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

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joint venture.

In its 1972 Domsat decision, tlie FCC inipo.sed a restriction on the AT&T-
COMSAT arrangement and on GT&E precluding tlieir extension of satellite
systems beyond their existing regulated monopoly business — switched voice
message traffic — for a period of three years from their date of first satellite
operations. This restriction will probal)ly expire in the late 1970's, the same
time frame for the proposed IBM/COMSAT entry.

Western Union will have as its base traffic its monopoly market, the trans-
mission of various forms of record messages ; RCA will similarly have some base
traffic— switched message traffic to and from Alaska — where RCA is the monop-
oly common carrier.

The basic marketplace for competition among Domsat entrants, as established
by the FCC, is the provision of services other than monopoly telephone and
record communications, i.e., the private line transmission of voice messages,
video signals and data. All FCC-approved entrants other than AT&T and GT&E
will be permitted to provide private line service from the outset. The only FCC-
approved entrants without some monopoly — related base traffic — that have
entered or may actually enter that market are ASC and CML.

There are other potential entrants into the private line satellite market, even
though the technological and financial requirements for entry are substantial.
IBM is a likely potential entrant because it is the dominant firm in the manufac-
ture of data processing equipment and because the high speed transmission of
data generated by that equipment will, in the not very distant future, be a prin-
cipal kind of communications carried via domestic satellite.^

The method chosen by IBM to enter the Domsat market — a stock acquisition
and joint venture with COMSAT — eliminates IBM as a separate entrant or as a
joint venturer of a competitor of COMSAT. Furthermore, it eliminates two lesser
entrants, Lockheed and MCI, who are authorized co-venturers of COMSAT.
This elimination of potential competition, both actual and perceived, is pro-
hibited by Section 7 of the Clayton Act.

1 From a technological and economic point of view, the most important long-term
marlvet open to Domsat entrants not possessing a monopoly traffic base is the high
speed transmission of data. The existing terrestrial communications networks of AT&T
and other carriers cannot provide efficient long-distance transmission of data at speeds
above 9.6 kilobits per second. Communications satellites — coupled with modern tech-
nologv in earth station and interface hardware — will economically transmit data at
speeds far in excess of 9.6 kilobits per second over any distance, including coast-to-coast.



4866

This acquisition will, moreover, have very substantial anti-competitive effects
beyond elimination of potential competition. We believe it extremely probable that
this acquisition, together with IBM's dominant position in the computer market,
will permit IBM to develop an end-to-end, highly sophisticated, domestic com-
munications system tying together a substantial portion of the nation's computer
capacity. This probability is heightened by IBM's current development of time-
division-multiple-access devices and related equipment which will permit one
operator, if it has its own satellite communications capability, to link a substan-
tial portion of the computers in the country on a time-sharing basis. By the time
such a system is operational the temporary ban on participation in data services
which IBM accepted in the Control Data case will have ended. The joint venture
with COMSAT will, in the meantime, "freeze" the market and serve to prevent
the development of comiieting systems. It will, in the long run, assure that IBM's
dominance in computer hardware can be used to achieve dominance in interface
hardware and high speed data transmission by satellite.

With end-to-end capability, IBM will be able to offer a package of computers,
interface hardware and communications. It will be able to offer such a package
at such times and in such configurations as to suit its overall advantages over
its competitors in each market and it will enable IBM to price and manipulate
communications, interface hardware and computers in such a way as to stifle
entry and competition in each market. The Government has, among other things,
accused IBM of quoting a single price for related packages in order to foreclose
competition. Paragraph 20(a). Complaint, United States v. I.B.M., Civ. No. 69
Civ. 200, S.D.N.Y. Whether IBM does or does not actually quote a single price
for these products and services, it will enjoy the benefits of package selling, an
advantage which will be shared with no competitor in any of the affected
markets. If this sort of competitive advantage may have substantial anti-compet-
itive effects, Section 7 prohibits its being obtained by acquisition.

