Telephones

Telephones

The invention of the telegraph (1837) by Samuel Morse and the telephone (1876) by Alexander Graham Bell were milestones in the quest to communicate over great distances with reliability, accuracy and speed. Previously, communication over distance necessarily entailed encoding human thought through such means as drum and smoke signals, semaphores and trumpets, or physically transporting written messages by carrier pigeons and human travel.

Both the telegraph and the telephone encode messages electronically at their origin; consequently, messages may be transmitted literally at the speed of light over various types of transmission facilities such as copper wire, coaxial cable, fibre optics and through space to their destinations, where they are decoded into original form. Whereas the telegraph encodes each letter of the alphabet into a combination of long and short bursts of electric current through a circuit by the systematic depression of a key, historically the telephone [from the Greek, meaning "distant voice"] has encoded onto an electrical current variations in sound waves (that is, changes in the density of air) that have caused a diaphragm in the mouthpiece of the telephone instrument to vibrate. More recently, however, telecommunication systems have become predominantly digital, meaning that even voice communication is transformed into binary (on/off) pulses for much of its transmission. In any event, the invention of the telephone has represented a significant advance over the telegraph: by encoding messages directly for transmission, rather than through a telegraph operator, the telephone permits greater individual autonomy in messaging. Moreover the telephone allows instantaneous routing of messages to the receiver through complex switching devices, whereas the public telegraph service usually routed messages to central terminals, requiring subsequent physical delivery by messenger to the addressees. Moreover, the telephone permits simultaneity in message exchanges (real-time two-way interaction), whereas the telegraph transmitted messages on a store and forward basis.

The classic configuration of the telephone network has comprised terminal devices (which may be, but are no longer limited to, telephone instruments); "local loops" (pairs of copper wires or fibre-optic cables connecting terminals to a local switching centre); trunk cables connecting switching centres or exchanges within a community; toll-switching centres, which route long-distance messages; and long-line facilities (cables, fibre optics, microwave towers, communications satellites), which provide electrical interconnection between communities. With cellular telephony and other wireless techniques, as well as digital packing switching, however, the urban design of telephone systems becomes more complex.

The world's first definitive tests of the telephone occurred in Brantford, Ont, in 1876 with one-way transmissions. The era of the telephone in Canada was really inaugurated, however, in 1877, when A.G. Bell transferred, for 1 dollar, 75% interest in the telephone patent for Canada to his father, Alexander Melville Bell. A.M. Bell hired agents to solicit subscribers for "private lines" (that is, unswitched or point-to-point service). In 1880 the Dominion Telegraph Company secured a licence to operate the Bell patent for Canada for 5 years. Subsequently, however, the Dominion Telegraph Company was unable to raise $100 000 asked by Bell for outright purchase of the patent, and Canadian patent rights were sold in 1880 to the National Bell Telephone Company of Boston (today, American Telephone and Telegraph Company). Rival service was offered until 1880 by the Montreal Telegraph Company, using disputed patents of Elisha Gray, Thomas A. Edison and others.

In 1880 the National Bell Telephone Company had incorporated, through an Act of Parliament, the Bell Telephone Company of Canada (today also known as BCE), which was thereby authorized to construct telephone lines over and along all public property and rights-of-way. In November of 1880 agreement was reached with rival companies (principally Western Union Telegraph Company and its Canadian affiliates) to surrender their patents, and by 1881 the Bell Telephone Company of Canada had acquired all other existing telephone interests in Canada. In 1885, however, key Bell patents were declared void by the Government of Canada, again making it possible for independent telephone companies to offer service, some even in direct competition with Bell. Several hundred independent companies came into existence during the period prior to 1920.

The rise of competing companies in Nova Scotia and New Brunswick was instrumental in causing Bell Telephone to withdraw from these provinces, thereby enabling Bell to pursue consolidation of its operations in its remaining territory. In 1885 Bell abandoned Prince Edward Island to the newly formed Telephone Company of Prince Edward Island. In 1888 Bell sold its facilities in New Brunswick and Nova Scotia to the newly formed Nova Scotia Telephone Company, although at the time the latter was still controlled by Bell. Later in 1888 the New Brunswick Telephone Co was incorporated by legislative enactment and was given an exclusive franchise to provide long-distance service in much of the province; in the following year it acquired the provincial facilities of the Nova Scotia Telephone Company. In 1910 Maritime Telegraph and Telephone Company (MTT) was incorporated, and in 1911 it acquired both the Telephone Company of Prince Edward Island and the Nova Scotia Telephone Company. In 1966 Bell Canada procured a majority interest in both MTT and New Brunswick Telephone.

