|
DIGITAL BYPASS REPORT February 1985 *************** FRONT PAGE NEWS *************** IXCs, LOCAL TELCOS SUGGEST PLANS FOR 'EXPERIMENTAL' DISCOUNT SURCHARGE Interexchange carriers (IXCs) and local exchange players have filed comments with the FCC offering ideas on how the Joint Board's recommendation for a uniform surcharge of up to 35 cents on subscriber line charges can be administered, initially under experimental tariff conditions. The Common Carrier Bureau's order for comments last December was prompted by the Federal-State Joint Board's proposal that optional alternative tariffs be permitted to recover interstate carrier common line costs, as a partial approach to alleviate the threat of bypass (DBR, January, p. l). In concert with the Joint Board and interested state commissions, the FCC has authorized carriers to file experimental tariffs "to explore more comprehensive alternative tariff mechanisms for recovering the interstate allocation of NTS [non-traffic sensitive] costs," the commission said. The Joint Board's initial plan called for an "optional tariff," developed by the local exchange company, that would provide discounts to high-volume users to discourage their use of bypass facilities. In turn, the exchange carrier would recoup the shortfall in its interstate revenues caused by the discount through the 35-cent surcharge. The alternative tariffs would be submitted to state regulatory commissions for initial review and approval. If a state commission objects to a tariff or fails to act within 60 days of filing, the Joint Board could override the state's action. AT&T SAYS DISCOUNT CREDITS SHOULD GO DIRECTLY TO IXCs Commenting on the FCC's modified experimental tariff plan, AT&T argued that the optional tariffs must be structured to provide credits, based on carrier common line payments, directly to the IXCs and not to the local telcos. The savings from these credits, AT&T said, would be reflected in the IXC rates to discourage bypass by high-volume toll users. "Because the threat of uneconomic bypass arises from high toll charges paid by high-volume users, it can be combatted only by giving IXCs the means to structure toll rates..." AT&T said. Allowing the local telcos to provide direct payments or billing credits to customers, based on a customer's combined interstate toll charges paid to IXCs, would be "administratively and technically impractical," AT&T said. Such an approach, AT&T added, would also place the IXCs at a "severe disadvantage" in pricing their services because they would not know the amount of credit received by their customers on the basis of volumes carried by other IXCs, and so would not know the "effective" or competitive price of service to customers. "Direct credits from the LECs [local exchange carriers] to customers of IXCs would not sufficiently reduce the potential for bypass by the IXCs themselves because the IXCs would receive no relief from their uneconomic access cost burdens," AT&T said. As to a formula for calculating the optional tariff credits used to reduce the IXC common line payments, AT&T suggested that discount credits be distributed among IXCs in proportion to the percentage of total carrier common line charges paid by each IXC in the area covered by the tariffs. And AT&T argued that amounts paid for both originating and terminating access should be included in calculating the credits. WHILE USTA, OTHERS CALL FOR MORE LOCAL EXCHANGE CONTROL The United States Telephone Association urged more flexibility in establishing guidelines for implementing experimental, alternative tariffs. The USTA filed comments jointly with the National Telephone Cooperative Association (NTCA), the National Rural Telecom Association, and the Organization for the Protection and Advancement of Small Telephone Companies. In support of local exchange companies, the group suggested that conditions for managing discount credits be controlled by the local telcos, and warned that the current 35-cent surcharge level would not produce the revenue needed to cover the discounts of the alternative tariffs. Alternative tariffs, the group said, should provide the exchange carrier with the option of giving discounts to the interexchange carrier or giving credit to the end user. "We support the end-user credit option to enable the exchange carrier to enhance its own customer relations by identifying the credit with the customer's use of the exchange carrier network, rather than creating customer perception of the reduction in his toll bill as resulting solely from the efforts of the interexchange carrier," the group said. The group also suggested that discounts or credits should be limited to customer usage on the switched network, with the qualifying level of customer usage being the total switched network use by the customer on all of his lines. Concerning the 35-cent monthly surcharge, the group expressed concern that such a plan would be "administratively difficult and costly," suggesting that revenues produced from the surcharge "would have to be spread so thin as to be of little benefit to specific customers." The exchange carriers, according to the joint commenters, would favor a higher initial subscriber line charge in the effort to further deload toll costs and minimize bypass. "Implementation of the surcharge plan and evaluation of its results will clearly demonstrate the need for different approaches or availability of larger sums to cope with the bypass problem," the