IBM also has the ability to design its computers so as to make it impossible,
or exceptionally diflScult, for competitors' peripheral equipment to interface with
them. The proposed acquisition will give IBM an opportunity to use this means
to prevent competitors of the IBM/COMSAT venture from selling to customers
using IBM machines. The IBM/COMSAT joint venture will thus have the power
to effect a foreclosure of a very substantial part of the high speed data trans-
mission market, and an important part of the Dorasat market. An acquisition
that confers power of this magnitude violates Section 7 prima facie.

There are other anti-competitive effects of this acquisition that warrant con-
sideration :

Research and Development— IB^l and COMSAT are among the country's lead-
ing companies in research and development. Their combination will preclude
the probability of their competing in R&D on interface hardware. Furthermore,
the combination will stifle technological advances in satellite, interface and
computer technology at least until the time of their actual entry in the Domsat
market. xVfter such" entry, the IBM/COMSAT venture will discourage the adop-
tion of technological developments which would render any of their products
obsolete.

Computers. — If high speed data transmission technology advances as pres-
ently projected, computer purchasers and users will become increasingly de-
Tiendent upon Domsat communications for eflicient utilization of their computers.
If IBM is permitted to enter the Domsat market and undertakes to market an
end-to-end product, it is extremely probable that its share of the computer mar-
ket will increase. Such further concentration will only exacerbate the already
existing dominance of IBM in that market.

Financial Barriers to Entrti. — The financial barriers to entry into the Domsat
market are alreadv high. With the entry of IBM especially in combination with
COMSAT, the possibility to small and medium companies securing outside
financing for that entrv will be extremely remote.

Entrenchment of COMSAT.— At the present time. C0:MSAT is the dominant
companv in the communications satellite market. The addition of IBM will
bring COMSAT immense market power and will entrench COMSAT'S power
in this market. Such entrenchment violates the Antitrust Division's Merger
Guidelines and is violative of Section 7 of the Clayton Act.

Sherman Act. — This combination of companies, each dominant in its own
sphere, may also violate Section 2 of the Sherman Act as a combination to monop-
olize the market for high speed data transmissions: a principal market to
which Domsat entrants, like ASC. must ultimately look if they are to be
successful.



4867

As pointed out above, IBM's dominant position in computers can be used to fore-
close competition in high speed data transmission. COMSAT brings to the joint
venture its dominance in satellite communications, which is in all cases the
optimum and in many cases the only method of high speed data transmission.
IBM brings a means to exclude others from the business. A combination of this
sort achieved by stock acquisition is clearly prohibited by Section 7 of the Clayton
Act. It seems, further, to be almost a classic combination or conspiracy to monop-
olize, in violation of Section 2 of the Sherman Act.

The issues raised by this proposed venture are significant and far-reaching. If
approved, the venture will have a major impact on the Domsat, computer, and
computer interface and peripheral markets. It is a matter which should be
reviewed by the Subcommittee in connection with its investigation of the com-
munications and computer industries.

AFTERNOOX SESSIOX

Senator Hart. The committee will come to order.

Our opening witness this afternoon will be Mr. Thomas Parkin, vice
president of software, Control Data. It's my understanding that Mr.
Parkin will demonstrate and explain, if that is the right word for it,
what a computer is. how it works, and give us some practical examples.

We are appreciative of the cooperation of the corporation for making
Mr. Parkin available for what we call an educational purpose.

You may proceed, sir, in any way you desire.

STATEMENT OF THOMAS R. PARKIN, VICE PRESIDENT, SOFTWARE,
CONTROL DATA CORP., MINNEAPOLIS, MINN.; ACCOMPANIED
BY EARLE L. LERETTE, SPECIAL ASSISTANT TO CHIEF EXECU-
TIVE OFFICER

Mr. Parkin. Thank you, Senator Hart. Thank you very nuich for
the privilege of being here to tell you about computers.

