History of the Atlantic Cable & Undersea Communications
|Technology Convergence (Parts 1 & 2)
The Battle for Combined Telephony and
At the end of the Second World War, domestic telecommunications in the UK were operated by the Government through the General Post Office (GPO). Overseas telecommunications were in the hands of Cable & Wireless (C&W), at that time a private company. After Prime Minister Winston Churchill (1874-1965) was defeated in the 1945 General Election, the UK had a Labour government that quickly set about nationalising C&W. This was achieved on 1 January 1947, giving the British Government complete control over both telegraphy and telephony, whether by cable or radio. The one exception to this monopoly was that US international telegraph companies were allowed to operate their own collection points in the UK.
In the USA things were very different. Telecommunication services were in the hands of private companies, with national and international communications, as well as the two technologies of telegraph and telephone, being separated by Federal Communications Commission (FCC) regulations. Domestic telephone was dominated by American Telephone and Telegraph (AT&T), domestic telegraph by Western Union, international radio telephony by AT&T, and international telegraphy by the Commercial Cable Company (CCC) and Western Union. In 1945, when Western Union commenced its merger with the Postal Telegraph Company, it was obliged to give up its international services; although neither was achieved until 1963 (see The Atlantic Price War).
This was the shape of the transatlantic telecommunications market at the beginning of the 1950s, when planning began for the first transatlantic telephone cable, TAT-1. As part of its research programme the GPO developed technology that would allow telegraph signals to be sent through voice channels and they wanted to use this on TAT-1. It was this desire to send telegraphy services over a telephone cable that began the battle for ‘Technology Convergence’.
In 1950, the FCC had, for the first time, allowed telegraphy and telephony services to be provided over an international coaxial cable, Havana to Key West. The services were provided by International Telephone and Telegraph (ITT) and AT&T respectively. Now, with this British breakthrough technology for transoceanic distances, AT&T appeared to be in a position to threaten ITT’s (the holding company of CCC) dominant position in the international telegraphy market. To counter this perceived threat ITT set about promoting a new repeatered transatlantic telegraph cable.
The initial rumours that CCC planned to lay the world’s first transatlantic coaxial telegraph cable were heard in Washington in 1953; at that time the project was code named ‘Project Eskimo’. By the autumn of 1954 both the FCC and the British Foreign Office had been approached for landing rights for this cable. The project had evolved significantly and was now known as ‘Deep Freeze’. The planned cable route was to be 3,500nm (6,494km) long connecting Massachusetts, USA - Newfoundland - Nova Scotia - Greenland - Iceland - Scotland, far to the north of the planned TAT-1 route. It was to use the new rigid housing repeater technology developed by Standard Telephones & Cables (STC), a UK subsidiary of ITT. It would be the longest coaxial submarine cable in the world, with 65 repeaters spaced every 55nm (102km). The cable was to be manufactured at STC’s cable factory, which was then being built in Southampton (it opened in 1956). Deep Freeze would be capable of carrying 120 telegraph circuits and 5 voice channels and was planned to go into operation in 1957. The project was estimated to cost some US$25M, of which US$17M would be spent in the UK, mainly with STC. CCC intended to offer leased lines in the new cable for US$200K, operating at 60 words per minute (wpm); this compared to the existing market rate across the Atlantic of US$270K and 42wpm. ITT had already secured US Pentagon support for the project and had a contract with the US Air Force for the purchase of 11% of the capacity plus its assistance in obtaining foreign landing licences.
However, the project did not convince the GPO management, who had no desire for another American owned cable, especially one which would provide more telegraph circuits than those currently in operation. Deep Freeze also raised, at government level, the emotive question of US telegraph companies being allowed to operate in the UK. At that time, although CCC and Western Union operated transatlantic telegraph cables from both ends, their landing licences in the UK had expired and could now be withdrawn. The GPO believed that American companies being able to operate telegraph cables in the UK was an anomaly that should be corrected, especially as reciprocal rights were not given to British companies in the USA. It was, therefore, GPO policy that these historical rights should be revoked. If CCC were to ask for and be granted a 20 year licence for the new cable then it might request that this principle be applied to extensions of these recently lapsed licences. This could potentially open the door for Danish and French cable owners to do the same, which would be unacceptable. There was absolutely no question that the British would ever allow AT&T to operate the UK end of TAT-1 for either telegraphy or telephony services. A further concern for the GPO was that the surplus capacity on the cable could put back its embryo plans for a Commonwealth cable (see Coaxial Commonwealth Cables). The British Government was also concerned that US Government backing for the project was, in effect, financial support to a private company venture that was in direct competition with telecommunications services owned by the UK and Canadian Governments.