group said. *** FCC *** GRAPHIC SCANNING READY TO PART WITH DTS, CELLULAR INTERESTS Graphic Scanning Corp. is preparing to relinquish its, and its subsidiaries', interests in digital termination service (DTS) activity, as it makes a "voluntary" move to sell its assets and generate cash for stockholders, Graphic official Jonathan Dodge told DIGITAL BYPASS REPORT. Graphic and its subsidiaries currently have some 30 applications pending for DTS licenses. In a related move, Graphic last month also began to unload some of its cellular radio interests. Company officials maintain this action is unrelated to an initial decision by FCC Administrative Law Judge Thomas Fitzpatrick that said the firm indirectly controlled and was "the real party of interest" for some 700 low-band paging applications filed by 4 separate applicants. The company said it had signed agreements to sell its cellular radio telephone partnership interests in 3 Connecticut markets--Hartford, New Haven and Bridgeport, along with systems in Los Angeles and New York. Graphic subsidiaries have also agreed to sell their interests in cellular properties in Tulsa, Okla., and Houston, with the eventual goal of selling off all cellular assets, Dodge told us. WHILE FCC SAYS PAGING DECISION DOES NOT AFFECT PENDING APPLICATIONS Following closely the initial decision of FCC Administrative Law Judge Fitzpatrick, the FCC and Graphic Scanning Corp. were busy last month clarifying publicly that the matter of Graphic's relationship with A.S.D. Answer Service and 3 other firms does "not directly jeopardize" other licenses and applications pending from Graphic. Reports in the press, the FCC stated, "have conveyed the erroneous impression that the initial decision has the effect of placing pending applications and authorizations of Graphic Scanning Corp. and its subsidiaries at risk." The commission said that an initial decision does not trigger any action regarding licenses or applications of Graphic or its subsidiaries, and no decision has been made regarding those licenses or applications. Fitzpatrick's initial ruling (CC Docket Nos. 82-582-590, Jan. 9) agreed with the commission's Separated Trial Staff finding that Graphic was the controlling interest behind the paging applications filed by A.S.D. Answer Service Inc., B.W. Communications Systems Inc., P.A.L. Communications Systems Inc., and Vinyard Communications Inc. Graphic also announced last month that it would ask the commission to overrule the initial decision concerning A.S.D. and the other 3 firms. The company said the ruling would have "no material impact" on the decision to go ahead with its "asset distribution program." CITICORP PRIVATE CARRIER REQUEST AWAITS FCC DECISION ON CHANNEL PLAN A Citibank application for private carrier network service is presently on hold with the FCC, as the commission reconsiders its final channeling plan for allocating frequency to private interests looking to resell capacity for voice and data transmission. Citibank subsidiary Citicorp Digital Exchange Inc. (CDE) was blocked from offering similar services last November, when the commission dismissed its DTS applications on the grounds that the firm is prohibited from offering such carrier services under the Bank Holding Company Act (DBR, December l984, p. 3). The bank apparently moved to avoid a potentially time-consuming challenge of the CDE decision in U.S. Circuit Court, applying directly for common carrier allocation. Proposing to offer private carrier, extended network service in 29 U.S. cities, Citibank plans to offer interconnections of digital PBXs to high-speed lines for voice and data, linking of company and independent databases with Citicorp customers, and teleconferencing between Citicorp locations. Meanwhile, the FCC has received about 600 applications for the same frequency--l7.7-l9.7 GHz--where Citibank has applied for specific channels. The commission only recently has indicated it is leaning toward a lottery plan to be in the public notice stage within the next 2 months. ****** TELCOS ****** AT&T OFFERS UP NEW PRIVATE-LINE TARIFFS With an eye toward the FCC's rescheduled special access tariff date of Feb. l5, AT&T has asked the commission to approve a new rate plan for its interstate private-line tariffs to wipe out the artificial subsidies of local access costs historically contained in AT&T's end-to-end, dedicated services prices. Although AT&T maintains it would be reducing prices for its dedicated long-distance facilities by an average of 2l%, the overall effect of the new tariffs will result in a price increase averaging 8.6% for end-to-end services. The move goes along with the company's restructuring its pricing in line with costs, passing along the higher access costs from the local telcos to its private-line customers by increasing their rates. AT&T said the proposed rates in the new tariffs would produce nearly $264 million in additional revenue needed to cover its costs of providing end-to-end service and access charges paid to local telcos. And the new rates, AT&T said, would raise its earnings on private-line services to the authorized level of l2.75%. AT&T's proposed tariff package would replace 6 existing tariffs. The new tariffs define and establish rates for intercity channels between AT&T locations in distant cities, connections to switching or customer-controlled-routing functions that AT&T provides at its locations, and local access channels provided by local telcos