I'm personally very bullish o]\ computers. My preparation for this
meeting is 25 to 30 years of involvement with computers since slightly
before there were any. and I really am personally quite enthusiastic as
a technologist about computers.

I'm not here to have anything to say about your main issues, but
hopefully to provide some background and help dispel some of the aura
of omnipotence computers have achieved.

I'm here with Mr. Lerette who is the special assistant to our chief
executive officer, Mr. Xorris, and after my initial remarks he'll show
you some samples, which we'll pass around.

It's our intention today to try to talk about the three points shown
in figure 1. and I'll interweave the talking about these into one con-
tinuous narration, because if one tries to explain what is a computer
and how does it work and how are they used as separate topics it be-
comes quite confusing.

[The figures referred to throughout Mr. Perkin's narration appear
as exhibit 1 at the end of his oral testimony.]

Mr. Parkix. We've all heard about computers. We've felt their im-
pact on our daily lives. We see their effect in billing, in all sorts of
fantastic articles in the paper about how a computer made a goof. Well,
perhaps if we look inside a little bit, we may get some understanding
of how a computer works and you'll observe that it is not a comput-er
that ever makes a goof ; it's the people who use it and the people who
write programs for it.



4868

At the end I expect to make a few remarks about the future of our
technologj^ but if at any point through the talk you wish to interrupt
for a question, please do so.

To give you some initial impression of a computer I've shown you a
picture, figure 2, which is an installation of several component parts
and we intend to discuss these parts one at a time so that you'll see how
they interrelate what the individual pieces do and what is a computer.

Figure 2 is a computer system installed in a special room of its own
with a fancy subfloor with air-conditioning; a very tidy piece of
machinery. It's not like a rolling mill. It's a place where people work.

A computer basically exists in a system as shown in figure 3. With-
out being in a system a computer doesn't do much. By itself a computer
is just a glorified desk calculator, but when you imbed it in a system,
that is, you make available to it storage media, like tapes and discs, in-
put media, like card readers, and remote access capability like termi-
nals and teletype units, or line printers, then it becomes a system which
is capable of doing some useful work. We'll examine how those pieces
of the system fit together.

There are many things a computer is not. A computer is not an
anthropomorphic entity with intelligence of its own. It's really a very
high-speed calculating machine.

It can do exactly what you tell it and it can do that very rapidly,
but that's all it can do; just exactly what you tell it. It's quite literal
minded as noted in figure 4. You don't say, pound a nail. You say,
pick up the hammer by the end which is round and raise it up and push
it down. It's a series of very, very miniscule steps of instruction that
one must give a computer to make it do something.

Let's look at the five basic functions of the computer shown in figure
5. It really is just an electronic machine to do those five things. It takes
input in. It stores it. It performs arithmetic on it through a control
mechanism, and it provides output. That's all a computer does. In any
of the many, many thousands of installations of computers, that's all
any of them do just those five basic functions. They may become in-
credibly complicated, and we'll see some examples of this, but the
essence of it is simplicity itself.

Again, I emphasize the five basic functions of the computer, shown
in figure 6, because we're going to be talking about each one of these
and how they work together and how they correspond to similar func-
tions in man.

Man performs input functions by sight, taste, touch, smell; the
kinds of things that you know how to do; you have that feeling of
gathering from your senses the input from your environment as noted
in figure 7. A computer does it by means of punched cards, push but-
tons, mag tapes, punched tapes, keyboards, all kinds of electronic and
electromechanical sensory devices as noted in figure 8.

For example, figure 9 is a typical punched card, made A'er\' famous
by the company of my distinguished predecessor, Mr. Katzenbach.
This is the famous IBM card, as everyone calls it. It's a standardized
cai'd which has rows of holes in it, punched in it, in a rectangle array-
There have been various attempts in the past to make those round but
they haven't caught on. The rectangular hole is the standard and the
various combinations of holes tell you what letter is punched in a
particular column.



4860

For example, in the very first column there's a punch in the top row
and a punch in about the fourth row down and that means an "A,"
and a punch in the top row and the fifth row down is "B," and so on.