The British Government countered the US State Department’s first request for it to look favourably on CCC’s request for a landing licence by asking if the GPO could be allowed to operate telegraph circuits over TAT-1. The US State Department response was that the use of TAT-1 for telegraph circuits would require prior agreement by the US Government. AT&T’s reaction was that raising the question of telegraph circuits on TAT-1 would delay the project, and it refused to support the GPO’s proposal.
In February 1955, a message was sent to the US Government stating that Her Majesty’s Government would allow a landing licence to Deep Freeze only on condition that the cable was to be used solely for defence purposes. The Cold War was at its height and NATO use of any cable was a significant consideration. In May, at a meeting of foreign secretaries in Paris, CCC enlisted the help of the US Secretary of State, John Foster Dulles (1888-1959), who spoke to the British Foreign Secretary, Harold Macmillan (1894-1986), stressing that the defence requirements were of ‘urgent necessity’ and urged the British Government to have further talks with CCC. Macmillan agreed to give things a push! Subsequently, the US State Department’s official response stressed the need for improved transatlantic communications but it did not identify Deep Freeze specifically. This enabled the British to counter that TAT-1 could achieve this but for the FCC restrictions on its use for telegraph services. A US State official then made it clear that US Government policy would not allow the British to provide commercial telegraph services in the USA. In light of this disclosure the GPO considered that further discussion with CCC would be pointless.
Then in October 1955, rumours began to circulate that AT&T was planning a second telephone cable to the Continent of Europe (TAT-2) with even wider bandwidth than TAT-1. The rumours suggested an unheard of capacity of 250 telephone channels [TAT-2 was commissioned in 1959 with 36 x 4Khz and later upgraded to 48 x3kHz voice channels]. If this cable were to be built with such a capacity, then a telegraph circuit could reduce in price to around US$500 and there would be pressure on the US Government to allow telegraph services over the new cable. These rumours prompted CCC to make an amended offer to the British Government, this time presenting a proposal based on Deep Freeze as a joint ownership project. However, the GPO was still wary of CCC’s estimates of military usage and of future demand for leased circuits. It considered that the provision of a designated telegraph cable, rather than telegraph circuits as a by-product of a telephone cable, was not making the best use of the available technology. CCC challenged the GPO view that government telegraph circuits could be provided within TAT-1. CCC’s position was that neither the GPO nor its American partner (AT&T) could use TAT-1 for telegraph traffic within the United States. CCC also drew attention to the fact that opposition to the use of TAT-1 for telegraph was already being expressed by the American telegraph carriers and must be expected to continue. From CCC’s perspective the GPO’s attitude was inconsistent. CCC had originally offered to go ahead on its own with the project and now it was allowing the GPO to ‘buy into’ it. It had also offered to insert repeaters into its existing cables so that they could meet any capacity demands should Deep Freeze fail. In CCC’s view the GPO could not lose.
For their part the GPO wanted to achieve a half share in a modern transatlantic communications system and wanted to cheapen telegraphic communications to the full extent possible by technical progress. Conversely, ITT’s two major interests were to acquire a commanding position in transatlantic communications and to perpetuate the high cost of telegraph techniques for the benefit of its existing investments. The GPO believed that in pursuit of its first aim, CCC had offered to share part of the cable with it in order to guarantee even greater benefits (security of tenure and a larger share of the market). The GPO considered that this left it with three options; i) turn CCC down, ii) go ahead with Deep Freeze and give Western Union notice to quit, iii) try to negotiate with a consortium of American companies. By this time, three diplomatic notes had been exchanged between the British and US Governments concerning Deep Freeze. The GPO asked the British Embassy to make unofficial enquiries to establish the US Government's reaction to the project. The Embassy reported that the other three US telegraph cable companies were very concerned by any move that AT&T might make to expand its telegraph carriage. They had filed objections with the FCC against AT&T offering telegraph facilities over its radio link to the Canadian border for TAT-1 and in its projected cable to Hawaii (HAW-1, 1957). Since all three telegraph companies were operating profitably there was little incentive for amalgamation, which anti-trust laws might have prevented anyway.