Newfoundland's principal telephone company was incorporated in 1919 as the Avalon Telephone Company, which was operated on a private basis by the Murphy family. The company's controlling interest was acquired by a group of Newfoundland and Montréal business persons in 1954. In 1962 Bell Canada became the major shareholder. On 1 January 1970 the Avalon Telephone Company became Newfoundland Telephone Company Ltd, and in 1976 public shares were issued, making Newfoundland Telephone a widely held company, with Bell Canada holding majority ownership. Today, Newfoundland Telephone is a wholly owned subsidiary of NewTel Enterprises Ltd, a holding company owned to the extent of 55% by BCE Inc of Montréal. In recent years, pursuant to a 1989 Supreme Court decision, Newfoundland Telephone Company has been regulated at the federal level of government by the Canadian Radio-Television and Telecommunications Commission.

Whereas in eastern Canada Bell voluntarily withdrew with the onset of competition in the first decade of the 20th century, in other regions it met the emerging competition more aggressively. Two policies that were developed at the turn of the century - pricing and interconnection practices - are of particular interest, since they have remained controversial to the present. Bell's pricing was alleged to be noncompensatory and hence detrimental to competition in instances where direct or potential competition existed; indeed, telephone service was for a time offered free in some communities (Peterborough, Fort William, Port Arthur). Moreover, Bell Telephone did not interconnect rivals to its local or long-distance network, thereby disadvantaging subscribers to independent companies. Nonetheless the independent telephone industry in Ontario and Québec continued to grow, especially through the period 1906-1920. By 1915 independent telephone companies in Ontario accounted for 79 000 telephones, or one-third of the provincial total. However, during the 1950s and 1960s Bell acquired most of these independents, with the result that in Ontario at present non-Bell telephone companies account for under 5% of the province's telephones.

In the years before 1906 there was much dissatisfaction with rates and with the reluctance of Bell to extend service to less lucrative rural areas. Consequently, PM Sir Wilfrid Laurier formed a select committee of the House of Commons in 1905, chaired by Postmaster General William Mulock, to investigate the telephone industry in Canada and make recommendations. The committee published verbatim proceedings which provide a valuable history.

In 1906, through revisions to the Railway Act, certain aspects of the operations of the Bell Telephone Company of Canada were brought within the jurisdiction of the Board of Railway Commissioners for Canada. Henceforth, all telephone tolls charged to the public by the company were subject to the approval of the board; the board was also empowered to order interconnection between Bell and other telephone companies. Regulatory jurisdiction over Bell Telephone was transferred to the Canadian Transport Commission (now the Canadian Transportation Agency ) in 1967 and to the CRTC in 1976, the major responsibilities of these regulatory tribunals being to ensure that the tolls charged were reasonable and just, and not unduly preferential or discriminatory; furthermore, terms and conditions of interconnection with other companies were to be authorized by the regulator. Long, complex public hearings were frequently held to ascertain the ramifications of applications put forth by Bell or by other telephone and telecommunications companies.

The retention of Bell Canada under private ownership after 1906 was in opposition to policies advocated by certain municipal and provincial governments and led to further dramatic changes in the structure of the Canadian telephone industry. In 1908 and 1909 Bell Telephone operations in Manitoba, Alberta and Saskatchewan were purchased by the provincial governments to be operated today as provincially owned utilities.

With revenues in 1998 of $12.7 billion, Bell Canada remains by far the largest telecommunications company in Canada. Bell Canada is owned to the extent of 80% by BCE Inc (formerly Bell Canada Enterprises Inc) and 20% by Ameritech Corp, a US firm. Bell Canada serves most of Ontario and Québec as well as portions of the Northwest Territories, and has operations also in Manitoba, British Columbia and the Yukon with points of presence also in the US through Bell Nexxia. Bell Canada is a major investor in other Canadian telecommunications companies: for instance, in Aliant (42% ownership); Manitoba Telecom Services (20%); Télébec Ltée (100% ownership); and Teleglobe (21.5% ownership).

The second largest telephone operating company in Canada is Telus, which was created in January 1999 through a merger of Alberta-based Telus Corporation and British Columbia-based BC Telecom. Telus Corporation had been formed only in 1990 through a reorganization and privatization of the crown-owned utility Alberta Government Telephones Commission (AGT). In 1995, Telus Corporation expanded by acquiring Edmonton Telephones from the City of Edmonton. BC Telecom likewise was formed only in 1993 as a holding company for the British Columbia Telephone Company (BC Tel), which then served all of the province of British Columbia except the City of Prince Rupert, where a municipal system operated. In 1998 Telus attained revenues of $5.8 billion through wireline (local and long distance), wireless (cellular), data, information management and advertising services. GTE also holds a substantial interest in Québec Téléphone, which operates principally in the lower St Lawrence River region, the Gaspé and the north shore of the St Lawrence as far east as Labrador.