or other vendors that connect customers to AT&T locations. In the filing, AT&T also asked the FCC to allow 3 new private-line tariffs to take effect on Feb. l5, when the local telcos' special access charges are to go into effect. Rates for AT&T long-distance, AT&T international long-distance, AT&T WATS and AT&T 800 service are not affected by the tariff proposal. AT&T did not specify new rates in the filing last month, explaining that it is still evaluating its local-access costs based on the local telephone companies' proposed tariffs of Dec. 3, l984. The firm said it expects to file full details of its tariffs after the FCC rules on the application that it waive the normal 45-day period for considering new tariffs. TARIFFS WILL PERMIT SERVICE, COST FLEXIBILITY, AT&T SAYS The structure of the new tariffs would give customers more options for configuring their private lines by defining new categories of connections available between distant locations, AT&T said. Under current pricing, revenues from AT&T's dedicated long-distance facilities subsidize portions of the costs of the local access between AT&T locations and customers' locations. The new tariffs would eliminate this subsidy by defining and establishing rates for each portion of end-to-end private lines, the firm said. Under the proposed tariffs, AT&T customers could continue to obtain end-to-end communications services from AT&T, and would also have the option of purchasing the local access portions of their private lines from their local telephone companies, or from other vendors. The "customer control" functions will also allow users of certain AT&T services to control the routing of data or voice traffic on their private networks, according to AT&T. By defining more clearly the way costs are incurred, the company said the structure of the new tariffs will allow AT&T to reduce prices for its dedicated long-distance facilities. The structure will also enable AT&T to pass along to users more precise costs of access supplied by the local companies, the firm said. AT&T first proposed revising its private-line tariffs in October l983. The FCC rejected those filings because rates proposed at that time were based on estimates of how much AT&T would have to pay the local telephone companies in access charges for connecting private lines to customer locations. AT&T-C LOOKS TO DIRECT CONNECTIONS FOR CELLULAR SERVICE AT&T Communications is reportedly looking at alternative connections to route cellular carriers' long-distance calls directly from its network to customers. By avoiding the local telephone exchange for cellular carrier connections, such a move by AT&T could in effect create a form of service bypass. Under the alternate routing plan, AT&T could route cellular customers via private lines leased from the local telcos, thereby avoiding the usage-sensitive switched access charges now paid to telcos for use of their local switched network. Essentially, cellular carrier traffic would be covered under the new FCC private-line tariffs, currently pending at the commission. At the same time, AT&T-C would pay the lower, private-line access fees. With the AT&T-C direct connection arrangement, cellular carriers would no longer be required to lease private lines themselves for long-distance calls, and AT&T-C could bill cellular users directly, rather than the local telco. The question of just how much bypass of the local telephone exchange the cellular industry could generate is uncertain. Currently, existing cellular services use their own cellular switches along with the local telco's switch to connect customers with the network. Cellular long-distance traffic is currently routed to AT&T-C after being routed through these switches. CELLULAR PLAN COULD OFFER BILLING, REVENUE GAINS Such a move by AT&T could open the cellular market to the possibility of consolidated access and billing for customers, further eroding the local telcos' revenues from access charges, and underlining the service bypass factor. But the cost savings to cellular carriers is an unproven part of the AT&T-C scenario--as cellular firms are currently exempted from access charge fees on long-distance connections anyway--although there has been talk of imposing some charge on the industry for provision of its intra-LATA services. For the cellular firms, the incentive could be in billing consolidation, from which they could derive additional revenue since they already handle billing for AT&T on customer charges. And they could, in effect, take over the charges currently handled by the local telcos. And AT&T is not concerned that the addition of cellular carriers to its list of private-line customers would add to the firm's order backlog for end-to-end service. Spokesman Jim Byrnes told us the cellular connections would not add to the decreasing backlog situation, given the nature of the private-line connection. AT&T, he said, would be dealing with one line and one party--the local telco--for service to the cellular carriers in the area, as opposed to arranging multiple lines for many customers in one area. AND LONG-TERM PLAN CALLS FOR ENHANCED FUNCTIONS AT&T-C Manager for Market Development Keith Lietzke told us company officials would be looking down the road toward "improved functionality" for its cellular service connections, focusing on T-l type transmission in an integrated services digital network (ISDN) environment. For the near term, AT&T hopes to have its cellular