In May 1956, informal discussions took place in Washington DC to try and bring the parties closer together. Prior to the meeting, an agreement had been reached that it should be government to government only. So the British delegation was surprised at the presence of representatives of the US companies. The Americans were obliged to consult among themselves before their spokesmen could give any considered statement. This led to there being a number of adjournments in which the comments the British had made were considered in detail by all the government agencies and company representatives. The FCC Commissioner, Edward M Webster, met informally with the British and gave a barely credible explanation for the presence of the telecommunications companies. He indicated that the FCC had been unprepared for the talks and so had to have representatives from all agencies, private companies and even the Senate Committee present. The Commissioner also explained that the FCC was embarrassed by the US Government support of Deep Freeze, since it would adversely affect the competitive situation that currently existed between the US telegraph companies. He stated that a defence review had altered its relevance so that the importance of the project, from the defence point of view, was now probably insufficient to outweigh its commercial disadvantage that would arise from disrupting the competitive balance among the US overseas telegraph carriers.
The principles on which the British delegation approached these meetings were that the UK should have a half share in cable ownership, operating the services at the UK end, and that services should be provided by the use of modern cables of large capacity in which telephony and telegraphy should be integrated. Their main objectives from the discussion were to get agreement that any new cable should be available for both telephony and telegraphy, that TAT-1 should be open for Telex traffic and public telegraphy and that any new cable capacity should be laid as a joint venture by the GPO and a consortium of American companies. The British also wanted clarification as to whether greater participation in transatlantic telegraphy by the UK would involve the purchase of a share of existing facilities (which they were to reject). They were to avoid any commitment on the period and terms of the landing licences needed to regularise the position in the UK of Western Union and CCC, and finally, to reject the proposal for Deep Freeze. However, it soon became clear to the UK delegation that there was no hope of achieving their objectives, particularly since AT&T made it plain that it opposed using TAT-1 for both telephony and telegraphy.
For its part, the FCC put forward a proposal of principles on which further discussions between the UK Government and the US companies should be based. They suggested that each party should bear a share of the total costs of installing new facilities proportionate to the interest acquired by each party in such new facilities, that the UK should be willing ‘to make adequate provision for just, equitable and non-discriminatory treatment of all American carriers handling traffic between the United States and the United Kingdom with regard to both the share of the traffic to be allocated to such carriers and the division of the tolls for handling such traffic’ and that both radio and cable should be given adequate opportunity to develop fully—in other words to retain the status quo. The FCC also wanted the carriers to be relieved of their existing legal obligations in the UK and, in return for greater UK participation in existing cable facilities, for the employees of the US cable companies in the UK to be adequately provided for; in addition, that provision should be made for the special problems which would confront Western Union in connection with its obligation to divest itself of its international telegraph operations. Finally, the FCC would also require a review by both Governments before any agreement with a US carrier could be finalised.
The final outcome of the May 1956 discussions was an agreement that the US side would look at ways and means for proposals by American companies to the UK Government to be first cleared with the relevant government agencies and, so as to preclude over-investment, to look at whether the companies could operate competitively while using circuits in a telegraph cable owned by them as a consortium and the UK Government. For their part the British agreed to review the landing licenses situation, to consider whether they would buy into existing cable facilities and to reconsider Deep Freeze.
The British delegation was extremely disappointed with the discussions that took place during these meetings, and came away with a clearer view of the power politics in Washington. It reported that no US Government agency was prepared to accept responsibility for future policy, so that replies were based on the existing situation and negative to proposals for change. They concluded that: ‘The communication operating companies are extremely powerful and are strongly against any form of government control. This attitude is common to them all, but it is taken more strongly by AT&T than by any other company. It is illustrated by the fact that in our talks the United States Government agencies were not allowed to state their views until prepared statements of these views had been vetted by the companies (we believe word by word)’. The report also stated that the US Government representatives ‘showed themselves sensitive to the criticism that the way in which their overseas telecommunications are organised prevents them from taking full advantage of the benefits of modern technique’ and that ‘they were brought to realize, apparently for the first time, that it is up to them, no less than ourselves, to find some way of bridging the gap between our philosophies. In this connection, it may prove to be of special value that Congress, which is the real policy making authority in this field, was represented at the meetings’.
