Carterfone Changes Our World

The FCC's June, 1968 "Carterfone Decision" was one of the most important and far-reaching in its consequences of any that body has made in its history. The "Carterfone Decision" clearly signaled the FCC's commitment to the "competition in the marketplace" philosphy which, just a year later, gave a green light to the specialized common carrier and, still later proclaimed an "open skies" policy for domestic satellite applicants.

In its "Carterfone Decision" in June, 1968 the FCC declared that the Carterfone could be attached to the telephone network and ordered the Bell System (and other telcos) to revise their tariffs to make such attachment possible.

In their decision, the FCC cited their earlier (1956) "Hush-A-Phone" decision and clearly stated that a subscriber's right to use the network in ways which are "privately beneficial without being public detrimental" extended to all types of equipment, including telephone terminal equipment.
The Bell System h ad filed a tariff in 1957 which provided that: "No equipment, apparatus, circuit or device not furnished by the Telephone Company shall be attached to or connected with the facilities furnished by the Telephone Company, whether physically, by induction or otherwise. . ."

"I started working on the Carterfone device as early as 1949," says Carter, "back in the days of the vacuum tube. I worked on it in my spare moments but ended up shelving it until 1958. By then it was easy, with the benefit of transistors. And there was a ready market and no need for elaborate promotion. We just showed up at oil company shows and started selling.

"I had followed the old Hush-A-Phone case for the seven years they fought that case. I had really thought that decision in 1956 had cleared the air. What I didn't know was that the FCC had merely shelved the court-ordered tariffs subsequently filed by AT&T. The commission had neither rejected nor accepted those tariffs when I filed with the FCC three years later. I just didn't believe anyone I wasn't harming had the right to tell me I couldn't be in business. As long as they failed to prove I was harming them, I knew I was still in the fight.

"While we could visualize what should be possible and how it could change the shape of the communications industry, our first thought, however, was for self preservation. We just were determined not to be driven out of business. Our support in the case was not broad at all. I approached a number of communications equipment manufacturers for financial support, but they were all afraid of jeopardizing current or potential Bell contracts."

But Carter continued his fight, virtually alone, and finally won. And the shock waves set off by this regulatory "bomb-shell" sent a numbing chill thru telephone people all across the nation even as it brought a glow of warmth to telephone equipment manufacturers both domestic and, especially, foreign.

Interconnection as we know it today did not truly become a reality until January 1969, when the Bell System revised its tariffs to allow the interconnection of privately owned equipment to the telephone network through "connecting arrangements." The Bell-required connecting arrangements . . . or "couplers" . . . Consisted of equipment only available from the telephone company at a substantial monthly charge. The telephone companies maintained that these arrangements technically were necessary for "network protection".

This telco foot-dragging continued for several years . . . in and out of the courts . . . and it was not until end of 1977 that the consumer's right to freely connect privately-owned and manufactured terminal equipment anywhere in the United States was firmly established.

The appeal of "interconnect", as the option to be called, was three-fold: first, communications cost savings; second, possible improvements in communications service (more features and more options); and third, greater compactness in equipment.

Early in the "interconnect" game, consultants suggested two "rules of thumb" for prospective buyers or leasers. "Your dollar savings over telephone company charges," they said, "must be 17 to 19 percent and you must see a return on your investment within five years."

A major reason many businesses, large and small, were anxious to "go interconnect" in the early seventies was to get system features not offered in equipment available from local telephone companies. Early in the game Communications News published a "Guide to the Interconnect Market" which contained a shopping list of 60 different service features . . . from "Abbreviated Dialing" to Wake-Up Service" . . . which were available in telephone systems offered by interconnect equipment suppliers. Stored program technology has made most of the exotic new services possible. And this "Guide" went through several reprintings.