United States. Congress. Senate. Committee on the.

The Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) online

. (page 21 of 140)
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reports can be easily prepared. Likewise, the whole process ojf warehousing and
shipping can be automated and help reduce the very high cost of food distribution.
I believe the information revolution will have a greater impact on the ordinary
citizen and the environment within which we live than atomic energy or. iii
fact, any other technological development for the rest of this century." Almost
everyone will be affected more or less dramatically bv computers, including the
use of their leisure time.

The number of computer installations that exist todav represents only two to
three percent of the total computing power that will be in place 10 years from
now. So, to those of you who are concerned about not being able to understand



5052

some of the current computers, don't worry about them. Just start thinking about
the ones that will be around five and ten years from now. The only limiting factor
to this projection is cost, and all the indicators as shown by the previous graphs
clearly demonstrate that the cost factor is headed in the right direction — down.
The third part of this presentatio on the consequences of the application of
new technology on the quality of life will now be developed.

My friend, Dr. Eugene Fubini. has proposed a law in four phases that defines
the consequences of the application of new technology on the quality of life.
His first phase states that when a new technology is developed, the first thing
people do is to use the new technology to do what they did before but only do
it better, (see figure 13). For example, the internal combustion engine was
first used to take the place of horses, and created the horseless carriage ; like-
wise, television initially took the place of a teacher in a classroom.

In the second phase, man thinks of new things that have not been done before.
Re-examining the internal combustion engine one observes that buses and trucks
were created and also plows and other agricultural machinery to take the place
of agricultural workers. In the case of television, movies were adapted to the
media, and of greater significance TY brought live news into our homes every
day. TV certainly has changed the whole pattern and style of political campaigns.
The third phase provides that our life style be changed to match the tech-
nology. The internal combustion engine made possible supermarkets, major
shopping centers, and suburbs. With television children now stay home and watch
television rathe, than go out and play. What is essentially created for them is a
vicarious type of experience through television which the school was supposed
to supply to the pre-TV-aged child.

These effects laid the foundation for structural changes in our lives. For
example, the internal combustion engine not only enabled the creation of suburbs
and supermarkets, but also started a population shift of poor people moving
from the country into the cities as they were displaced by agricultural machinery,
filling the spaces in the cities vacated by the exodus of the wealthy who were
moving into the suburbs. Therefore, in a way it may be observed that the internal
combustion engine was the cause of fhe ghettos.

Which leads to the fourth phase— out of tliese social consequences a new cul-
ture is formed. It is predictable that the video telephone will eventually signifi-
cantly reduce travel by automobile and airplane. This development will occur
as we gain the ability to say over the phone "show it to me," which will lead to
more visits by communications media than by physical transportation.

Let use examine the consequences of the application of computer technology
as it progresses through the four phases of Fubini's Law. Refer again to figure 13.
Initially, the computer did what was done before— only faster. It replaced large
numbers of people who solved problems on calculators. And it wasn't too long
before we could do things that had not been practical or possible and computers
were applied, for example, to planning all facts of construction and road build-
ing, in complex control sy.stems, to machine tool controls, guided missiles and
space flights. And now with the low cost minicomputer and microcomputer, we
foresee a change in our life style. For example, the credit card economy is the
first step in the creation of a totally new life style in which money need no longer
be carried. In the banking industry, this is a very serious matter, because banks,
along with all other financial institutions, are deeply concerned with their future
role in society. I am sure that your banks, like tho.se in the United States and
in Japan, are examining all methods of electronic fund transfer and are re-
searching ways in which banks can be involved in the cashless society. Without
a doubt, we will change our life style to accept the new applications of computer
technology. Quite frankly, no one can foresee the social consequences that will
derive from this formidable dynamic force.