Almost immediately, the GPO took the decision that it could not envisage any circumstances in which it would want to buy into the existing telegraph cables and that it would reject Deep Freeze. With regard to the landing licenses, it was concerned that the Anglo-American Telegraph Company (wholly British owned), whose cables Western Union leased, should not be adversely affected by any decision. At that time, American Securities were negotiating to buy Western Union’s international holdings and those of Anglo-American, and so the British Government agreed to grant the companies new 25 year licences. However, these licences restricted them to existing services and technology; they were neither allowed to provide Telex services nor to replace existing cables. On Deep Freeze the GPO wrote to CCC in July 1956, indicating its decision. In September, after further representations made by CCC to the US State Department had failed, the British Government confirmed its decision to reject Deep Freeze in a formal note to the US Government. In 1957, CCC attempted to revive Deep Freeze as a purely defence project with, once again, lobbying going to the highest levels in the British and US Governments, but due to the success of TAT-1 it was doomed to failure. This spelled the end for separate telegraph cable projects and by the early 60s existing transatlantic telegraph cables were being abandoned.
The Deep Freeze project required complex negotiations at the highest levels of governments in Canada, Denmark (Greenland), Iceland, the UK, and the USA. The chief negotiator for ITT was retired US Rear Admiral Ellery Wheeler Stone (1894-1981). In June 1954 he was Chairman of CCC and able to claim personal friendships with Sir Roger Makin (1904-96) British Ambassador in Washington, Sir Harold Caccia (1905-90) of the UK Foreign Office who became US Ambassador from 1956 to 1961, and Harold Macmillan (1894-1986), who at that time was Housing Minister. Three months later Macmillan became Defence Minister and in 1955 Foreign Secretary. These friendships stemmed from Stone’s exploits in Italy during WWII. It also appears that ITT had support for Deep Freeze from Major General Sir Leslie Burtonshaw Nicholls (1895-1975), chairman of the board at the nationalised C&W. The US Justice Department records indicate that Nicholls provided ITT with confidential information on the project from within the British Government.
In Canada, on 14 September 1954, ITT met with and continued to communicate with Lester Bowles Pearson (1897-1972), Head of the Canadian Delegation to NATO and the UN. Again, US Justice Department records indicate that Pearson provided ITT with confidential information on the Canadian Government’s position, the possible participation of NATO in Deep Freeze and the impact of NATO’s participation.
Despite ITT’s ability to influence intervention at high levels of government (both diplomatic and military) and the leaks of confidential information to ITT and CCC, Deep Freeze failed to get off the ground. The negotiations were the catalyst for the GPO to mount the first attempt to promote the concept of ‘Technology Convergence’. This had strong support within the British and Canadian Governments, and so critical political resistance in London and Ottawa could not be overcome. Also, the reticence of the USA to even consider convergence for TAT-1 was a strong incentive for the first Commonwealth Cable, CANTAT, to be built and thus reject Deep Freeze. ITT had little to counter these major obstacles, or the lobbying power of AT&T in the USA, other than the pressure of personal friendships, which was never going to be enough.
In 1959, ITT appointed a new CEO, Harold Geneen (1910-97), and in 1960 they sued the US Government for breach of contract, in a US$804,000 law suit, for failure to support its Deep Freeze project in negotiations with the British Government. The company alleged that the delays in its negotiations with the UK Government were caused in part by signs which began to appear indicating that the US Government was not fully supportive of the project. CCC claimed that in May 1956, unbeknown to it, the Department of Defence had advised the FCC ‘that the nature of defence support of the project had changed and that under conditions then supposed to exist the defence agencies would wish to abandon it’. The FCC then advised the defence agencies that on this basis it would withdraw its approval in principle. The Commission notified CCC to this effect in July 1956 and the US Embassy in London then advised CCC that it could not continue to make representations on its behalf. CCC asked the GPO to appear as a witness for it against the US Government, and the GPO agreed to send a civil servant to testify. On 5 April 1968, the US courts finally dismissed the claim. CCC did not appeal the decision.
