This category covers establishments primarily engaged in furnishing telephone voice and data communications, except radiotelephone and telephone answering services. This industry also includes establishments primarily engaged in leasing telephone lines or other methods of telephone transmission, such as optical fiber lines and microwave or satellite facilities, and reselling the use of such methods to others. Establishments primarily engaged in furnishing radiotelephone communications are classified in SIC 4812: Radiotelephone Communications, and those furnishing telephone answering services are classified in SIC 7389: Business Services, Not Elsewhere Classified.
Wired Telecommunications Carriers
Since the invention of the telephone in 1877, the demand for telecommunication services has steadily expanded. Even when competition from wireless systems increased during the 1980s, wireline service sales grew at a rate of more than 5 percent annually, and long distance calling volume expanded by 12 percent. In 2000, total local service revenue exceeded $120 billion, and toll service revenues topped $108 billion, according to figures from the Federal Communications Commission (FCC).
The Telecommunications Reform Act of 1996 made the most sweeping changes in the industry in 62 years. Aimed at reducing segmentation between local phone service, long distance service, wireless service, and cable television, the act sought to lower prices, improve services, drive greater technological innovation, and create new business and jobs for the United States. By the early 2000s, one of the most obvious results of the reform was the rapid pace of mergers and acquisitions in the industry. For example, by 2002 only four of the seven regional Bell holding companies created by the breakup of AT&T in 1984 remained: Verizon Communications Inc., SBC Communications Inc., Bell South Corp., and Qwest Communications International Inc.
The wireline telecommunication services industry includes firms that provide electronic communications using wire networks or fiber optic lines. The massive U.S. wireline infrastructure incorporates 750,000 miles of aerial wire, 3.5 million miles of cable, and, following massive infrastructure build-outs during the 1990s, some 90 million miles of optical fiber. The Federal Communications Commission (FCC) reported that by the mid-1990s all the telephone companies together served nearly 94 percent of U.S. households.
Although the Telecommunications Act of 1996 removed legal barriers in general, the industry is still largely divided into long distance carriers and local telephone companies (telcos). Local telcos provide basic telephone services. They bring telephone access lines into homes, hook up new customers, and service local lines and equipment. Telcos also connect customers to long distance carriers, and sometimes handle intrastate toll calls that are considered long distance.
In addition to basic services, many local telcos also publish phone directories, offer operator assistance, and provide numerous add-on services. Examples of such services are: voice mail, caller identification, call-waiting, touch-tone dialing, wide area telephone service (WATS), separate digital lines, 1-900 billing services, and video conferencing.
By far the majority of local telephone lines are serviced by the Bell Operating Companies (BOCs)—called "Baby Bells" because they are the offspring of the 1984 American Telephone and Telegraph Company (AT&T) divestiture. At the time of the breakup there already were a few established independent local phone companies, notably GTE. Together these companies and the BOCs are referred to as Incumbent Local Exchange Carriers (ILECs), as opposed to new local carriers, called Competitive Local Exchange Carriers (CLECs).
In addition to the BOCs and independents, competitive access providers (CAPs) offer local telephone services. Started in 1992, CAPs typically furnish dedicated fiber optic telephone lines that connect corporations and long distance carriers. Because CAPs are not subject to the same pricing regulations with which the BOCs must comply, they can often deliver service to high-volume corporate customers at reduced rates. Early on some observers feared that these companies would siphon off debilitating amounts of high margin business, but the telcos have not suffered greatly from their presence. The terms CAP and CLEC are now often used interchangeably.
Long distance carriers, the other division of the wireline telecommunication services industry, provide national and international services via wire and fiber optic lines. Their services often utilize satellite and microwave systems as well. Long distance carriers typically pay a hefty fee to have local carriers route long distance calls to their lines, although the rates have steadily declined since 1997.
Since 1984, when its virtual monopoly of the telephone industry was ended by the Federal courts, AT&T has steadily lost market share in the long distance segment. The FCC reported that in 2000, AT&T held a 39 percent share of long distance revenue. Worldcom held about a 22 percent share, while Sprint had about 9 percent.
AT&T, Worldcom, Sprint, and some other large services are referred to as "facilities-based" carriers because they maintain the infrastructure necessary to connect calls. In addition to facilities-based carriers are "resellers," companies that complete customer calls using a transmission facility leased from a large carrier.
Most telephone networks transmit voice and data communications using analog technology, which sends a type of sound wave over the phone line. A digital system sends bits of numeric data, making it much faster, cheaper, and more reliable than analog transmission. In addition to the data communication options offered by the standard carriers and the CAPs, a new breed of wireline service companies is providing data communication services. Value-added network (VAN) providers furnish contract services such as electronic mail, credit card verification, and electronic data interchange. These companies typically lease lines—which they use to set up data communications networks for their customers—from carriers at bulk rates. Many VANs are able to efficiently link a company's global computer networks. By contracting with a VAN, a company also can avoid incompatible national regulatory and technical communications standards and receive consolidated billing.
The first attempts at an electrical telegraphing system occurred in the mid-1700s in Europe. One experimental system used 26 wires—including one for each letter of the alphabet. Numerous telegraph models were developed with limited success during the late 1700s and early 1800s. American Samuel F.B. Morse introduced the first commercially successful telegraph in 1844. "What hath God wrought?" were the first...