Let me bring the work of another friend and expert to bear on the subject.
Dr. C. C. Gotlieb of the University of Toronto has written a book with Dr. Allan
Borodin and they have made some very interesting observations on the spectrum
of problem areas with regard to computers. See figure 14. There is a progress-
sion or scale from the technical pedagogical and management problems at one
end of the spectrum of problem ireas. to social, ethical and philosophical prob-
lems at the other. The spectrum changes from well-structured, unambiguous
formulated problems at one end to those that are more loosely defined and poorly
understood at the other. If there are completely defined abstractions of physical
systems or if the actual system can be studied and modified, it is possible to pose
some interesting technical questions with the hope of getting reasonably precise



5053

responses. If mathematical reasoning or experimental techniques can be applied
to answer questions, or if solutions may have measurable accuracy, we are
closer to the left end. As we move to the right from the physical and mathematical
sciences into the social sciences of economics, sociology and political economy,
the responses become less precise and more philosophical. Here the problems might
better be described as issues and the advantages and disadvantages of various
courses of actions debated. Solutions, or better, the resolutions, depend on agree-
ment among values, goals and techniques. At the end of the spectrum are ethical
and philo-sophical questions which we cannot answer but we can only hope to
illuminate the issues by examining semantics of the terms involved.

I have presented a brief overview of where information technology stands in
the spectrum of problem areas. They are predominantly on the left side and
middle of figure 13. The technical, managerial and economic problem areas are
well in hand ; however, the legal and political areas are not even adequately de-
fined, while the ethical, social and philosophical areas have hardly been
addressed.

In its short span of 25 years, the computer has pervaded to a greater or lesser
degree every activity of business, government, education and industry, but with-
out exception has affected them all appreciably, and the potential applications
liave liardly been tapped. Other liistory -making advances in technology may be
dwarfed in importance by the influence of the computer on our lives and our
environment. There is no doubt that the information revolution will affect the
quality of life. It remains to be seen whether the information revolution will
improve the quality of life and we must all share the responsibility for this
consequence.

You have been a most attentive audience and thank you for inviting me.



5054



WORLD POPULATION
1650-2000





bUUU
5600














/




5200














/




4800
4400
4000
3600
3200
2800
2400














/
















/
















/


z
o

_l
J














/














/


z
o














/














1


r


o

Q.












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2000
1600
1200












/
















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^








800

400

n


.


■—


-^



























1650 1700



1800 1850 1900

YEARS



1950 2000



5055



INCREASE IN TRAVEL SPEED



10,000 —



1 ,000 —





MANNED 1





SATELLITES V





X-I5*




EARLY JET 1




FIRST /





TRANS-ATLANTIC «/
FLIGHT /




automobile/^




HORSE DRAWN >^STEAM


-


COACH^**^^ locomotive


SMALL SAILING


^^^^^^^""^


"■^■^■^■^' —


""^


MAN ON FOOT (3mph)
'^ 1 1


1 1 1



Fig. 2



5056



TELEPHONE COMMUNICATIONS
1880-1985



170
160
150
140
130
120
110
100
























1












1












1












~T~












1










j












/












/




9U
80
70
60
50
40










/












/












/






















1












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20
10
n








^












"^^






J


^


1


1


1


1



1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

YEARS



Fig. 3



5057



THE SPEED OF CHANGE



•INTERVALS BETWEEN DISCOVERY AND APPLICATION
IN PHYSICAL SCIENCE



EM



•;; } PHOTOGRAPHY ( 112 YEARS)

I.. . I TELEPHONE ( 56 YEARS I

I • 1 ELECTRIC MOTOR ( 65 YEARS

RADIO ( 35 YEARS) ;?:''":' :'"":'^



VACUUM TUBE ( 33 YEARS i (V



X-RAY TUBE ( 18 YEARS) [!|w!|SA|

RADAR ( 15 YEARS i f .:1
TELEVISION ( 12 YEARS . [T'^x^
NUCLEAR REACTOR ( 10 YEARS 1 FW]
ATOMIC BOMB ( 6 YEARS) 1^1

TRANSISTOR '5 YEARS)E3
SOLAR BATTERY ( 2 YEARS !(}
STEREOSPECIFIC RUBBERS AND PLASTICS ( 3 YEARS)rl

I I I __j I I y



EXPONENTIAL GROWTH OF SCIENTIFIC KNOWLEDGE



SOURCE: NATIONAL EDUCATION
ASSN. . USA




5058



EXPONENTIAL GROWTH OF SCIENTIFIC KNOWLEDGE



TECHNOLOGY HAS MULTIPLIED BY

10 EVERY 50 YEARS FOR

OVER 2800 YEARS









ZZi.



M.