So each of the characters that you wish to get input into a computer
will get punched into a card like this, in general. Xot all input goes
this way but by far the vast majority of input to computers is through
punched cards.

Figure 10 is a card reader. The instrument in front is the card
reader and you can see a small stack of cards at the lefthand side of
that card reader. In the background is a computer. That card reader
is capable of reading 1,200 of those cards a minute, and it reads them
through a very high-speed mechanical motion of the cards. The cards
are stacked on the other side. And that's one means of getting input
into a computer.

Figure 11 is a disk pack. A disk pack is another form of input device.
It is frequently used to accumulate a large number of card images and
characters from card images and then the disk is put onto the machine
and read in as the input medium. The disk pack is a series of little
platters that look somewhat like phonograph records. "We'll see another
view of that a little later.

Figure 12 is an example of a man working at a console. This is the
keyboard type of input, which is really quite slow and hardly used
except in some control situations.

Occasionally, large amounts of data are recorded on magnetic tape
and that becomes an input device.

Figure 13 is a row of magnetic-tape units. The operator is mounting
one of the tapes. They're threaded on from one reel to the other and
read at very high speeds by the transport mechanism; much higher
speeds than your home tape recorder.

Figure 14 is an operator adjusting an optical character reader for
reading documents. This is a much more so])histicated kind of device
which is beginning to become available. The character readers for
optical character reading today generally require special fonts; not
always, but generally. For example, printed on the bottom of your
bank check you'll see a strip of characters that looks rather odd. Those
are both magnetically readable because they're printed with magnetic
ink and they're also electronically readable by optical scanning because
they have that peculiar shape. Optical character readers are just
beginning to become widely used as an input mechanism. They cer-
tainly are faster than punching cards.

Figure 15 is bank teller terminal which is currently becoming the
A^ogue for some banks. It's gradually spreading because it makes the
banking mechanism much faster from the bank's point of view, much
more accurate, and provides a better service to the customer. Inci-
dentally, service to customers is the fundamental mechanism which
driA'es the usefulness of computers. They provide a better service,
ultimately, to a customer, or else they're not being used.

Figure 16 is a ticket terminal which is a device which is beginning
to be used. You'll find them in the "Washington subway system when
it starts in operation, for example. You'll find them in off-track betting
situations in States which allow lotteries and some liorseracing. They're
being used around the world, also, in numerous applications.



4870

Figure 17 is a kind of terminal which is in use occasionally in
medical situations. The technician is just touching the front panel
of the display and the computer, by analyzing which pad was touched,
can tell Avhat input was intended. Typically, a set of questions or
statements is put on the screen and the technician selects which state-
ment she wishes to have applied and then it gets recorded by the
computer.

In some situations we have rather esoteric equipment becoming
available. For example, figure 18 is a device which can simultaneously
monitor a number of bodily functions for a patient. Those data are
digitized and fed directly to a computer for recording, for analysis,
and for observing trends to see whether the blood pressure or whether
the temperature rates are within the norm.

Figure 19 is an even more sophisticated example of an automatic
machine to do analysis in the laboratory of serums and blood tests.
Here the machine is doing the chemical test and automatically digitiz-
ing the data, feeding it to a computer for storage and analysis and
subsequent printout on the patient record.

Thus we have seen a number of examples of computer inputs which
fits the text shown on figure 20. But, all a computer can operate on
is numbers. Everything else is data which becomes converted to num-
bers in some form. The data can be letters, symbols, dimension, meas-
urements on a drawing, the length of a bar; whatever information
is necessary to go into the machine — but at some point it gets converted
to a number.

It doesn't become meaningful inside the computer until it's in a
number form we call digital, meaning exactly what it comes from,
the digits of the hand indicating the way we count. The digital system
in use in computers is the binary system. "We'll come to that in just
a moment.

