If AT&T Had Managed the Phone Business Like Google

https://tedgioia.substack.com/p/if-at-and-t-had-managed-the-phone

by chubot • 5 years ago

159 64 5 years ago

tedgioia.substack.com

Fun read! Drawing parallels of today’s world with the past. In some ways phonebooks of the past aren’t too different than the modern search engine. Hundreds of numbers (urls), a central lookup, and prominent placement to get your business ranked ahead of millions of others. As long as we have phone books, the person who took the time to write it all will always win.

Nevermark• 5 years ago

One of the competitive dynamics of phone books was that businesses were essentially extorted to buy advertising in any phone book whose publisher had the scale to give everyone in your town a copy.

If you didn't buy advertising in every one of N phone books, you lost roughly 1/N sales for each book you failed to advertise in.

More than one empire was built by introducing new phonebook after phonebook to town after town. Despite none of the towns needing another phonebook.

So it may be a bittersweet situation that Google's lock on search at least saves businesses from having to advertise in 20 search engines. Although given Google advertising is an auction, maybe there are no savings.

zxcvbn40382• 5 years ago

I just realized it has been so many years since I’ve seen a phone book. Or phone numbers without area codes.

eesmith2• 5 years ago

Fun?! When it came up two weeks ago I felt like it was making me more ignorant. Here's what I wrote at https://news.ycombinator.com/item?id=28473805 :

This makes no sense. It's like the author has zero knowledge of the relevant history, including things I learned in high school American history.

Don't read it unless you want to get dumber.

At the very least, here's some of the missing real-world context.

The Mann–Elkins Act made the telephone system a common carrier in 1910, fully 11 years before this scenario. You couldn't legally "have their legal permission" for this practice.

100 years ago would have been part of the trust-busting of Taft and Wilson, at the end of the Progressive Era. AT&T had to do business bearing that in mind - something Google doesn't have to do now.

More specifically, AT&T and the US government even had an out-of-court agreement concerning possible monopoly behavior - the Kingsbury Commitment - that ended with the Willis Graham Act of 1921 which said the ICC could regulate AT&T as a natural monopoly. Google doesn't face that now.

"PRESIDENT: [Clearly alarmed] Monitor every call? Are you joking?"

One operator per phone call = very expensive. Ads won't pay for that.

There wasn't the automation ability to play those recorded advertisement. As it was, a vast army of switchboard operators was needed just to make the system work.

"we give out the number of another beauty salon instead"

They wouldn't be surprised. That's exactly what happened. That's supposedly the reason for creating an early automatic telephone exchange. https://en.wikipedia.org/wiki/Strowger_switch The quote attributed to him is: "No longer will my competitor steal all my business just because his wife is a BELL operator."

"You will bankrupt all of these businesses. .. That’s why we cap it at 25%."

AT&T knew how to extract a profit. Quoting https://www.cybertelecom.org/notes/att.htm

] "Having secured its monopoly position, AT&T engaged in the 1880s in a series of rate hikes under the justification of expanding the service. The public faced with no alternative service responded negatively. Responses included establishing legal authority to regulate the rates (See Common Carriage) and also the establishment of municipal networks."

Had AT&T taken this hypothetical Google advice, the public would have responded even more strongly.

"Well, we already have a word for that. It’s called bribery, Mr. Google"

Are you kidding me? They would have said "It's called lobbying, not pax."

The 1920s C-suite would have had no qualms with the idea of lobbying in the interests of corporate power.

The WP entry for "Lobbying in the United States" even includes a political cartoon from 1889, titled "The Bosses of the Senate" - https://en.wikipedia.org/wiki/Lobbying_in_the_United_States#... , linking to https://commons.wikimedia.org/wiki/File:The_Bosses_of_the_Se... .

We divested our telegraph business ages ago.

WHAT!? They didn't leave the telegraph business until 1991. Here's a copy of their press release. http://www.baudot.net/docs/att--exits-telegraph-biz.pdf .

james_in_the_uk• 5 years ago

Interesting factual analysis. I think the original piece was written as parody of Google, though, rather than as a criticism of At&t per se

mjevans2• 5 years ago

A phone book is literally an alphabetically sorted key-value table. Several tables usually, the secondary one is just on businesses and those might be sorted by a third column of 'type' first.

