since the other party came prepared, they must have specific ideas in mind.

"This is exactly what I want to talk about," Dave rolled up his sleeves, clearly ready to delve into details. "Dean, do you know that MCI has a fiber optic business?"

"If I remember correctly, MCI is on the list of contractors for the NSF network," Dean said, having kept close tabs on the privatization process of the NSF network and therefore investigating the National Science Foundation in detail.

"Dean, you are well-informed," Dave said with appreciative eyes, "MCI has contracted a considerable portion of the backbone construction of the NSF network.

Do you know what this means? This means we have the hardware infrastructure for internet voice calls, the network lines!"

Dean and Durell’s eyes brightened, "So you’re saying that by combining Teams with MCI’s hardware infrastructure, internet voice technology already has a commercial foundation?"

"Yeah! Exactly!" Dave stood up excitedly and paced the balcony, "Dean, John, MCI has conducted internal experiments.

Calls made through the network cost much less than those on traditional phone lines!"

With that, Dave took out several documents from the briefcase he brought and handed them to Dean and Durell.

These contained detailed parameter comparisons, not to mention voice quality for now—the operating cost was the focus.

Traditional telephony uses circuit switching to connect two phones through a series of switches, involving two essential pieces of hardware, the circuits and the switches.

Because of operational differences, traditional telephony requires more switching circuits, which means higher line costs.

Additionally, in office environments, traditional telephones also need to use multiple handsets to set up a dedicated private branch exchange (PBX) system.

TThe PBX system within a company, just in terms of the one-time hardware investment, could cost upwards of a hundred thousand US Dollars, not counting ongoing maintenance.

But internet telephony has no line costs, because the development of the internet does not require Byte Company to push.

The federal government and operators will foot the bill for this investment. Additionally, internet voice calls almost do not need other infrastructure or hardware; the only cost is the calling terminals.

"Dean, do you know how much lower the cost is for calls made through the internet compared to traditional phones?" Dave downed his glass of red wine, "40%~80%!"