For the time being I want to talk about storage because a computer
doesn't become interesting and useful until it can store things. Figure
21 reminds us that man does storing by memorizing and by making
notes and by looking up things in books. Figure 22 shows us that a
computer does storage by a large number of different techniques.

Basic electrical circuits for storing information have been in exist-
ence for about 30 years. Magnetic drums, magnetic cores, and magnetic
tapes are all mechanisms for storing information which are more
or less accessible at different speeds. Figure 23 notes that storage
contains three kinds of important things. It contains numerical data,
the kinds of letters and symbols which people communicate with the
computer, and the instructions for the computer.

Parenthetically, we should note that storing instructions in the
memory of the machine is the technique which made the digital com-
puter a significantly more powerful instrument than anything else
that had ever been invented by man before. This was a contribution
made by a friend of mine, Johnny von Xeumann. He basically came
up witli this essentially simple concept that said store in the computer
the instructions to tell the computer what to do and let the computer
also operate on those instructions as well as operate on numbers.
That was a profoundly simple concept which changed the course
of history because, previously, controlling of complex computing
machines' was an incredibly difficult and time-consuming proposition.



4871

Instantly he put the power of the computer to work to provide its
own control and that is a profound breakthrough in the annals of
human endeavor.

Let me talk a little more about the concept of memory locations
that have addresses. Let us look at figure 24. There is a distinction,
you see, between the number on the box and the contents of the box.
A memory location in a computer has an address — it may be a
location number 8, but location number 8 doesn't contain the number
8. It contains something— a string of characters or a decimal number
or an alphabetical set of symbols. The contents of an address
and the address are two completely different things and they
are a very difficult piece of the total concept of computers to keep m
mind when beginning to learn the subject of programing. All begin-
ning programers have trouble with this. Figure 25 is an example of
a surface of a magnetic drum. The whole surface of it may have
millions of bits of information recorded on it but each location oil
that drum, or certain symbolic locations on that drum, will have ad-
dresses. For example, the address you may want to go to is location
1.012; the contents of that address" may be a name, it may be a piece
of payroll information, or it may be a piece of data of any kind that s
significant to that use of the computer.

Magnetic cores developed fairly early in the computer act as a
storage mechanism, and later on I'll show you some samples of mag-
netic cores.

Figure 26 shows that it's a string of these cores— a number of
them— which comprise a location in storage. A single magnetic core
stores a single bit— and I'll try to explain what a bit is— but the im-
portant point is that it's a set of those bits that comprise a storage
location. In the case of magnetic core storage we may have several
planes of storage and a single thread through all those planes will
give you a single word or location. Such a location has an address
but tlie contents will be determined by the bits of storage.

^s^ow, one bit of storage is a simple yes or no. It's a one or a zero.
It's an on or an off. All a magnetic core can store is just that one bit
of information and if you wish to store more, let's say a thing called
a byte, say six bits or eight bits comprising a byte, then you must have
six or eight individual bit storage elements; or if you want to store a
24-bit word, or a 60-bit word, or some other size Avord of information
in the machine, then you have to have a core, a one-bit core for every
one of those bits as shown on figure 27.

Figure 28 shows us a bigger view of the magnetic core. It shows the
way they're threaded together. A magnetic core is like a doughnut,
but incredibly small. These days the smallest ones are smaller than
the head of a>in, and through' those cores they string two wires like
this, and in addition they strinor a third wire which goes through all
of the cores at the same time. That third wire is called the sense line.
In order for that information stored in that core to be known, the
core is magnetized. It's a piece of magnetic material which is magiiet-
ized. It's either magnetized in the righthand direction or m the left-
hand direction, and if that core is magnetized one way, it's a one; it
it's magnetized the other way, it's a zero.

The way we get the information out of that core and the way we
find it is to put half of the amount of current through one of those
wires that it takes to turn that core over, and half the amount through



4872

the other wire, and it's only the wire at the intersection of those two
points as shown in fig:iire 29, that will be affected. The third wire, w^hich



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 6 of 140)