routing service in operation sometime during the first half of l985, Leitzke said. He also agreed that the resulting revenue increases from the consolidated billing services would be an adequate attraction for the carriers, while quality of service would be important as AT&T upgrades its cellular lines for data and other "paging-like" services. Meanwhile, Lietzke added, the regional holding companies (RHCs) have been "something of a political problem," expressing their concern that cellular routing constitutes a form of service bypass that would grab additonal revenues away from their Bell operating companies. Lietzke disagreed on the matter of bypass, arguing that the cellular proposal includes service with wireline--RHC separate subsidiaries--as well as non-wireline independent carriers. ILLINOIS BELL'S NOVALINK IS IN SERVICE Illinois Bell's Novalink fiber optic-based digital service went on line last month in downtown Chicago, providing point-to-point data connections for business users in the local telco's downtown optical fiber loop. The Novalink service is providing connections for high-speed data, voice and video transmissions at speeds of up to 45 Mbps. The service is currently being marketed to medium and large-sized business customers, according to Illinois Bell Product Manager Charles Diddia. Plans call for the service to be expanded to include additional sections of the Chicago metropolitan area. (Illinois Bell, Floor 30B, 225 Randolph St., Chicago, IL 60606, 3l2/727-296l.) OHIO BELL TO INSTALL FIBER ROUTE FOR MCI Ohio Bell has contracted with MCI Communications Corp. to install a fiber optic transmission route for the interexchange carrier. Set for completion in mid-l985, the new link will provide MCI with additional long-distance call transport capabilities for its customers in the Cleveland area. This is the first such venture for Ohio Bell and for the local telco's regional holding company Ameritech, involving the marketing of fiber optic services to an independent carrier. Ohio Bell began installing the system last December and expects to have the fiber route ready sometime in June. The link will run just over l5 miles from MCI's downtown Cleveland switching facility to MCI's switching facility in the Cleveland suburb of North Royalton. Under terms of the deal, MCI will have exclusive use of the fiber optic cable transmission route for l0 years, with optional additional periods. And MCI will be responsible for maintaining the associated electronics and switching systems while Ohio Bell will own and maintain the cable. BELLSOUTH SIGNS WITH PARADYNE BellSouth Advanced Systems Inc., the BellSouth customer premises equipment subsidiary, has signed a 3-year contract with Paradyne Corp. for distribution of the latter's intelligent multiplexers and modems. BellSouth will distribute several Paradyne modem products, including its 2.4, 4.8 and 9.6 Kbps units and the MP-l4.4, with l4.4 Mbps capability. (Paradyne Corp., Largo, FL 33540, 8l3/530-2244.) OCCS **** U.S. TELECOM CONSOLIDATES SERVICES United Telecommunications Inc. late last month announced the consolidation of its long-distance voice, video and data communications business into a single marketing entity called U.S. Telecom. Consolidation of the business identities by the $2.8 billion Kansas City-based holding company includes United Telecom Communications Inc. (UTCI)--U.S. Telecom's predecessor company--U.S. Telephone Inc., Isacomm Inc., and Uninet Inc. United Telecom Chairman Paul Henson said that U.S. Telecom's voice and data transmission businesses represent "a second major business thrust" for United Telecom. Presently, $2.l billion of United Telecom's revenues come from its United Telephone system, providing local telephone service to customers in l9 states. "Our local exchange service is a mature business. To continue to grow, we have to develop a new base of business serving other segments of the telecommunications market," Henson said. The firm is focusing much of its growth strategy on the construction of a $2 billion nationwide, digital fiber optic network. The system will eventually carry the traffic of all the company's business units, and provide voice, data and video transmission services to U.S. Telecom customers. "We believe our broad range of products, coupled with 23,000 miles of network, will allow us to move quickly into a prominent position in the inter-city telecommunications industry," Henson said. Construction of the network began last year and is set for completion sometime in l987, according to U.S. Telecom President William Esrey. Indeed, the consolidation of the United Telecom units coupled with the fiber network falls in line with the firm's move to reach both the local and long-haul voice and data markets for business and residential customers. "As business and residential users demand an increasingly varied and sophisticated range of telecommunications services, they will seek a single vendor that can supply and interconnect all of the services they need," Esrey said. Under the plan, all 4 business units will assume the U.S. Telecom name for identification and marketing activities. Meanwhile, U.S. Telecom will assume management responsibility for the other 3 units. Isacomm will continue to market voice, videoconferencing and shared tenant services to commercial and residential subscribers. Uninet will continue to offer enhanced data transmission services. And U.S. Telephone, acquired last June, will