Telecommunications Systems and Large World Cities:
A Case Study of New York

INTRODUCTION

The rapid development of teleports is largely a product of two phenomena: the emergence of selected metropolitan regions as "information capitals" and the opportunities to enhance a region's telecommunications infrastructure facilitated by deregulation and technological advances. While a teleport represents a new and potentially significant element in a region's telecommunications infrastructure, it is also important to recognize how a teleport fits into the overall pattern of telecommunications development within a large city. This chapter provides a case study of the telecommunications infrastructure in the City of New York and explores the implications of telecommunications for urban economic development. The chapter consists of four parts: 1. an analysis of the city's information sector, 2. an assessment of the city's telecommunications infrastructure, 3. a description of the telecommunications systems within New York City, and 4. policy options for using telecommunications in economic development.

NEW YORK CITY'S INFORMATION SECTOR

The current strength and growth potential of New York City's economy depends substantially on the city's function as a headquarters site for major corporations, as a center for publishing, television, and other media, and finally as a capital for such information-based services as financial services, banking, law, management consulting, accounting, and advertising. These services have gained prominence during the past 25 years as the city's economy shifted from one of goods production and handling (i.e., manufacturing, trade, and transportation) toward one characterized by a concentration of information-handling activities. In 1958 the information sector 18 of the 51 private nonagricultural industries accounted for 35 percent of the city's private employment. By 1984 the information sector had grown to 55 percent of the city's private employment, as illustrated in Exhibit I.

Furthermore, the information sector accounted for 41 percent of the city's income in 1958 and 58 percent of the city's income in 1984. These figures do not include federal, state, and local government agencies, which also have a high information component. Banking, securities, and business services together accounted for 23 percent of the total city value added in 1984, more than double that in 1958. These industries are highly information intensive.

 

EXHIBIT I Percentage of New York City's Employment and Income in Information Intensive Sectors

Industry or Group Employment* Income** 1958 1984 1958 1984 Printing and publishing 4.0 3.2 4.2 3.5 Instruments and electrical machinery manufacture 2.4 1.1 2.7 1.2 Communications 2.5 2.9 3.2 5.0 F.I.R.E.*** 11.9 17.3 17.1 23.6 Selected Services**** 14.1 30.6 13.6 24.4 Total Information Sector: 34.9 55.1 40.8 57.8

* Percent of total private non-agricultural employment ** Percent of total value added of provate non-agricultural establishments in constant dollars *** Consists of banking, credit agencies, securities, insurence and real estate **** Consists of business services, motion pictures, amusement services, health, legal and educational services, social services, nonprofit organizations, miscellaneous services and museums. Source: Drennen, 1985

Information handling and processing is not confined to information-based firms, but impinges upon all economic activities. This is particularly true for New York City with its strong headquarters concentration. For example, many firms engaged in goods production (e.g., apparel manufacturing) maintain their top management and support staff in New York City. Occupational employment statistics in fact show that in five of the six major industrial classes. New York City has a higher proportion of workers in white-collar, information-handling occupations than does the United States as a whole. (See Exhibit II).

 

EXHIBIT II Proportions of White-Collar and Blue-Collar Workers by Industry, 1984 (United States and New York City)

White Collar Blue Collar Manufacturing     United States New York City 37.2% 48.0 62.8% 52.0 Construction     United States New York City 21.4 26.2 78.6 73.8 Transportation, Communication and Public Utilities     United States New York City 49.3 56.1 50.7 43.9 Wholesale and Retail Trade     United States New York City 61.8 68.9 38.2 31.1 Finance, Insurance and Real Estate     United States New York City 92.9 88.5 7.1 11.5 Services     United States New York City 70.7 64.3 35.7 29.3

Source: U.S. data from U.S. Department of Labor, BLS, Employment and Earnings, January 1985. New York City Data from Drennen, 1985, derived from Occupational Employment Statistics, New York State Department of Labor

Advanced communications systems have allowed manufacturing firms based in New York to coordinate production and marketing on a global basis and thus to increase their use of information technology in corporate operations. Even the day-to-day activities of the city's hotels, retail stores, and theaters, rely extensively on new telecommunications systems. Finally, basic telephone service is essential to local shopkeepers (pharmacist, dry-cleaner, and butcher) to respond to customer orders, to make deliveries, and to order new stock. In all sectors of the New York City economy, information transmission systems play a vital role, and the city's future economic health will increasingly depend upon the capacity of private firms to make effective use of advanced telecommunications.

