A Coalition Creates the Competitive Communications Carrier Category
How the National Telecommunications Network enabled the nascent long distance market
In 1985 Roy Wilkens was serving as president of Williams Pipe Line, a division of The Williams Companies in Tulsa, Oklahoma. An electrical engineer by training, Wilkens had risen through the ranks in the energy industry and now was leading one of the country’s largest petroleum products pipelines. Little did he know that he was about to jumpstart an entirely different industry.
The company had recently decommissioned some older parts of its pipeline and Wilkens was leading a strategic planning exercise to determine how best to grow the company. They looked beyond the energy industry and saw some interesting disruptions in telecom.
From a regulatory perspective, the Department of Justice had just ordered the break-up of AT&T, leading to the emergence of dozens of new long distance competitors. From a technology perspective, fiber optics was emerging as a viable means of transporting telecommunications signals with high reliability and low cost over long distances. Roy and his team recognized the opportunity to build and operate a new kind of pipeline — one carrying bits rather than BTUs.
Many of the new long distance competitors were ambitious entrepreneurs who saw the opportunity to sell long distance voice services to homes and businesses. Prior to the breakup, during weekdays AT&T charged $2.70 for a five minute call from NYC to LA. Nights and weekends the same call cost $1.08¹. These startups believed that they could dramatically undercut those rates and quickly take market share away from AT&T. They also believed that lowering prices would increase long distance use and grow the market, which was already generating over $13B in long distance revenues¹.
Each of these startups raised enough capital to buy a long distance telephone switch and then connected that switch to all the Bell operating companies (Ameritech, Bell Atlantic, BellSouth, NYNEX, PacBell, Southwestern Bell, and US West) that had been broken out of AT&T. The closer they could connect into the Bell networks to where a call was originating and completing, the lower their cost. The scary situation for these startups was that the only company that could sell them the circuits to make all of those connections was AT&T, the very company they were competing against. AT&T had proven its ability over decades to leverage its legal and regulatory might to use pricing tactics, delayed action, and other borderline legal means to starve or crush competitors and maintain its dominance in the industry.
AT&T had spent $billions over many decades to build out its network, mostly using older analog technologies with worse performance than digital fiber optics. When these new long distance competitors ordered a circuit from AT&T, do you think they were provisioned one of the best performing or one of the worst? These tiny competitors of AT&T were desperate to find an alternative.
MCI had been instrumental in forcing the breaking of Ma Bell and was building out their digital microwave and fiber network. Sprint had also announced a 23,000 mile fiber optic network. Both represented an alternative, but both would also be competing with the new long distance players.
Back in Tulsa, Williams didn’t know telecom, but they knew how to build long-haul networks, having built many of the world’s great pipelines (mostly for others), often in record time. They had teams that worked with landowners to negotiate rights-of-way, teams that worked with local, state, and federal governments, teams that negotiated interconnection agreements with other pipelines, and teams that managed complex construction projects. They also knew how to operate long haul networks. The Supervisory Control and Data Acquisition (SCADA) systems used in operating pipelines monitored potentially life-threatening issues so they were much more sophisticated than anything in the telecom industry.
The company also had thousands of route miles of monitored pipelines across the country. The company could not only build inside decommissioned pipe, but also alongside active pipelines. As Wilkens explained to Joe Williams, Chairman and CEO of the Williams Companies, “The biggest single problem in building fiber today is security. Most fiber is being laid on railroad rights of way, and people are digging up drainage structures and around railroads all the time. They only dig around a pipeline once, and pipelines are patrolled and well marked.”²
Wilkens and team still faced significant challenges including convincing Williams to invest the $26M for the initial network build and figuring out how to pull fiber through decomissioned pipe without breaking it, but on May 9, 1985 Williams Pipe Line announced it was building a 1,200 mile fiber-optic network in the midwest — from Minneapolis to Kansas City and Omaha to Chicago. Williams was able to build faster and at half the cost of Sprint and MCI. Soon the new business was extracted from the pipeline company and given the name WilTel.