maintain its long-distance services. The organizational structure will continue as it has under the former UTCI format, with Esrey serving as president of U.S. Telecom, Richard Smith as president of Isacomm, Thomas Pardun as president of U.S. Telephone, and C. Thomas Taylor as president of Uninet. RCA GLOBCOM PUMPS $6 MILLION INTO PAGEAMERICA RCA Global Communications has made a $6 million equity investment in PageAmerica Group Inc., giving RCA Globcom approximately l5% of the outstanding equity securities of PageAmerica. Under the deal, if RCA makes a further investment in PageAmerica of at least $4 million by the end of l985, it also has rights to purchase additional shares from PageAmerica and from certain major shareholders at prices above the current market value, allowing RCA to obtain a majority interest in PageAmerica. RCA has until l989 to decide whether to invest a larger stake in PageAmerica and the paging industry. "We see radio paging as a $4 billion-plus industry within l0 years with network-driven, value-added paging as the major growth sector," RCA Globcom President Valerian Podmolik said. RCA Globcom and PageAmerica currently operate a joint venture called Radio PageAmerica. Its network links data communications and telex with radio paging service, expanding the paging application for a variety of business customers between the 2 firms. The RCA/PageAmerica joint strategy "plays to the strengths already in place at RCA," Podmolik said. The first network pagers for the joint service have been provided to Risk Arbitrage Monitor. The firm plans to send data codes to its Arbitrage trading clients' display pagers, giving them up-to-date information. (RCA Global Communications, 212/806-7736.) GTE TELENET EXPANDS DATA NETWORK GTE Telenet last month announced expanded service of its Telenet public data network, offering asynchronous service to 20 new cities, along with upgrades of its existing facilities in l5 other cities to provide full X.25 synchronous services. New synchronous customers can begin service this month through GTE's interim Dedicated Access Facility (DAF). The DAF is a synchronous direct connection between host computer systems and the Telenet network utilizing the X.25 protocol standard. GTE's interim DAF is providing dial-up service until a planned permanent DAF system is installed this year (DBR, November l984, p. 8). The Telenet system was to provide local dial-up access from 373 U.S. cities, and to networks in 54 foreign countries, as the last of the total 35 cities were set to come on-line last month, GTE said. (GTE Telenet Communications Corp., 8229 Boone Blvd., Vienna, VA 22l80, 703/442-l934.) ITT CONSORTIUM TO BUILD WEST GERMAN NETWORK A consortium of companies, including ITT Corp.'s German subsidiary--Standard Elektrik Lorenz (SEL), has received an order from the West German Air force to build an all-digital communications network. The network will be designed with telecommunications equipment and components from all members of the consortium, which also includes Siemens, and a division of the Dutch Philips electronics firm. The ITT portion of the network contract is worth $33 million. The German air force will use the system to update current communications channels, allowing for simultaneous transmission of voice, data and images. The network upgrade also calls for provision of services during emergencies and traffic overload. The new system, which will include digital switching equipment from ITT/SEL, presently consists of "several dozen" private telephone exchanges, according to ITT. (ITT Communica- tions Services Inc., l00 Plaza Drive, Secaucus, NJ 07096, 20l/330-5452.) TRIBORO ACQUIRES NORAMCO Triboro Communications Inc. announced the acquisition last month of the capital stock and New York City metropolitan area telecommunications operations of the North American Communications Corp. (NORAMCO), from its parent Tel-Plus Communications. Under the $2.l million deal, NORAMCO's services will be performed by Triboro's wholly owned subsidiary, Telecom Plus of New York City Inc. NORAMCO's communications operations include over 500 private telephone systems, including major customers such as Hazeltine and Bear, Stearns & Co. Triboro Communications is a 93% owned subsidiary also of Tel-Plus Communications. Tel-Plus in turn is an 80% owned unit of Telecom Plus International. (Triboro Communications, 2l2/689-l000.) ****** TRENDS ****** EMG STUDY SEES 'CARRIER' BYPASS EMERGING OPPORTUNITY FOR IXCs An Eastern Management Group (EMG) study--North American Transmission Market l985-l984--predicts substantial growth in bypass technologies and services among the Fortune 500, utilities, service industries and universities. The report also projects that fiber optic technology and carrier bypass will emerge rapidly as strong factors in the bypass industry. The EMG study says the amount of bypass will move from 3l% in l984 to 44% in l987 for the "Fortune-type" company; service industries' use will rise from 9% to 24% during the same period; utilities' current 60% bypass figure will rise to 70%; and universities will "explode" from l6% to 6l% during that l984-87 span. "The bypasser, whether it is the inter-exchange carrier, the end-user or any third party, can offer discounts of 30-50% over the anticipated local operating company's special access rates and still make a substantial return on investment," EMG said. The prospects for interexchange carriers (IXCs) and carrier