TIME
SOURCE; NATIONAL EDUCATION ASSN. , USA



EXF»ONENTIAL GROWTH OF SCIENTIFIC MANPOWER




SOURCE: NATIONAL EDUCATION ASSN., USA



WHAT IS INFORMATION TECHNOLOGY




5060



WORLDWIDE COMPUTER MARKET

(U.S. BASED MANUFACTURERS)

FOR 1955 TO 1975




5061



TREND IN MINI COMPUTER CPU PRICES




1972 1973
YEARS



MAXIMUM MAIN MEMORY CAPACITY AVAILABLE IN
LARGE COMPUTER SYSTEMS




1974 1976



5062



REDUCTION IN COMPUTATION COST FOR A COMPUTER WITH
10,000 OPERATIONS/SECOND CAPABILITY




J \ \ L



I960 1962 1964 1966 1968 1970 1972 1974 1975

YEAR



SOURCE: AUERBACH COMPUTER TECHNOLOGY REPORTS



CONSEQUENCES OF THE APPLICATION OF NEW TECHNOLOGY



FUBINI S LAW

1. CX) WHAT IS BEING DONE - ONLY BETTER.

2. DO WHAT WAS NOT DONE BEFORE.

3. CHANGE LIFE STYLE TO MATCH TECHNOLOGY.

4. SOCIAL CONSEQUENCES FORM A NEW CULTURE.



5063



SPECTRUM OF PROBLEM AREAS WITH REGARD TO COMPUTERS




SOCtAL ISSUES IN COMPUTING. GOTLIEB AND BORODIN



THE INDUSTRIAL REORGANIZATION ACT (S. 1167)
(The Computer Industry)



WEDNESDAY, JULY 24, 1974

U.S. Senate,
Stjbcommittee on Antitrust and Monopoly

OF THE Committee on the Judiciary,

Washington, D.C.
The subcommittee met at 10 a.m. in room 2228, Dirksen Senate Of-
fice Building, Hon. Philip A. Hart (Chairman of the subcommittee)
presiding.

Present : Senators Hart and Hruska.

Staff present: Howard E, O'Leary, Jr., chief counsel; Bernard
Nash, assistant counsel ; Janice Williams, chief clerk ; Peter N. Chum-
bris, minority chief counsel; Charles E. Kern, II, minority counsel;
and Michael Granfield, minority economist.

Senator Hart. The subcommittee will be in order.
The first witness this morning is someone who has testified in earlier
days before the subcommittee, Mr. Jack Biddle, the executive director
of the Computer Industry Association. We welcome you back.

STATEMENT OF A. G. W. BIDDLE, EXECUTIVE DIRECTOR,
COMPUTER INDUSTRY ASSOCIATION, ENCINO, CALIF.

Mr. BiDDLE. Gentlemen, we appreciate this opportunity to appear
before this committee to present our testimony on what we believe to
be an issue of critical importance to both our industry and our Nation.

Although my statement is rather long, I will endeavor to summarize
it. Senator.

Senator Hart. We'll have it printed in full.

[Mr. Biddle's prepared statement appears at the end of his oral
testimony as exhibit 1.]

Mr. Biddle. The Computer Industry Association represents 40 mem-
ber companies with combined annual revenues in excess of $1.5 billion
and employing more than 40,000 people.

Our individual member firms range in size from under $1 million
in annual sales to something in excess of $200 million. We have
attached a list of our member firms to our testimony.

Their products cover the full spectrum of goods and services asso-
ciated Avith computers and data processing; main frames, memories,
tape drives, disk drives, printers, data entry devices, terminals, soft-
ware, and services such as leasing and systems consulting.

( 5065 )



5066

The association was formed 2 years ago this month. Its objective
then and now is to endeavor to bring about free and open competition
within the computer and data processing industry ; an industry that
has, since its inception, been dominated and controlled by one com-
pany — IBM.

In many respects our association was born of frustration. Its found-
ers had come to realize that no matter how superior their technology,
or how good their product, sales, or service, their existence as viable
companies would remain at the sufferance of the industry giant.

Our founders frustrations ran even deeper. One Federal antimonop-
oly suit against the giant resulted in a consent decree that did little
to reduce the defendant's market share or power.

Another suit was filed on the last day of the Johnson administration
and for more than 3 years nothing had happened to bring it to trial.

