Service Providers

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Service Providers

Telecommunications service providers are the companies at the heart of the telecommunications industry. They provide people with the means to communicate with one another by telephone, mobile phone, and the Internet. Telecommunications service providers also make available cable or satellite access for television and computer connectivity. Service providers are constantly trying to locate and build solutions that will tie organizations and individuals together no matter what their locations.

Early Telecommunications Service Providers

The first identifiable telecommunications service provider was the telegraph office of the late 1800s. Telegraph offices were typically owned or operated by the U.S. federal government in conjunction with local and state authorities. They provided the first end-to-end connectivity of wiring to enable instantaneous communication between two distant points. These simple telegraph offices created the foundation for modern day commercial telecommunication organizations.

One of the most notable service providers, Bell Telephone Company, dominated American communications for decades. This organization became the leader in wiring the country with telephone service and providing dial tone, call connectivity, phone services (e.g., call accounting and consolidated billing), telephone equipment, and simple yet expensive connectivity for a large number of private corporations that were starving for connectivity to tie their slowly evolving information technology infrastructures together. Bell Telephone remained dominant until its final breakup in 1980. The U.S. government determined that its grasp on the telecommunications industry was monopolistic in nature, obstructing competition and innovation.

Deregulation of Telecommunications

The breakup of Bell Telephone was a first step in opening the industry to competition for all telecommunications systems of the United States, but there was still work to be done. By 1995, despite government intervention, there were still a finite number of service providers trying to compete in a heavily regulated industry. However, the type and number of innovations needed to propel the world into the twenty-first century were emerging far too slowly to handle the needs of the customers and the organizations they operated. At that time, the Internet was ready to explode in popularity, and the speed of connectivity was an issue and concern that slowed its deployment. Without further deregulation , the telecommunications infrastructure did not respond quickly enough to the demands for change.

The U.S. Communications Acts of 1995 and 1996 were designed to address this concern. These acts have set the stage for the continuing technology revolution still being experienced today. These changes have not come without consequences, and there have been many casualties along the way. The acts opened up new avenues of competition and innovation within traditionally regulated telecommunication markets. It quickly became possible to purchase bandwidth , or the speed of connectivity, from the lowest-cost provider despite customer location. The only limitation was that remote or rural areas of the country did not have the cabling infrastructure to tie it all together, but even that is changing as the cost of running cable has drastically dropped. The wide adoption of fiber optics as a medium to transfer data is making it possible for even the most remote schools and communities to become connected to the global digital world.

Types of Service Providers

There are many service providers of varying types. There are the traditional Internet Service Providers (ISPs) that provide basic access to the Internet and traditional telecommunication providers fighting with large multinational companies for access to local telephone customers in order to provide them with their needed long distance and local telephone service. "Tier 1" service providers (e.g.,,, and UUNET) provide uplinks for smaller ISPs, providing local high speed digital subscriber line (DSL) service or cable modem service to residential and small business customers.

There are Application Service Providers (ASPs) that are connected to the T1 service providers. The ASPs provide collocation services for web sites, web-enabled application servers, and managed private networking for telecommuters who need to be connected to their corporate employers' networks. There are storage service providers whose sole competency is providing high-speed inexpensive storage to corporations, in addition to managed service providers whose core competency is not easily distinguishable as they provide many of the same services noted earlier. This list is not exhaustive by any means and the types of service providers change daily. This list grows almost as fast as the imaginations of the entrepreneurs behind this revolution.

Economic Realities

As a result of deregulation, companies that thought they could provide these types of complex services, and perhaps had an ingenious twist on how to provide it, could enter the market; these efforts met with varying degrees of success. In the stock rush of 1999 and 2000, even technology-driven dreamers with only a mediocre idea could obtain funding. Often it was a requirement to take more money than was needed. The monies were handed out by profit-driven venture capitalists who rushed into a strong stock market hoping to create mind-boggling degrees of wealth overnight.

Many of the venture capitalists and their well-funded entrepreneurs succeeded; however, many core business principles that helped to build traditional, solid companies of the 1980s and 1990s were overlooked in the effort to join the technology bandwagon quickly. In the stock market struggles that began at the end of 2000, most of the poor financial performance was linked with failures of the dot.coms , but the telecommunications industry has also been partially to blame.

Some of the casualties include DSL providers that offer fast connectivity to hundreds of thousands of customers and businesses. The customers, once connected, become dependent on the DSL provider and susceptible to connection interruptions or infrastructure collapses. Unfortunately, several large DSL providers in the market have failed. The companies providing service often carry tremendous debt and must experience continued growth in order to cover payments and expenses. Some of these companies have disappeared virtually overnight, leaving their customers scrambling to find ways to reconnect their business-essential and home-use communication lines. Competition, economic conditions, and market realities shake out the least fit of these service providers; in the end, the strongest few will survive.

Service Providers in the Future

As the telecommunications industry moves forward, new options are becoming available that will change the way people do business and interact with their environments. Throughout the past decade, many companies have begun to build fiber-optic rings within major metropolitan areas. These are typically near most of the major business districts in these population centers. Efforts are underway to connect these high-speed rings across a national fiber-optic backbone. These rings of connectivity are completely unregulated in the traditional sense. It is expected that they will provide the infrastructure that will help revive the industry and replicate the robust growth and innovation of the early Bell Telephone era.

Since the speeds available via fiber optics are unlimited relative to current technical capabilities, it is easy to comprehend how speed of light communications will once again change the vision and direction of telecommunications. Visionary entrepreneurs will develop ways to take advantage of this speed and push the costs of connectivity lower than they are now. These new service providers will make every effort to combine the best of all of the previous providers, providing unparalleled layers and levels of connectivity. Telecommunications service providers, having evolved from telegraph systems to fiber optics throughout the years, continue to be the core of the telecommunications revolution.

see also Internet; Internet: Backbone; Telecommunications; World Wide Web.

John Nau


Collins, Daniel. Carrier Grade Voice Over IP. New York: McGraw-Hill, 2001.

Green, James Harry. The Irwin Handbook of Telecommunications Management. Chicago: Irwin Professional Publishing, 1996.

Halabi, Sam (Bassam), and Danny McPherson. Internet Routing Architecture. Indianapolis, IN: Cisco Press, 2000.

Internet Resources

Cisco Connection Online. Cisco Systems, Inc. <>

Carrier-Class IP Telephony Solutions. Nuera Communications, Inc. <>