bypass--direct connections between the customer and the IXC--also look promising, EMG said. Competition to provide low-cost, end-to-end service will put "considerable pressure" on local operating companies to offer competitive switched and special access rates. "If these rates are not competitive with alternative technologies, carrier bypass will be the only course of action," EMG said. MCI stated in a survey for the report, EMG said, that "it would not hesitate to avoid a BOC, whenever permissible and cost-effective for MCI. EMG quoted AT&T as saying if large customers approach them for direct connections, "they are willing to talk." The EMG study is also high on fiber optic technology as a key bypass component. Using fiber, "a strong business case" can be made for an "entrepreneur" offering carrier bypass service in high-concentration business/urban areas. (The Eastern Management Group, 4 Century Drive, Parsippany, NJ 07054, 201/267-3700.) FCC OFFICIAL CALLS INTRALATA COMPETITION 'INEVITABLE' Opening up intraLATA (local access and transport areas) competition is "inevitable," according to an FCC official, but the timing of such deregulation, as well as the extent of competitive service offerings, is a matter of debate. The acting chief of policy and program planning at the FCC's Common Carrier Bureau, Thomas Sugrue, told attendees at the Communications Networks 1985 conference here in Washington last month that intraLATA service will be "completely deregulated sometime," but noted that opinions at the commission on the proper timing of such deregulation vary greatly. Sugrue said he wouldn't venture a guess on when such restrictions on intraLATA service--now provided primarily by local telephone operating companies on a monopoly basis--might be lifted. "It could be 4 weeks, 4 months, 4 years, 4 centuries. Commissioners [Henry] Rivera and [Dennis] Patrick say it won't be in 4 weeks, though." Sugrue did say that intraLATA competiton eventually will benefit the public interest by pushing prices of services toward cost. At a panel discussion at Comnet on accessing the local exchange, Lawrence Garfinkel, vice president of marketing services at AT&T Communications, urged that AT&T should not be restricted from offering intraLATA services, as it is now. In a later interview with DIGITAL BYPASS REPORT, Garfinkel said AT&T "has no propensity to bypass," but is instead pressing local operators to deliver the types of services necessary to complement sophisticated interexchange services. "Services to be offered by the intraLATA carriers must be compatible with the interLATA carriers," he told us. Garfinkel said it would be more sound financially to allow local telcos to handle local traffic. "When you look at the possibility of building private local service, you must face the financial realities. If we can get the complete services from the intraLATAs, why would we want to bypass?" Nonetheless, Garfinkel noted that there is already intraLATA competition, citing the New York Teleport project, and said it is unrealistic to say intraLATA service will forever be a monopoly business. To do so "is not recognizing technological and economic realities," he said. William English, senior vice president for legal and governmental affairs for Satellite Business Systems, also urged local operating companies to offer more sophisticated services. WHILE BELLCORE DISCUSSES ITS PLANS FOR THE FUTURE Seemingly in anticipation of warnings to the BOCs by interexchange providers about the need to provide sophisticated digital services, Bell Communications Research, the research labs jointly owned by the 7 regional Bell holding companies, earlier gave an overview of its efforts in the integrated services digital network (ISDN) arena. James Ehlinger, division manager of data services planning at BellCore, gave a clear indication that BellCore will support CCITT standards for ISDN services. He listed as the company's objectives in establishing ISDN parameters digital connectivity; integrated access of various services, including voice, data, images and text; a limited number of standard interfaces; separate channel digitized signaling; and a new service framework, encompassing de facto standards and examples of new service capabilities. Walter Johnston, from Nynex's technical planning office, said 75-80% of all Bell local loops can currently handle basic ISDN functions, operating at 144 Kbps over their embedded lines. He added that local telco revenues are shifting from basic phone service to more specialized services and increased digital services, although digital lines are currently being installed mainly to meet voice, rather than data, demands. Johnston noted that Nynex's rollout date for an ISDN interface probably would not be until 1988 or 1989; but Ehlinger said in a week or two other unnamed RHCs will announce dates for ISDN interfaces somewhat earlier than Nynex. In the future, Johnston said, service competitors will be interexchange companies, customers who will be building their own private networks, and "pure resellers" such as shared services and teleports. ******** BUSINESS ******** SBS, NEC SIGN FOR JOINT DTS LINK Satellite Business Systems (SBS) and Nippon Electric Corp. (NEC) have signed a contract to link their teleconference facilities via NEC's DTS radio system, using its local distribution radio (LDR) technology. The interconnect will link the NEC Radio & Transmission Division's teleconference room in