Indexes for phone books also existed, I forget if they used to be notched in the side like better dictionaries.

duped• 5 years ago

Here's how I'd pitch it

Oil for the lamps of China, but for adverts

pkulak• 5 years ago

I really thought it would be more subtle than that. Google sells its phones, charges for it's phone plan (market rates on both) and certainly doesn't advertise during calls.

Google uses advertising to pay for services with near-zero marginal cost. That's a pretty new phenomenon, so it's not surprising that AT&T never thought to give away ad-supported hardware to use on it's limited capacity, circuit-switched network.

mngnt• 5 years ago

I think AT&T and telephone business are a bad analogy, exactly because Google kind of is involved in the telephone business and does not apply these stratagems there.

For me the point of the article is the strategy Mr. Google uses currently in other fields: They offer you a product for free, a product way better that other (even paid) offerings, to capture the market and to collect data and serve ads inside those products. This doesn´t apply to Android so much, but take Gmail, Google Maps, Search, YouTube. All these services are ostensibly given away for free (like AT&T phones in the article), but have their performance compromised by ads everywhere plus they siphon the user data like a vacuum.

So to paraphrase your criticism: Google doesn´t sell its maps, but pushes the paid listing with larger map icons. Google doesn´t sell its search, but gives adverts when you´d expect the honest best result for your query. Google doesn´t sell the videos (barring the paid offerings), but prepends and interrupts them with ads.

This article just applies these tactics to something we are so familiar with - the phone service.

>services with near-zero marginal cost

I might be loking at this from the point of view of current, digital, automated and interconnected networks, but the way I see it, a phone network has near-zero marginal costs, too. Once you have built the network, your marginal cost per-call are quite low. I´d say comparable to relaying an email or replying to a search query once the infrastructure is in place.

saurik• 5 years ago

I think AT&T and telephone business are a bad analogy, exactly because Google kind of is involved in the telephone business and does not apply these stratagems there.

Users didn't come to expect it, and contrary to the Silicon Valley playbook, it turns out that you actually can charge nearly 100% of people and they will pay you: you don't have to give it away for free to have penetration. To me this is more of a hypothetical on "what if a company like Google (specifically the Google of now) invented phones instead of AT&T?".

tablespoon• 5 years ago

MR. GOOGLE: Oh yes you can—if you’re letting people make phone calls for free. They have no choice in the matter, do they? But that’s only the start. We will match the advertising to what customers are discussing on their calls. So if mom is complaining about her back pains, we pitch a healing ointment or some other medicinal product. If dad is calling about his car breaking down, we tell him about the latest Ford Model T.
VP ENGINEERING: But that’s impossible. How do we even know what people are talking about on their phone calls?
MR. GOOGLE: That’s a great question, and it makes clear how little you have done to exploit your platform. You need to monitor every call, and compile a file of information on every customer.

It kind of ruined it for me to have suggestions like this that were totally impractical with 1920s technology.

MR GOOGLE: That’s just the start. There are a hundred more ways we can make money from phones. For example, people need to find out the telephone numbers of the people they want to call. That’s what we call a search function. Businesses will pay top dollar to be included in the search results.
PRESIDENT: [So shocked he spits out his coffee]: Whoa—do I understand you correctly? When someone calls the operator and asks for the phone number of Judy’s Beauty Salon, we give out the number of another beauty salon instead—and take a kickback for lying?

IIRC, the automatic telephone switch was invented to prevent this very problem. An undertaker invented it because one of his competitor's wives was the telephone operator, and she would route calls for new business meant for him to her husband.

https://en.wikipedia.org/wiki/Strowger_switch

pfalafel• 5 years ago

It kind of ruined it for me to have suggestions like this that were totally impractical with 1920s technology.

This text is not about what could or couldn't be done 100 years ago. It is about today.

hakre• 5 years ago

It's a fantastic story written today. Each recipient can only receive it by realizing the ability to read it - whenever that time is to be found.

This makes the more timeless properties interesting, perhaps.

For example, those who own the tools of production can enter to grab for the large share of the market that can do nothing but not go away until all are free or all are dead.

It's less that this was impractical in 1920s, it's more that each period has the monopolies of its time.

dntrkv• 5 years ago

I get everyone here is on the Google hate-train, but this is just bad. Not an interesting perspective in the least.

renewiltord• 5 years ago

HN is simultaneously the only site dominated by FW: FW: FW: FW: style stuff while also convinced of its superiority. It is enjoyable to see.

vortico• 5 years ago

This is the best story I've read all week. More non-techy people should at least know how Google, Apple, Facebook, and Microsoft work (i.e. their business models), and this is a start to put it in perspective for people who don't normally care about these things.