We feel that the time has come for some decisions. If we, as a nation,
believe in the concept of competition and in the benefits of a free enter-
prise system, then we must take steps to make that system work.

The legislative mandate must be clarified and the enforcement ma-
chinery modernized and streamlined. The entrepreneur must be able,
once again, to succeed or to fail on his own merits.

He should not be kept in business through governmental interven-
tion if his activity is not providing economic benefit nor should he be
put out of business by a monopolist when his existence benefits the con-
sumer and the Nation.

We believe that free and open competition between near equals is
good for producers, consumers, and the economic health of our Nation.

That others share this belief is borne out in part by the fact that
our membership has increased by a factor of five since we appeared
before this committee 1 year ago.

Since that time a lot has happened. Our association has asked the
Office of Management and Budget to double the allocation for the
Justice Department's Antitrust Division.

We have endorsed in testimony the Tunney bill, which requires pub-
lic access to the consent decree process. We've asked the Department of
Justice to seek interim relief pending the outcome of the U.S. v.
IBM case.

We asked the Federal court in Tulsa, Okla., to insure that IBM docu-
ments introduced into the public record as evidence would not be
destroyed.

We are actively pushing for standards, both domestically and
internationally, to promote the interchangeability of computer equip-
ment and to increase competition in the computer industry.

We recently offered $50,000 as seed money to form an independent
computer users association so that the user could be represented at
hearings such as this.

We have asked the Congress to amend the Public Utilities Holding
Company Act to include telephone holding companies; and we have
endeavored to stimulate informed public discussion of the problems
of concentration in our industry and of possible solutions that would
serve the best interests of the three constituencies : users, competitors,
and investors.

In this regard, Senator, we did hold a background briefing for the
Washington press corps day before yesterday seeking to encourage
their attendance at these hearings.



5067

I would like, if I may, to enter tlie materials distributed at that
conference into the record at this time.

Senator Hart. They will be received.

[The materials referred to apj^ear as attachments to exhibit 1.]

Mr. BiDDLE. Some of the items include a reprint of a recent article
in Harper's magazine, along with the ensuing letters to the editor;
statistical data on the industry; a glossary of terms so that the lay-
man can understand some of the terminology that we frequently use.
in this industry; advances for release on the statements of myself and
Dan L. McGurk, and reprints of articles from More magazine; Elec-
tronics magazine and Business Week.

In addition, during the past year, IBM was found guilty of monop-
olization and attempt to monopolize by a Federal district court in a
private antitrust case and preparations for the trial of U.S. v. IBM
have accelerated with the trial due to begin this October.

In the meantime IBM has become more, not less, aggressive. Their
unilateral control of the marketplace remains intact and the prospects
for near-term relief for our industry continue to be dim.

For this reason our association came to this committee and asked for
an opportunity to testify. Relief for our industry through the applica-
tion of the antitrust laws is still many years away.

The fact that this committee is holding hearings on this critical
industry is encouraging, as is the fact that the House and Senate have
acted favorably on the Antitrust Division's budget request.

However, for the problem before us to be solved it must first be
understood. In the hope that we can contribute to the deliberations of
this committee we would like to make the following key points.

One, the computer, as we heard in yesterday's testimony, has quietly
revolutionized life in America. In doing so it has become the central
nervous system of our entire economy.

Two, the computer industry is dominated and controlled almost in
its entirety by one company, IBM. The extent of their monopoly con-
trol is second only to that of A.T. & T.'s over the telephone industry.

Three, the maintenance of their monopoly control is based upon a
number of interlocking strategies, some subtle, some markedly preda-
tory.

Four, IBM's continued control over the computer industry enables it
to control the central nervous system of our Nation's economy, repre-
senting what we believe to be, as citizens, a real and dangerous threat
to the United States.

Five, the elimination of monopoly power and control of this industry
requires an understanding and appreciation of the subtle strategies
and techniques used to maintain it.

Six, our present antitrust laws and enforcement procedures appear
unable to effectively deal with the problem.

The first commercially built computer, the Univac I, was delivered
to the Bureau of the Census in 1951. In little more than two decades
the computer has, in fact, had major and far-reaching impact on our
Nation and our way of life.

To a large extent the computer has made advances in other tech-
nologies possible. It has taken over the boring and repetitive tasks and
freed man's hands and mind for more creative work.

