American History 1988-Chapter 186 - 180: Indirect Tactics

The meeting is halfway through, and the situation has become quite clear by now. 𝑓𝘳𝑒𝑒𝓌𝘦𝘣𝘯ℴ𝑣𝘦𝑙.𝘤𝑜𝑚

IBM, due to a combination of the right time and place, firmly controls most of the main lines of the NSF Network.

With these lines, IBM’s ANS division almost effortlessly carries out its network business.

What’s more, its customers are virtually ready-made—those universities, research institutions, and government agencies when choosing a network service provider.

Obviously, IBM is more likely to gain their favor, as these organizations need to consider their data security.

Thus, unknown private service providers find it hard to compete with IBM among these customer groups.

The arrogant IBM, with its unique advantages, haughtily refused to provide data transmission support for other network service providers.

The reason they could be so confident was not only because they owned hardware advantages, but also because of their vested interest relationship with the National Science Foundation office.

Just take a look at the "double standard statement" IBM issued at first, such obvious discriminatory behavior, yet the National Science Foundation remained silent.

Everyone seated here does not believe there are no tricks in the contract between the two parties.

However, suspicion is just suspicion, as some game rules are well understood by everyone.

Moreover, they can’t fall out with each other because no one can guarantee that the National Science Foundation will continue to regulate the Internet after the privatization of the network.

The federal law does not have clear provisions, and the federal government has not made any statements, leaving everything in a fog.

Of course, there is also the fact that a powerful IBM is standing against everyone.

Today, more than a dozen online service providers are able to sit together to discuss ways to deal with IBM.

Since the former has refused everyone and monopolized the NSF Network.

Then everyone will unite to build another network, one that is about clustering for warmth, while keeping IBM out.

"I did a rough estimate," Dean looked at the data in his hand, "members of the Commercial Internet Exchange, all of their users together total more than a million.

This includes government agencies in New York, corporate users in Ohio, and various research organizations in Virginia.

Clearly, most of the computers connected to the network are internal corporate users, with private users only occupying a small part."

The users from New York were contributed by SPI, which initially contracted the operation of the NSF Network locally, with users mostly from universities and local government departments.

The users from Ohio and Virginia were mainly contributed by American Network and UUNET, with users mostly from enterprises.

Though institutional users are mainstream, their engagement is lower than that of private users.

And the rules set by members of the Commercial Internet Exchange are based on time charges, without engagement there is no profit.

The current situation is related to the expensive network service charges.

"As far as I know, everyone’s charging range is roughly between 5 to 30 US dollars per hour, depending on the region and service.

So, to attract as many users as possible, I want to know, is there room for this to drop?"

"It’s difficult for us to lower the cost any further," Adams shook his head helplessly, "UUNET is still in its expansion phase, and we need to invest a considerable amount of funds in hardware construction."

Dean looked at the others; they had more or less the same reason.

"So does anyone have any plans on how to snatch more users from IBM?"

A user base of over a million is not enough to compete with IBM. To become the future leader in the industry, they needed a larger market.

Hearing Dean’s question, Adams shrugged as if it was self-evident, "Of course, we will provide network services in more areas, which will bring us more customers."

"You are laying your own lines, right?" Dean pondered.

"Exactly," Adams and Schrader nodded, "To ensure smooth data transmission, we chose fiber optics for the trunk part, which is very expensive."

Using fiber optics for the trunk line? Of course, that’s very expensive!

For the same length, the price of fiber optics is generally 5 to 6 times that of copper wires!

"Why choose fiber optics?" Dean was somewhat puzzled; since they were complaining about costs, why choose the most expensive option?

"Because the NSF Network’s main lines also use fiber optics." Adams did not see anything wrong with that.

"Is that the reason?" His answer almost made Dean so frustrated he couldn’t catch his breath.

"That’s right, we don’t want users to feel that UUNET’s facilities are much worse than IBM’s, which is not good for business promotion.

Plus, a senator named Gore proposed a ’Information Superhighway’ plan, which also uses fiber optics.

The plan is very popular right now, and everyone is talking about it."

"Oh, God!" Dean smiled bitterly and spread his hands, "That plan is meant for the future, isn’t it too early to follow suit now?

As for business promotion against IBM? For such an insignificant reason, you’ve actually jacked up your own costs by 5 to 6 times!"

"Insignificant?" Adams looked at Dean skeptically, "But IBM..."

"Listen, Adams," Dean gestured for him to hear him out, "No one cares whether you use copper or fiber optics, what users value more is the service.

Moreover, the maximum transmission rate of copper wires can reach 40Gbps. Do you know the fastest transmission rate after NSF Network used fiber optics? 1Mbps!

That’s far from reaching the copper wire’s limit, let alone fiber optics.