Jensson5• 5 years ago

People know that companies shows them ads to make money, do you really think they are that stupid?

lelanthran• 5 years ago

People know that companies shows them ads to make money, do you really think they are that stupid?

Well, the majority think that they are the customers (of Google, FB, etc), so ... maybe?

paxys• 5 years ago

I don't think people realize just how expensive and congested these networks were back in the day. Phone calls cost what they did because capacity was a real constraint. It's not that they were all ethical businessmen doing a public service as the article makes them out to be (some old business tactics of AT&T, Standard Oil, American Tobacco etc. would make the most ruthless big tech exec of today blush). They simply could not conceive of a business model where customers could use their service 24x7 because it was impossible to provide it.

You don't even have to go all the way back to the 70s or 80s to see this. We used to pay by the minute for dial up internet and cell phone calls well into the 00s.

The "all you can eat" business model — whether ad-supported or for a fixed monthly fee — is a very recent invention, and is only possible because of massive improvements to the underlying infrastructure (fiber, LTE, cheap servers).

drvdevd• 5 years ago

I do often think of smartphones as being an extended, new age version of the payphone and I guess after reading this - the ATT equipment. Since you don't really own the device it is very similar in a sense. It feels like the same model with the capacity just shifted around...

yftsui• 5 years ago

Fiber is the most amazing invention from last century. Want to see what it was like in the 00s? Visit Yellowstone and stay inside for a night, during busy hours even phone calls are prioritized.

zxcvbn40382• 5 years ago

I remember a business trip to NYC in the early ‘90s, I got settled and dialed in to do some work, and after thirty minutes I started getting visits every ten minutes from the receptionist, concierge, and a maintenance worker who came as a group to “fix” my off the hook phone. This went on for several hours before they gave up. They never admitted it but I suspect the hotel only had 2-3 phone lines. Not soon after when I moved there I remember initially it cost ten cents each to make a local call.

Everything in NYC at the time was cash-only and metered. No refills on drinks. Ketchup packs were are a quarter each. I never saw so many hands out except for India. The people were much nicer in India, in NYC it was more your classic Klingon style “Buy something or die!”

ridaj2• 5 years ago

I believe AT&T long subsidized its local operations with revenue from long distance operations. This took advantage of businesses' higher willingness to pay for long-distance in order to subsidize local access networks (as opposed to reinvesting all the long distance profits into more long distance capacity). It stopped not just because of capacity increases but because the govt created the incentive for competition in long distance, and imposed a ramp-down of the local access subsidy. When ISPs allowed ordinary people to finally communicate with the world without paying huge rates, AT&T successor companies fought hard in the 90s for Internet dialup to be treated like "interstate calls" because they made more money on them that way. If we were living in AT&T's internet, we'd pay more to access the websites that are far away, not because it costs more, but because business customers are willing to pay enough for it that it makes it more profitable than giving it for less to consumers.

fragmede• 5 years ago

Interesting to consider how CDNs would work in that world!

djweis• 5 years ago

I have a book that covers this in great detail - The Deal of the Century. You're correct that long distance subsidized local service.

hellbannedguy• 5 years ago

It seemed like it was a few months after the government broke up the telephone monopoly; prices dropped dramitatcilly.

I know this on a personal level.

I had a crazy friend in college who thought BHT (the preservative) could cure AIDS.

His phone bill was $350-500/month. He would call researchers around the country, even Dr. Fauci. (Fauci actually listened to him once, until he found out he didn't have any credentials.) He once called France to speak with a researcher at work, over Rock Hudson's treatment. The small business owner came in steaming. He said, "Who called France. The call cost me $500.00!"

Everyone was complaining about long distance charges.

It literally seemed like in was a few months after the breakup, and long distance calls were dirt cheap.

(It might have been longer than months, but it felt that way. It was then I realized the important antitrust laws, and how monopolies need to be slapped down.)

BrandoElFollito• 5 years ago

In France the company Free (internet), and then Free Mobile (mobile telvo) made revolutions by ultra cheap prices.

The heavy ISPs went to the government literally crying that it will break their business and they will lay off thousand of people.