As each day goes by new applications are found for these wondrous
machines. New tasks are performed with lightning speed and accuracy.



5068

In many respects this revolution has occurred quietly. Few of us ever
see a computer. We're almost totally unaware of the literally thou-
sands of computers installed and operating in our country today.

As Mr. Parkin of CDC told us yesterday, computers sort our mail,
schedule our airlines, process our checks, control our electric power,
print out our paychecks, and calculate our bills.

Wall Street, the Federal Government, the defense establishment,
our transportation system, our banking system, our utilities and our
manufacturers, are all totally dependent upon the continued operation
of their data processing equipment.

It has taken us two decades to convert, from clerks and reams of
paper to the high-speed processing of millions of pieces of information
contained in a single magnetic tape or disk.

The task of reversing this process, should it ever become necessary,
would be virtually impossible. There is no going back.

Today the smooth functioning of our Nation's economy is synony-
mous with, and wholly dependent upon, the smooth functioning of
our installed base of electronic computers.

Unfortunately, a situation has developed that threatens the operation
of this key national resource. In the computer field, the lack of
standards has made the interchange of equipment and media between
systems difficult and inefficient.

Few people not intimately involved with our industry are cognizant
of the fact that each computer center is unique unto itself. There is
simply no way to borrow the computer next door.

This is equally true of an auto manufacturer's assemblyline, an
airline's reservation system, or Federal Reserve banks clearing
operations.

In each instance they must rely upon their computer system supplier
for systems service and support. There is no other alternative.

The significance of what I've described above becomes clear when
one realizes that 7 out of 10 computers in America today were produced
and are serviced by one entity, IBM.

If, for the sake of illustration, their field service organization were
unavailable for 2 weeks, our Nation would slowly and inexorably
grind to a halt.

The transportation system, the banking system, the communications
system, and the Fortune 500 manufacturing companies would all cease
functioning — layoffs would be in the millions — creating chaos beyond
comprehension.

Personally, I know of no other single corporation in the world with
this much potential power over a nation's economy. Although they
surely wouldn't abuse it, the very possession of this much power in
the hands of a few people is frightening.

It is all the more so when one realizes that few Americans, including
their Representatives on Capitol Hill, even know that it exists.

It is, I believe, important for the committee to understand how
this situation came about. The computer industry can be a classic case
study through which some important lessons might be learned about
the monopolization of high technology industries and some insights
gained as to the effectiveness of existing antitrust laws in our present
environment.



5069

Tomorrow my collea<iue, Dan L. ]\IcGurk, will comment on some
actions that this committee and the Confrress mi<rht take to rectify
this situation.

Althonofh most jieople associate the be^rinninrrs of the computer
industry with the first commercial Univac I, the data processing in-
dustry as we know it is an extension of the punched-card tabulating
machine industry, an industry that goes back to the 1930's.

Judge Earl R. Larson, in deciding the HoneijweJh Inc. v. Sperry
Rand case^civil action 4-67 CIV 138, U.S. District Court, 4th Dis-
trict, Minnesota — recognized the transfer of market control that took
place during the transition from punched-card equipment to digital
computers.

In his findings of fact and conclusions of law, Judge Larson said :

In 1956, IBM was the principal U.S. supplier of 80 column tab card equipment.

The tremendous customer base which IBM had because of its domination of
the tabulating industry had a good deal to do with its position in the early
days of EDP industry, and * * * gave them the predominant role, which has
tended to perpetuate itself.

Further, he went on to note that in 1956, IBM shipped 85 percent
of all new equipment. "At the end of 1956. IBM had 75 percent of
all EDP systems outstanding" in America.

Against this background it is important to note the Department
of Justice filed an antitrust suit against IBM on January 21, 1952.

The Government suit charged IBM with monopolizing the tabulat-
ing machine industry and engaging in various restrictive practices
in the conduct of business.

At the time the Government action was filed, and for some years
thereafter, IBM had about a 90-percent share of the tabulating equip-
ment business.

On January 25. 1956, the U.S. District Court for the Southern
District of Xew York, Judge Edelstein presiding, approved a consent
decree entered in the case of the United States v. IBM.

The decree contained numerous remedial provisions directed at



Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 21 of 140)