Part of the fiber build announcement was a partnership with Teleconnect, an Iowa-based long distance startup that former schoolteacher Clark McLeod funded with a second mortgage on his home and money from friends and family. Teleconnect wasn’t the only long distance startup trying to creatively solve the interconnectivity problem. In fact McLeod had been in talks with six other entrepreneurs, each of whom had raised enough funding to build a regional fiber network, but none of whom could afford to build a nationwide network.
For example SouthernNet’s fiber could connect the company’s Atlanta long distance switch to the local Bell companies in Georgia, Alabama, Tennessee, South Carolina, North Carolina, and Virginia, but SouthernNet’s customers also wanted to make clear and affordable calls to the other 44 states. On its own, SouthernNet didn’t have a complete solution, and neither did the other 6 companies.
So, although competing with each other for long distance customers, the seven carriers decided to band together to solve the longhaul interconnectivity problem. They formed the National Telecommunications Network (NTN). Clark McLeod brought Williams into the group. In December 1985 Williams announced a build to the west coast that would make NTN the first nationwide fiber optic network. The group also opened an office in Washington, D.C. focused on lobbying to protect their interests against AT&T’s continuous efforts to reverse their regulatory losses and regain a monopoly position.
The partnership was a huge success. The companies interconnected their networks and figured out the operational details for provisioning a circuit across multiple networks. Each company immediately had the combined reach of its brethren, cutting their costs and improving the quality of their calls. WilTel remained a carrier’s-carrier, not competing for retail long distance customers but selling circuits to all the other long distance carriers and some very large business customers.
For example, WilTel could connect a Los Angeles customer to Miami by carrying that customer on their own network from LA to Kansas City, interconnecting to LDX NET to extend the circuit to New Orleans, interconnecting with Southland Fibernet to extend the circuit to Tallahassee, interconnecting with Microtel to finally complete the circuit in Miami. From the customer’s perspective, WilTel was providing the end-to-end service.
By 1990, WilTel had installed more T1 circuits than AT&T. (A T1 can carry 24 simultaneous voice calls and was the standard circuit for the industry.) NTN’s president, Martin McDermott in Washington was making sure everything continued to operate smoothly and directed the lobbying efforts to protect the rights of the emerging competitive communications carrier industry. And that industry thrived.
Once the industry was firmly established, the partners shifted their focus fully to winning the competitive battles amongst themselves and others. The industry naturally consolidated. WilTel filled out their own nationwide footprint through acquisitions and additional builds, and in time there was no longer a need for the National Telecommunications Network. The new long distance competitors didn’t need to buy from AT&T and they didn’t need to own their own fiber networks since they could buy from WilTel (or Sprint or MCI).
Through the combined efforts of all, long distance prices continued to come down and the market grew. Eventually long distance calls became so inexpensive that they were bundled into unlimited cellphone and broadband offers. Without the collaborative efforts of the NTN members, it’s impossible to know what would’ve happened, but if AT&T had successfully crushed the nascent industry it’s likely we would not have seen the innovation and falling prices that we have all enjoyed.
In 1999, the Telecommunications Reseller Association (TRA) recognized Roy Wilkens as the one person most responsible for bringing competition to the telecommunications industry, but he couldn’t have done it by himself. As Wilkens stood at the podium at that TRA meeting, he asked all former WilTel employees in attendance to stand. Over 600 out of the 3000 in attendance stood. This ambitious group of pipeline guys and gals from Tulsa had gone on to start or help build companies across the telecom industry.³ If he had included other NTN employees, the impact of these collaborative pioneers would have been even more impressive.
¹ 95/96 Statistics of Communications Common Carriers, Federal Communications Commission, 1996 https://transition.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/SOCC/95socc.pdf
² Hicks, Doug. Snapshots in Time: A Collection of Little Stories Punctuated by Big Values, High Adventure, a Lot of Lifes Lessons, and Quite a Bit of Humor about One of Americas Great Companies. Tulsa, OK: Williams Companies, 2002.
³ Stewart, D.R. “Telecoms gushing from old oil.” Tulsa World, July 30, 2000, https://tulsaworld.com/archives/telecoms-gushing-from-old-oil/article_dd8cb42f-357a-5c3a-8ed4-70691e314136.html