Canada's third largest telecommunications organization is Aliant. It was formed in 1999, through an amalgamation of the 4 Atlantic area telephone companies: MTT (Maritime Telegraph and Telephone Company), NBTel (New Brunswick Telephone Company), NewTel (Newfoundland Telephone Company) and Island Telephone (serving Prince Edward Island). These regional companies, which continue to operate under their own brand names, now share a common platform for management, a strategy designed to allow them to expand their offerings, improve their competitive position and increase revenue. Aliant is owned to the extent of 42% by Bell Canada. Combined annual revenues for the 4 companies in 1998 were 1.7 billion.

Whereas at one time the 3 prairie telephone systems were owned by their respective provincial governments, today only Saskatchewan Telecommunications (Sask Tel) remains a provincial crown corporation. In 1998 Sask Tel attained consolidated revenues of $753 million, making it the fourth largest telecommunications entity in the country.

Manitoba Telecom Services (MTS), the successor company to the crown-owned Manitoba Telephone System, is Canada's fifth largest telecommunications company with annual revenues of over $450 million. MTS is now owned to the extent of 20% by Bell Canada.

Canada's major telecommunications companies have formed the Stentor Alliance to coordinate activities and to provide centralized support and operational expertise in the delivery of telecommunications services. Originally formed in 1931 as the TransCanada Telephone System, the Alliance today also represents members at intercarrier relations and at industry forums.

Much of the amalgamation and privatization activity that has gone on over the past decade can be attributed to Canada's new Telecommunications Act, which came into force on 25 October 1993, updating and consolidating legislation dating back as far as 1908. Among other things the Act empowers the CRTC to regulate all telecommunications carriers, whereas previously provincial governments regulated all provincially incorporated telephone companies. The Act also empowers the CRTC to exempt classes of carriers from regulation, and to forbear from regulating in cases where it finds competition to be effective.

Nine of the largest telephone companies in Canada, one from each province (except for Ontario and Québec, which are jointly represented by Bell Canada), along with Telesat Canada (Canada's sole domestic satellite carrier), have formed an association known as Stentor, whose purposes include the co-ordinated provisioning of nation-wide telecommunications services. With revenues in 1993 of $13.5 billion, Stentor members accounted for 78% of all telecommunications services revenues.

Though telephone service for years has been provided primarily on the basis of monopoly in each area, federal regulatory initiatives over the past 15 to 20 years have been reopening the field to competition. In 1977, for example, the CRTC ruled that Bell Canada must afford cable television companies access to its poles and ducts, without restricting the services sold by those companies. In 1979 the CRTC ordered Bell Canada to grant CNCP Telecommunications (today Unitel Communications Inc) access to Bell's local switching network for purposes of offering business-communications services in competition with Bell Canada. Also in 1979 the CRTC required Bell Canada to afford access to its switching facilities to a mobile-telephone company. Following a 1982 CRTC decision, subscriber ownership of terminal equipment became possible and widespread. Today, in Bell Canada's territory, even the inside wiring has reverted to ownership by the property holder, as opposed to Bell.

Most significant of all, however, was the CRTC's 1992 decision allowing competitive entry into public long distance voice communication, a market alone accounting for $8 billion of the estimated $17.4 billion telecommunications service industry revenues in 1993. Even more recently the federal government has been attempting to open up local telephone service to competition as well by encouraging cable television firms and telephone companies to begin competing in each others' markets. The government refers to this as "convergence." On 19 May 1994, for example, the CRTC issued a report on the information highway envisaging full-scale competition between erstwhile telephone and cable companies in both the local telephone exchange services market and in the market for cable TV services. As well, the CRTC foresaw the likelihood that telephone companies would enter program origination and other content-related services activities. In September 1995, the government's Information Highway Advisory Council issued its final report, advocating direct competition wherever possible. There can be little doubt, then, that in the eyes of the federal government, convergence and the information highway are not only imminent, but are to be welcomed and supported.

Western societies have entered the information age, or post-industrial society, and telecommunications companies are of great significance in this transition. It has been estimated that up to 50% of the labour force is now engaged in information production or distribution. At the same time, technology is transforming hitherto distinct information industries into a highly complex, interrelated system. Microelectronic circuitry, communications satellites, broadband cable and fibre optics brought into the home appear to be eradicating previously distinct industry boundaries. Also, online word processors allow office-to-office transfer of messages. Virtually all forms of information that were once defined by their singular mode of material encapsulation (film, newsprint, books, computer printouts) can now be encoded and diffused electrically over vast geographic areas at low cost. There is increased interdependence between telephone companies and newspapers, banks and other financial institutions, computer companies, broadcasting, cable companies, etc.

On the one hand, new competition would seem to make detailed regulatory supervision of rates less important. On the other hand, however, competition may disadvantage rural dwellers and the poor as prices for telecommunication services become more closely aligned with accounting costs. Moreover, convergence seems to be resulting in the creation of ever-larger communication conglomerates whose interests straddle many fields, not only reducing local ownership and control, but centralizing communicatory power, not only in telecommunication carriers but in transnational information providers as well.

See also Media Ownership.