The restriction on speed is not the line material, but hardware such as gateways and routers.

The NSF Network uses fiber optics because its transmission distance can reach up to 100km, while copper only has 100m.

For long-distance cross-state transmission, fiber optics indeed would be a better choice.

But most of our business is concentrated within a single state, or even a single city.

At that point, even if we have to use more copper wires, it is still cost-effective."

After Dean’s in-depth analysis, everyone in the room finally had a clear understanding of copper wires and fiber optics.

Adams, who had a certain technical background, also went through several changes of expression, "But they told me that using fiber optics is beneficial for promoting our business."

The "they" Adams referred to was the company’s internal marketing department; he was good at technology but not at management.

So, many of UUNET’s marketing decisions were left to the respective executives.

"Trust me, Adams, copper wire is the best choice for the next five years.

Right now, our primary task is to expand our scale, and the money we save can be used to extend UUNET’s service coverage more broadly.

As for competing with IBM, we can totally do that from other aspects, such as a wealth of online content, lower fees..."

After being guided by Dean, Adams’s eyes gradually lit up.

"Wow, Dean, now I finally understand why you became a startup star?"

"You don’t need to tell me the real reason, I’ve always believed it’s mainly thanks to my handsome appearance!"

Dean humorously replied, causing everyone in the conference room to laugh.

"Alright, guys," after everyone relaxed for a while, Dean went back to the topic.

"To defeat IBM, relying only on the speed of our expansion is too slow.

We need to open our minds, think about where there’s an existing, dense, community-wide copper wire network?"

An existing copper wire network? And community-wide? Everyone unconsciously turned their glances towards Duane in the corner.

The latter seemed to be catching on too, wasn’t this referring to himself?

Seeing Duane puffing out his chest proudly, Dean smirked and snapped his fingers.

"Bingo, congrats on finding the right answer!"

Telephone companies, of course, had abundant hardware resources; their telephone lines were natural data transmission lines.

Don’t forget, in the current era, for the average user, dial-up internet is the mainstream.

"Mr. Duane of Southern Bell, I believe would be very happy to discuss this collaboration with everyone."

At Dean’s cue, Duane, flush with pride, stood up.

Good job, Dean!

Duane was absolutely thrilled with Dean’s words just now; look, business for Southern Bell was coming, wasn’t it?

Duane now was extremely grateful that he had given up the IP telephony market. The internet—that was Southern Bell’s real treasure.

"It’s an honor to take part in today’s grand meeting. Here, I heard a thrilling plan for networking interconnection.

Southern Bell is willing to support this magnificent project; we have local telephone operations in several East Coast states.

So don’t worry about transmission line issues, Southern Bell has sufficient strength to prove its technology is secure and reliable."

Duane’s words were very smooth, but they were all business, through and through.

Because of previous anti-trust sanctions, AT&T took the long-distance telephone business, as well as the ticket to enter the computer market.

The seven divested Bell companies did not receive clear permission to enter the network communication industry.

These subsidiaries also didn’t dare to apply for related services, probably because the anti-trust was not long past; were they afraid that the Department of Justice would forget them?

Additionally, because of the National Science Foundation network’s exclusivity, there was no clear expansion demand in the network communication market.

Therefore, none of the Bell companies felt an urgent need to enter the network communication market, but now the NSFNet is preparing to privatize.

The situation will soon change, and Southern Bell naturally longs for this market.

However, the shadow of anti-trust still lingers, and Duane dared not openly expand into the network communication business.

That was also why he let Dean look for ways to pull Southern Bell into the network interconnection project.

Now the time to reap the rewards had come; Southern Bell didn’t need to take to the field to provide network service to ordinary users.

It could completely partner with UUNET and SPI to provide network support for these companies.

Then UUNET and SPI would distribute the network services to ordinary users’ homes.

All software support and protocol compatibility would be taken care of by the former, with Southern Bell only providing hardware services.

Alright, after the intermediary transition, Southern Bell was not directly involved in the network communication market.

It was more like leasing lines, but it made just as much money.

UUNET and SPI saved a significant amount of hardware investment and accomplished rapid business expansion.

Southern Bell made money without the risk of an anti-trust investigation.

Win-win!

The representatives attending the meeting looked at each other; this was a proposal that was hard to refuse.

Renting lines from Southern Bell would undoubtedly be much cheaper than laying their own lines.

Despite the intimidating background of the other party, they could rent while investing in their hardware.

And the East Coast is not the only place with a Southern Bell; across America, there are hundreds of telephone companies, big and small.

Presumably, they would also not reject this value-added service.

"When do we implement our plan?" Adams and the others were already eager.

"The sooner the better!" According to Dean’s knowledge, Berners-Lee’s hypertext markup language was about to be completed.