New York as an International Information Capital

New York City's growth as an information capital has been made possible by the advent of telecommunications systems that facilitate both the concentration of financial and headquarters functions in the central business district and the movement of manufacturing and distribution functions. The rich web of face-to-face communications that provide New York firms with access to the latest information and ideas is closely linked to the new telecommunications technologies of the 1980s. Communications technologies allow firms based in New York to convert new information into profit-making services and to produce decisions that result in the production of goods and services around the world. New York City's headquarters complex includes 62 of the Fortune 500 largest industrial firms, II of the nation's 50 largest commercial banks, 10 of the country's top 50 diversified financial companies, and 7 of the nation's largest diversified service companies.(1) In addition, more than 300 foreign banks are located in New York, the largest such center of foreign banks in the United States.

International commerce plays a growing role in the economy of New York City and in the economy of the nation as a whole. In 1972 international trade (the value of imports and exports) represented only 8.9 percent of gross national product (GNP). In 1984 this figure had grown to 18.7 percent of GNP. New York has emerged as the international gateway for overseas communications traffic. In 1981 almost one fourth of all overseas business calls and 15 percent of all overseas residential calls originated in New York City. More than twice as many overseas message units originate in New York City as in Los Angeles, the second leading overseas telephone departure point in the United States. New York City has historically been a leader in international telephone services. The first commercial overseas telephone call was placed from New York City to London on January 7, 1927. Today, the city is the site for new international satellite services between New York City and London.

An Assessment of Telecommunications Systems in New York City

New York City's unmatched set of telecommunications facilities and services has been substantially strengthened through the deregulation of the telecommunications industry. No other city in the world has such a diverse and extensive telecommunications infrastructure, encompassing coaxial cable and fiber optic systems plus major satellite earth stations in outlying parts of the city. The availability of fiber optic systems throughout the city enhances economic development opportunities by information-intensive firms. Further, the planned cable television systems in the boroughs outside Manhattan and proposed digital termination systems (DTS) will constitute significant new elements in the city's telecommunications infrastructure.

New York City's advanced telecommunications infrastructure is a significant asset for economic development because it provides private firms with a wide choice of sophisticated services in a highly competitive environment. Advances in telecommunications technology contribute to the economic productivity of the city's industry by allowing private firms to extend their geographic reach and to market new products and services. For the small- and medium-size firms that characterize the New York City economy, shared tenant services within large office buildings will provide the benefits of state-of-the-art telecommunications technology without requiring large capital investment in equipment and facilities. For the information processing activities that occur in the "back offices" of financial service firms, the extensive telecommunications infrastructure facilitates the decentralization of routine office activities.

The enormous concentration of information-based firms in New York City has led to the development of New York City's unique telecommunications infrastructure. Ken Phillips, vice president of Citicorp, has stated that the Manhattan Central Business District has more than "twice the telecommunications switching capacity of the average foreign country, more computers than a country the size of Brazil, and more word processors than all the countries of Europe combined. Capital investment by business users in private telecommunications systems, communicating word processing systems, computer mainframes, minis, and micros is currently in the billions of dollars and is growing annually."(2)

There are three segments to the telecommunications infrastructure in New York City: 1. long-distance or intercity systems that link New York City with other parts of the nation and world; 2. intracity transmission systems that link telephone central offices, connect subscribers to communications carriers, and/or produce alternative local distribution systems; and 3. local area networks that transmit information within a single building or set of buildings. In light of New York City's role as the nation's leading information center, telecommunications policies and regulations designed to foster competition, including efficient pricing of telecommunications services, are crucial to the continued growth of telecommunications throughout the city.

 

NEW YORK CITY'S LONG-DISTANCE TELECOMMUNICATIONS SYSTEMS

Long-Distance Fiber Optic Systems

At the regional and national level, fiber optics is gradually replacing satellite and copper wire systems as the transmitter of information at high speeds over long distances. Several characteristics of fiber optic systems enhance their use in telecommunications systems:

1. Large capacity: A large amount of information can be transmitted rapidly in a very limited amount of space. The Office of Technology Assessment (OTA) estimates that "a quarter-inch diameter optical cable with two fibers carries as much data as a 3-inch copper cable with 2,000 wires."(3)

2. Declining cost: Compared with other telecommunications technologies, the cost per channel of communication over fiber is decreasing rapidly. Within the next three years, the cost of fiber alone will be approximately a few cents per meter. The primary financial constraints are right-of-way costs and installation of fiber and repeaters.(4)

3. High security: Fiber is resistant to wiretaps or interference from external sources.

4. Signal strength: Fewer repeaters are needed to regenerate signals with fiber than with copper systems, and thus maintenance and installation costs are reduced. Repeaters are needed at 1-mile intervals for copper telephone systems, but only for every 50 miles with fiber systems.