Fairfax, Va., to teleconference rooms on the SBS national network, originating in McLean, Va. Transmission will be full-duplex digital at l.544 Mbps, and will have the capability for dual motion channel, single image and still image transmission. Installation of the 5-mile DTS link connecting both companies' division headquarters was completed in December l984 and was undergoing final testing last month. An NEC spokesman told us the system would be used primarily to demonstrate the firm's line of microwave, satellite, carrier transmission and optical fiber products to customers via the SBS teleconference link. Future plans could also include connections with other NEC locations in the United States for data and teleconference links. (NEC America Inc., Radio Transmission Division, 2740 Prosperity Ave., Fairfax, VA 2203l, 703/698-5540). MICOM ACQUIRES INTERLAN Micom Systems Inc. last month announced an agreement to acquire Interlan Inc. for l.75 million shares of Micom stock. The move extends Micom's activity in the rapidly growing local area network (LAN) business. While the deal is expected to be completed around March l, the acquisition plan is subject to the average market price of Micom's stock and approval by shareholders of privately held Interlan. Interlan has been one of the major suppliers of the Ethernet local area network products developed by Xerox, supplying complete systems to end users, as well as Ethernet subsystems to original equipment manufacturers (OEMs) and system integrators. The company's Net-Plus LAN system offers multivendor compatibility for high-speed file transfers between Digital Equipment Corp. VAX computers, UNIX-based workstations and IBM personal computers. Under terms of the takeover, Interlan will continue to operate as a wholly owned subsidiary, reporting to Micom's office of the president. The Micom and Interlan sales organizations will be combined to add a direct sales and support layer to Micom's existing manufacturer's representative and distributive services. Micom's move adds the Interlan line of cable-based products--with sales of $l8 million in l984--to the former's line of Instanet Micro600 data PBXs. Instanet product sales accounted for more than $50 million of Micom's $l70 million in revenues last year. "Micom expects to be the first company to offer a local network approach which integrates data PBX and cable-based LAN technology in a single local network system offering," Micom President William Norred said. Micom's LAN strategy, according to Norred, is to bring together the high-speed data transfer capability of cable-based LAN products and PBX technology offering local network connections for interactive terminals to access multiple host computers. While customized versions of integrated Ethernet LAN technology with data PBXs exist, the expanding use of personal computers and communicating terminals is fueling a convergence of the 2 technologies through integrated offerings like the one planned by Micom. (Micom Systems Inc., 805/583-8600.) ERICSSON SECURES $9 MILLION IN CONTRACTS FOR FIBER OPTIC EQUIPMENT Three units of Ericsson Inc.--Ericsson Network Systems, Ericsson Network Projects Inc. and Ericsson Lightwave Cable--have received contracts totaling $9 million for optical transmission equipment, installation services and cable from St. Louis-based LDX Net Inc. Ericsson Network Systems will supply and install a high-speed optical fiber transmission system and maintenance system for LDX Net, which is building a 540-mile fiber optic network to link Dallas and Houston. Meanwhile, Ericsson Network Projects' contract with LDX covers the provision of splicing and characterization services on the fiber cable that is being used for the Texas network. And Ericsson Lightwave Cable's $3.5 million contract includes single-mode fiber optic cable for the LDX system. The Dallas-Houston link, slated for completion in April, is the first phase of a l,700-mile network that LDX will construct to connect St. Louis and other Midwest cities served by the company with Texas and the Gulf Coast. The equipment Ericsson will install for LDX includes Ericsson's 565 Mbps fiber optic system, with capacity for over 8,000 telephone voice channels. Other equipment included in the contracts is Ericsson's digital multiplexers, channel banks and transmission maintenance system. Regional carrier LDX began laying cable in September along rights-of-way leased in Texas and Louisiana. The rights-of-way travel east from Dallas to Shreveport, La., south through Western Louisiana, re-entering Texas at Beaumont/Port Arthur, and entering Houston from the east. Greenwich, Conn.-based Ericsson Inc. is jointly owned by LM Ericsson of Sweden and Atlantic Richfield Co. of Los Angeles. (Ericsson Communications, Transmission Systems, PO Box 938, Garden Grove, CA 92642, 7l4/895-3962.) ALCOA/FUJIKURA IN FIBER OPTIC VENTURE Alcoa Conductor Products Co. (ACPC) and Fujikura Ltd. of Japan have formed a joint venture to develop advanced power transmission and telecommunications equipment for fiber optics. The 2 new subsidiary companies will have a total investment value of $15-20 million. The joint venture, Alcoa Fujikura Ltd., will be located in Spartanburg, S.C. The new facility will also house Alcoa's electrical transmission accessories business, currently based in Pittsburgh. Fujikura will be a minority partner in the transmission accessories unit--Alcoa Conductor Accessories Inc. The new venture