They were sent away, wiped their tears and changed the price of a mobile contract from 80 to 10€.

They are still there and the customer is happy

B1FF_PSUVM• 5 years ago

how expensive and congested these networks were back in the day.

And the reason for that is that basically you needed a wire connecting from one phone to another: https://en.wikipedia.org/wiki/Circuit_switching

On the way to modern day digital packet switching (where you just send the bits for millions of connections down massive capacity pipes) there was multiplexing, etc. but it was a long and hard road.

jay_kyburz• 5 years ago

This is not a good analogy at all for so many reasons.

Here is something closer.

Google went to University and read all books and created the worlds largest filing cabinet with an amazing index of the worlds information.

They decided to allow other students to use the index to help track down the information they need for their assignment. They ask Google, where do I find information about X and Google tells them they will find it in some obscure corner of the library they would never have thought to look.

The index becomes so popular that some business people show up and suggest to Google that if people are looking for information about X, they might also want to buy some Y. Google shrugs and says, sure I'll tell them about your product as I send them off to find what they are looking for.

Then Google notices that email sucks (and they fix it), and maps suck (so they fix it). Then they buy the local video store and make it really popular.

But by this time Google is so huge its a mostly out of control monster.

___luigi• 5 years ago

100%.

I recently read "Software Engineering at Google" https://www.amazon.com/Software-Engineering-Google-Lessons-P..., and my take away was that engineering culture matters a lot to drive any success and innovation. Those who work there have the freedom to challenge anything, to steer the product, and as a result, find opportunities as described in the previous comment and fix it. The management works on shaping that innovation.

There is a graveyard in most Telecom company. ATT bought ad tech business AppNexus and media giant WarnerMedia back in 2018 (stone age of the internet) and didn't manage to operate it well, it's not the only one, Verizon has heavily in ad tech and media companies such as Yahoo!, but none of these companies brought the same internet culture shifting in the market as Google/FB/.. etc. We all love to hate social media companies, but these companies managed to tap into the opportunities presented and -arguably- didn't stop innovating.

kwertyoowiyop• 5 years ago

No wonder Google has so many messaging apps!

/snark

Gunax• 5 years ago

I think the reference is to gmail, where Google famously placed ads based on the email's content and not search.

marstall• 5 years ago

I think the core of the analogy is solid, that both AT&T and Google are monopoly providers of communications infrastructure - with divergent growth paths and business models.

To me the spoof does a good job of outlining how google's model is inherently somewhat predatory, and is that way precisely because it grew by starting out free.

It's intriguing to consider that the important public service of searching for services and products (which is most of Google's revenue) could be financed in a more transparent and straightforward way.

Jensson5• 5 years ago

Every search engine uses ads to monetize itself. A search engine you paid for wouldn't get enough users to pay for itself, since the cost of indexing the internet is huge. Youtube is the same deal, there are more ads when watching cable TV you paid for than watching youtube. You can't say that Google made the ad situation worse there either. So Google isn't pushing ads into new areas, Google is just running a normal business and applying the normal ways to monetize the areas it operates in. It just so happens that they are the biggest web business around and on the web you monetize with ads, but they weren't the ones starting that trend.

robertlagrant3• 5 years ago

This is all true, except for the user data part. If Google were a billboard company that tried hard to get people to look at its billboard, that's fine. If they're constantly observing by scanning emails, calendars, browsing and location data that's another.

Jensson5• 5 years ago

Data collection is standard procedure as well. Most ISP's keeps a record of every website you visit, most net providers keeps a record of all locations your phone has visited etc. Only difference is that most companies just sells these to some data broker like Equifax or similar while Google uses it for their own purposes.

mywittyname2• 5 years ago

Honestly, I'd rather look at subtle Google ads than the large, brightly-colored eye-sores that span our landscapes selling adult book stores, fast food, and Jesus.

zw123456• 5 years ago

Maybe some people don't remember or is was before their time, but for many many years, you could not actually own your own phone. You had to lease your phone from the phone company. It was not until the Carter Phone decision that paved the way and forced the phone company (Bell Telephone / AT&T, not Today's AT&T) to allow someone to attach their own device to the Phone companies lines. The Carter phone was one of the earliest modems and it was not even electrically connected to the wires it was acoustically coupled. But really they just did not want people using their network that way. The network design was based on a average holding time of 2 minutes per call, but once people started using it to transmit data between computers and people or between computers, the holding times went through the roof forcing them to spend a lot of capital to keep up with the demand. Maybe the analogy is more similar to wireless carriers that lock their phones ?