The success of TAT-1 had prompted AT&T to bring forward its planning for TAT-2, offering to provide spurs to the UK and Canada and offering the British Government shares in the cable. This offer was rejected in favour of the Commonwealth Cables project CANTAT. However, because TAT-1 provided a much faster service than the telegraph cables, the US Pentagon wanted immediate access to both its voice and data services. Using the additional capacity to be provided by TAT-2 as a justification, the FCC allowed AT&T to cross the divide between national and international telegraph services. It allowed AT&T to provide leased line services to the telegraph companies so that it could provide similar services to the defence agencies. This was the first occurrence of international leased lines for data over telephone cables and the use of the term ‘Carrier’s Carrier’ to denote the relationship between AT&T and the telegraph companies.
Although the FCC had allowed the international telegraph carriers to lease lines over the TAT cables, the companies were unhappy because leased lines did not contribute to the rate base on which their rate of return was fixed. The opening of CANTAT in 1961 then threatened to bypass the regulatory divisions in the USA, so the FCC was forced to allow the four telegraph carriers to lease lines on CANTAT as well as the TAT cables. International telegraph transmission became a state-to-state service and the GPO’s objective of ‘Technology Convergence’ had been achieved. CCC closed down its UK service in 1962 and, having bought out Western Union’s international business, leased lines in coaxial telephone cables from 1966 onwards.
However, the change in FCC policy positioned AT&T, not only as the telegraph companies’ wholesale provider but also their major domestic competitor. In 1963, AT&T and the GPO opened TAT-3 from Tuckerton, New Jersey to Widemouth Bay, Cornwall. This system had 128 x 3kHz voice channels. At that time, AT&T was also well advanced in the planning of TAT-4 (USA-France) which would have a similar capacity. The prospect of AT&T expanding its international telegraph services, then limited to US defence agencies, and the desire of the international telegraph carriers to provide their own facilities, led ITT to once again lobby the US Congress. In 1964, it accused AT&T of attempting to create a monopoly of international communications. ITT also offered, through STC, to build the fourth transatlantic cable instead of AT&T. The FCC’s response was to limit AT&T to international voice services other than existing customers and to allow the telegraph companies to own shares in new cables. Ownership was to be divided according to present and foreseeable future requirements. Thus the new technology was not allowed to influence the structure of the US market and so international telegraph and telephony services were once again separated. ITT made a formal filing to the FCC, calling for a revision to the international formula. Both RCA and ITT demanded direct access to customers—a return to the pre-war system of multiple international gateways, a demand that was to remain unresolved for 16 years.
Because of CANTAT, for a brief period in 1964 the FCC was forced to bow to the concept of Technology Convergence, but they quickly recanted. It was not until 1980 that the FCC reached a final decision on this question. In the meantime, the FCC continued to support AT&T and their model of the telecommunications network.
Trying to take advantage of advances in technology has often met with political inertia and or resistance from vested commercial interests. In the late 1980’s the term ‘Convergence’ was, once again, made a buzz word by the chairman of STC plc, Sir Kenneth Corfield (1924-2016). He master-minded a takeover of the UK computer company ICL. His rationale for this move was that technologies were bound to converge and that in the future individuals would have one device to provide computer, telephone and television services. How stupid was that concept? Instead of lauding Corfield as a visionary, the markets considered his strategy ridiculous and castigated him, the share price plummeted, the company went into decline, Corfield was forced out, and STC was finally taken over by Northern Telecom in 1991.
Sir Kenneth Corfield
The photograph of Sir Kenneth Corfield was taken in the Managing Director’s office at STC Greenwich (now Alcatel-Lucent Submarine Networks). In the background you can see a copy of a painting of the Great Eastern laying the Atlantic Cable; the original of which was painted by Robert Charles Dudley (1829-1909). Dudley sailed on the 1865 cable lay as official artist for the book commissioned by Telcon to record the events for posterity, and again on the successful 1866 Atlantic lay. The original painting hung in the Green Room at Greenwich and now hangs in the conference room of Alcatel Lucent’s temporary offices at Thames Bank House on Morden Wharf at Greenwich. The MD’s office was on the top floor of the North West Block on the Thames riverfront at Enderby Wharf, which was recently demolished as part of the Barratt’s riverfront development.
The Great Eastern by Robert Charles Dudley (1826-1909)
Article text copyright © 2016 Stewart Ash
Last revised: 30 July, 2018