What’s a Phone Company? And Why?
You no longer buy light from a light company, you buy electricity. Why are people still buying phone calls from a phone company?
Updated: 09-Oct-2006Version 2: 2023-05-28 17:09:26

This is a version of my March 2006 column in Von Magazine . The magazine is now posting images of the pages instead of the actual text so I’m posting the original version here. You can view the printed version here.

You no longer buy light from a light company, you buy electricity. Why are people still buying phone calls from a phone company?

Thomas Alva Edison did more than just create a viable light bulb; he created an entire system from generating power to converting it to light. For a long time we had companies selling light not electricity. They even supplied the bulbs. Edison’s electric delivery system was barely adequate for sthe task. Nikola Tesla invented the AC motor. AC was far superior and won out over DC. Edison was so desperate to keep his franchise he even killed an elephant to show how dangerous AC was but the public wasn’t fooled. Today we simply buy electricity as a commodity and make our own light.

Telephone companies are very much like light companies with a big difference – we still have telephone companies even though we now use software to create voice connections that are often superior to what a telephone company provides and without any cost above the Internet connection we need anyway.

Why do we still have phone companies and not light companies?

It’s even stranger when you realize that phone companies never created phone calls?

All they do is transport the calls. In the old days you’d create the phone call by speaking into a microphone converting your speech to electric currents. All that the so-called phone company did was to transport the calls over their wires. But in the 1800’s it was difficult to preserve the signal over long distances and the companies that carried the signals did a lot of special engineering to make it happen. It was expensive and barely worked. It seemed like a miracle and miracles are exempt from normal rules.

It was so special that the telephone companies were granted monopoly rights, sort of like the charter from a king, to run a phone system. In return they promised to be nice and play fair.

While Edison had Tesla to worry about, the phone companies were their own worst enemies. As they worked to improve the ability to transport the phone calls they developed digital technologies that undermined their very reason for existence. At the heart of the problem is that phone calls aren’t special at all. Once you have a digital network you didn’t have problems carrying calls over any distance. The telephony companies also developed the modem and by the 1960’s it had escaped the lab and allowed us to use the network for more than just phone calls. By the 1960’s we’d figured out how to send packets of data over the phone network and the phone companies, bound by their common carrier commitments were powerless to stop it.

That, in itself, wasn’t so bad. While it was easy to send email over a modem it was far more difficult to meet the constraints necessary for a high quality phone call. The engineering principles that defined the tightly managed phone network in the 1930’s were embedded in the very genes of the phone companies. They built a digital analog of the old phone networks. Sort of – when the carrying got tough, as on transoceanic cables, the carriers got creative. In fact, there are compromises all over the place – cellular telephony ignored quality because mobility was more valuable. Eventually technology gave us today’s digital phone network.

Even though the early packet systems weren’t suitable for phone calls, the applications they did enable were important enough to generate a demand for more packets. The quality of the packets didn’t matter, people found out what worked and what didn’t. Because it didn’t matter demand could drive supply. And, almost by accident, when we had enough carrying a phone call was no longer special.

There is no longer any need to grant a so-called phone company special privilege. Yet they insist on retaining the prerogatives of their bargain while reneging on their commitment to be fair and simply carrying bits. They want to emulate the robber barons of old and use their control of the transport to tax their customers’ value.

Phone companies had to learn how to bill for every event taking into account who was calling whom for how long and when. Creating billions of billing events is hard work but it can be very rewarding. Transporting bits is not as rewarding.

Phone companies never created phone calls – they did create bills.

Today’s PR is slicker – no dead elephants. But the message is no more honest.