5. Minimal delay: Unlike satellite communication, which must travel 23,000 miles to outer space and back, information on fiber travels directly between points. Although the time delay over satellite is not significant for many forms of communication, it represents a major inefficiency for the integrated digital networks that are increasingly being used for international communications.(5)

Because New York City is the largest single source of national and international telephone traffic, it has become the major hub for current and proposed fiber optic systems in the United States. Presently, there are five long-distance fiber optic communications systems that serve or are planned to serve New York City-based customers. The provision of these long-distance fiber optic services allows users located in the city the benefits of a truly competitive marketplace: choice of vendor, competition in price, and an incentive for innovative services. The major long-distance fiber optic companies serving New York City are described below:

AT&T has, in operation, a fiber optic cable linking New York City, Baltimore, Washington, and Philadelphia.

MCI has a fiber optic cable connecting New York City, Philadelphia, Wilmington, and Washington, D.C. This cable will eventually extend to Miami. In addition, MCI's planned acquisition of Satellite Business Systems (SBS) will allow MCI to incorporate the SBS plan to link New York with Boston.

US Telecom, a subsidiary of United Telecommunications, plans to operate a 23,000-mile fiber network within the next three years. A fiber optic link from New York City to Chicago became operational during the first quarter of 1986.

GTE Sprint is completing a fiber optic link from New York City to Sparta, New Jersey, and is constructing a fiber optic link from New York City to White Plains, New York.

Lightnet, a joint venture of Southern New England Telephone and CSX Corporation, is building a 5,000-mile fiber optic network that will serve 43 cities in 24 states east of the Mississippi River. New York City was connected to Philadelphia in 1985, and a route from New York City to Washington and Chicago is to be operational by early 1986. The New York City Lightnet terminal will be located at 60 Hudson Street; two fiber cables will enter New York City, and both are being brought in through an agreement with Teleport Communications, Inc. and the Port Authority of New York and New Jersey. Lightnet is also installing a fiber link for Teleport Communications, Inc. between New York City and Princeton, New Jersey.

Satellite Facilities in New York City

Developed during the 1960s, communication satellites provide a vital link for long-distance communications between New York City and other parts of the nation and world. Communication satellites are accessed by dish-shaped antennas known as earth stations. Large dishes are used for both sending and receiving signals, and smaller dishes are primarily used for receive-only purposes. Commercial satellites have, until recently, used the C-band transmission frequencies between 3.0 and 6.2 GHz. These frequencies, however, coincide with those used for microwave transmission on earth, and this has been a constraint on satellite earth station installations in urban areas already heavily congested with terrestrial microwave traffic, such as New York City. As a result, most satellite facilities serving New York City have been located in Vernon Valley, New Jersey, or in Suffolk County, Long Island, with microwave transmission used to link New York City locations to the satellite earth stations outside the city.

Advances in technology and the desire to avoid this congestion problem have led to increased use of Ku-band transmission frequencies for satellites, which rely on transmission at higher frequencies. The growth of Ku-band satellites has contributed to the installation and operation of new satellite earth stations within New York City by both private users and common carriers. Ku-band satellites, by utilizing a stronger signal, are able to reach smaller satellite dishes, and such satellite dishes can consequently be installed with greater ease on rooftops of office buildings. In addition, the Federal Communication Commission's recent deregulation of a portion of international satellite services has allowed international satellite facilities to be located within New York City. The partial deregulation of international satellite traffic will allow firms located in New York City to obtain the benefits of a competitive marketplace in international telecommunications as well as in domestic services. Given the city's preeminence as a center for international communications, the latest innovations in international services are being developed in New York and other world finance capitals first. The following section will describe the major satellite facilities within the City of New York

Teleport: A Public-Private Partnership

The largest satellite facilities in New York City are being developed by Teleport Communications, Inc. This represents a public-private joint venture between Merrill Lynch Telecommunications, Inc. and Western Union Communications Systems, Inc., the City of New York, and the Port Authority of New York and New Jersey. The idea for a teleport was based upon the belief that a public entity should provide a facility similar to airports, but for access to communication satellites. Due to the large volume of information flowing into New York City by electronic means the city and Port Authority considered access to communication satellites as vital to the city and region's economy. Microwave congestion reinforced the need for an alternative local distribution system and led to the creation of a fiber optic network linking the teleport on Staten Island to New York City and New Jersey. The 100-acre site on Staten Island was chosen because of its interference-free characteristics plus its access to both New York and New Jersey. In addition to the satellite earth stations to be built, the site will accommodate back office functions plus a telecenter - a 56,000-square-foot building that will control all teleport communications services and provide advanced data and voice services on a 24-hour-a-day basis.