is part of Alcoa's business expansion plans, to move into the high-technology growth fields such as fiber optic communications. ACPC is already a worldwide supplier of aluminum conductor and accessories to the electrical industry. (Aluminum Company of America, l50l Alcoa Bldg., Pittsburgh, PA l52l9, 4l2/553-3993.) EQUATORIAL ADDS ll GALAXY TRANSPONDERS In a move that effectively doubles its transponder capacity, Equatorial Communications has reached an agreement in principle with Hughes Communications Galaxy Inc. to purchase ll transponders on the Hughes' Galaxy 3 satellite. In addition to the ll transponders, Hughes will also provide Equatorial access to capacity on its terrestrial network, which includes earth stations and terrestrial microwave facilities in New York, Los Angeles, San Francisco, Atlanta, Dallas and Chicago. Equatorial will use its total of l2 Galaxy 3 transponders and Hughes' terrestrial network facilities to expand currently available capacity, and to provide additional services for what the firm characterizes as a "rapidly growing customer base." Equatorial is already using its existing transponder capacity on Galaxy 3 for its point-to-multipoint and interactive data communications services for private network links nationwide. "The growing demand for network services necessitated this bulk transponder purchase in order to satisfy Equatorial's near-term capacity needs," according to a company statement. Indeed, the firm says the consolidation of terrrestrial links and the addition of more transponder space should mean lower costs for the customer. Meanwhile, Equatorial still has options to provide its own transmission system, given the company's pending applications at the FCC for Equastar--its planned C-band domestic, 2-satellite system to be launched in l988. Along with the Galaxy transponder capacity, Equatorial intends to retain its 4 transponders on the Westar 4, with approximatley 20,000 customers currently residing on the system via Equatorial's 2-foot micro earth station units. (Equatorial Communications Co., 300 Ferguson Drive, Mountain View, CA 94043, 4l5/969-9500.) ********************** BACK PAGE NEWS--UPDATE ********************** HOUSE SUBCOMMITTEE WORKING UP LIFELINE LEGISLATION Spearheaded by Rep. Mickey Leland (D-Texas), the House Energy and Commerce Subcommittee on Telecommunications went public last month with a proposed measure designed to protect the poor, elderly and handicapped from rate increases brought on by divestiture and to ensure that the universal service concept is preserved for residential users. The Lifeline Telephone Services Act of l985 defines universal service as basic service intended to include a limited number of calls in a consumer's local exchange area, with an additional charge per call for extra calls. However, lifeline service, according to the measure, could not include what is commonly called measured or budget service, where telephone charges are based on the number, distance and duration of time spent on telephone person's principal residence. Although the measure does not address the emergence in some areas of local measured service, the bill's sponsors would oppose such charges under a universal service concept, but would compromise on allowing flexibility on the number of calls by residential users. BILL WOULD GIVE STATE PUCS AUTHORITY ON LIFELINE RATES/SURCHARGE The bill would require state public utility commissions to establish special lifeline rates--to provide local telephone service at a discounted rate for low-income residential customers. Under the measure, state regulatory agencies also would be given the flexibility to develop rates and eligibility requirements. In assessing those requirements, however, the states would be directed to pay particular attention to those most in need of assistance--the elderly, the poor, the handicapped and the unemployed, say the measure's sponsors. In addition, the legislation would make all qualified local telephone companies that provide lifeline telephone service eligible for payments from a lifeline service fund to defray the cost of the service. The measure's supporters on the committee have set that figure at $400,000 initially. A qualified local telephone company would receive compensation from the fund equal to 50% of the difference between the rate for lifeline service and the cost of providing such service. The fund would be derived from a small surcharge on interstate long-distance telephone service. However, the measure does not specifically say who would administer the fund, nor exactly how much the fee would be on long-distance service, but the measure's supporters are probably looking for more than the 50 cents suggested by the FCC. "We are in the midst of a dramatic change in the telecommunications industry and the way the industry responds to the needs of the marketplace. These changes, in all likelihood, will significantly affect the cost of telephone service to residential customers," bill cosponsor Leland said. The fate of HR l5l at this point hinges on how far Subcommitte Chairman Timothy Wirth (D-Colo.) is willing to let it go. If nothing else, the measure is another indication to the FCC on where lawmakers think regulators should go with deregulation of the telephone industry. The proposed legislation comes after the House Small Business Subcommittee's telephone task force denounced the FCC's access charge plan on small business users (DBR, January, p. 2).