I am not sure there are any exact analogies here to Google or anyone else. The phone company was, prior to 1984, considered a natural monopoly and was given special exception from antitrust laws. Google is in no way considered a natural monopoly, although some could argue that the DoJ looks the other way just a little bit when it comes to some of the Tech giants, I will leave that argument to others to hash out. But in no way are they sanctioned to the degree that the Telephone companies were in the early days in my view.

trabant00• 5 years ago

Like any analogy you will love it or hate it depending on your starting position on Google's practices. I hated the format though, good dialogue is hard to write, just make your points simply and directly.

personjerry• 5 years ago

Started like a fun dialog but got boring quick; No novel substance.

Tl;dr: This article tries to explain Google's ad driven business model, but in more words.

wombatmobile2• 5 years ago

Whatever happened to google's founders, Page and Brin?

Did they make any public comment when google dropped the moniker "Don't be evil"?

Have they spoken publicly in favour or against "surveillance capitalism" or whatever you want to call the business model, as practised by google contemporaneously?

ocdtrekkie• 5 years ago

Larry Page has been rumored to be chilling on his own personal island at this point like a movie supervillain.

Note that while Brin and Page are no longer accountable to anyone and don't speak up because they're "retired", as Google's controlling shareholders, they're still completely in charge of Google.

wombatmobile2• 5 years ago

Yeah I'm surprised it's not more of a thing that google search turns up almost nothing about its founders since the company dropped "don't be evil".

And since nobody has commented here about what they think of dropping "don't be evil", I'm beginning to wonder if any journalist has ever asked them.

And if no journalist has ever asked them that question, I'm wondering what has happened to journalism in the world.

77737772• 5 years ago

Kinda brilliant actually - convincing the AT&T guys of yore to give away everything for free so you can inject ads into a phone call. Yeah, that would certainly be met with disbelief, anyway I gotta go "skip some ads" on YouTube I'll talk to you later.

chubot• 5 years ago

FWIW I pay for YouTube Premium and it's so worth it. No skipping ads.

I wish Google would do that with everything. Allow me to see zero ads by paying.

77737772• 5 years ago

What do you reckon the monthly fee would be? Targeted ads by search is quite lucrative...

mywittyname2• 5 years ago

There's a bit of irony here, considering the "you too" model allows people to pay a monthly fee to skip the ads.

Maybe the AT&T those guys could teach something to these young'uns today.

cblconfederate• 5 years ago

Imagine where the world would be if ATT had taken that advice, everyone in the world having free communications so much earlier.

The problem with google is not advertising itself, but the heavy dominance they have on the advertising industry

raldi3• 5 years ago

And just think—we can sell the information we collect to other businesses. Or to the government or the police department. Anyone, really, who’s prepared to pay.

So sick of this lazy attack on Google. If they'll sell your data to anyone who's prepared to pay, where do I sign up to purchase your search history?

Edit: If you're downvoting, please also reply.

throwawayay022• 5 years ago

You need just some millions to your name and to contact their sales people. But to protect themselves it will be sold in a way that makes it useful to you and still have plausible deniability. Like Facebook letting you advertise to users that liked or saw something, instead of just straight telling you who they are, though it is trivial to do so with some tracking on the website.

raldi3• 5 years ago

It's a big backpedal from "Google sells your data to advertisers" to "Google allows advertisers to target groups with particular interests, and in the extremely unlikely event that they guess what group you're in and you click the ad and they're able to match your IP or browser fingerprint to somehow identify you, then they might be able to infer some of your data."

beardyw• 5 years ago

Here in the UK the phones themselves were "free" in as much as anything ever is. The cost was included as rental in your service agreement.

The problem for Google was that the web was largely free even when they started. To have launched a paid for service would never have worked even if they wanted it to.

theandrewbailey• 5 years ago

Here I was thinking that they would randomly discontinue features and products, like caller ID and answering machines.

Zababa• 5 years ago

Well, we already have a word for that. It’s called bribery, Mr. Google.

Is the author implying that they weren't doing this kind of thing before? That sounds ridiculous.

If AT&T Had Managed the Phone Business Like Google

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