Teleport is designed to serve 17 earth stations; satellite communications started on June 20, 1985, with the inauguration of the Comsat antenna. Portions of Teleport's regional fiber optic network have been in operation since April 1985. Several major firms, including Dow Jones, Bankers' Trust, Citicorp, and Private Satellite Network, are hooked into Teleport's fiber optic cable. In addition, the Catholic. Telecommunications Network of America plans to move its broadcast facilities to Teleport and will transmit its programming across the country from Teleport.

Teleport's most distinctive success to date has been as a provider of an alternative means of local communications through its 220-kilometer fiber optic network. AT&T has announced that it will use Teleport's fiber system to link Merrill Lynch to an AT&T office in lower Manhattan, thus bypassing New York Telephone's local network. Teleport's fiber system provides an important intraurban telecommunications system, at relatively low cost, to major users located in the City of New York and surrounding metropolitan region.

Within New York City, Teleport's major service nodes will include 77 Water Street, 2 World Trade Center, 60 Hudson Street, the Empire State Building (350 Fifth Avenue), the Fisk Building (250 West 57 Street), Astoria Studios, 161 Street and Jamaica Avenue, Queens, and the Polytechnic Institute of New York in downtown Brooklyn. In New Jersey, Teleport's major service nodes are in Newark, Jersey City, and the Forrestal Center Campus in Princeton.

Satellite Common Carriers in New York City

There are six companies that operate communication satellite facilities in New York City, providing access to their earth stations on a common carrier basis to major communication users. The common carriers included the following;

Hughes Communication. Now part of General Motors, Hughes Communication operates an earth station from its Spring Creek, Brooklyn, satellite facility. This earth station is linked to Hughes's three satellites, one of which is devoted to video transmission and two of which are devoted to data transmission by private businesses.

ITT Satellite Services. A unit of ITT World Communication Inc., ITT Satellite offers voice, video, and data transmission to firms located primarily in the lower Manhattan financial district. The Federal Communications Commission has authorized ITT to build an 8-meter, fully digital earth station on the roof of its 60 Broad Street building. This earth station will provide ITT customers with satellite connections between the United States and 200 other nations.

GTE Space Net. Located at Wall Street and Battery Park West, GTE Space Net provides comprehensive services to more than 100 corporations. This earth station communicates with GTE's three SPACENET satellites and two GSTAR satellites.

Private Satellite Network (PSN). PSN is headquartered at 215 Lexington Avenue and develops, installs, and maintains Ku-band satellite systems that provide point-to-multipoint teleconferencing services. PSN is connected to Teleport's fiber optic network and uses the teleport node located at the Empire State Building. PSN provides satellite services to such large firms as J. C. Penney, Merrill Lynch, and Ford Motor Company.

MCI/SBS. Through its planned acquisition of Satellite Business Services, MCI will have access to two SBS earth stations at I State Street in lower Manhattan. SBS primarily provides voice transmission by satellite and has extensive ground equipment throughout the United States to provide satellite communications.

International Relay Inc. IRI is the first company to offer a fully digital satellite link from New York City to international locations. IRI has a Ku-band satellite earth station at 345 East 46 Street in Manhattan. Customer access to this site is provided by New York Telephone, Manhattan Cable Television, and by microwave. IRI has a high-speed data link with London, through an agreement with Mercury Communications, Limited. The first user of the IRI-Mercury link was the Associated Press; in addition, the London Stock Exchange provides real-time London stock quotations to New York through the IRI-Mercury link.

Private Earth Stations in New York City

New York City is the capital of the nation's broadcast television industry. These firms make such extensive use of satellite communications systems that it is cost effective to have an earth station devoted exclusively to their operations. For example, NBC maintains and operates an earth station on top of the Celanese Building at 48th Street and the Avenue of the Americas, and ABC-TV maintains and operates an earth station in Manhattan as well. ISACOMM, a subsidiary of United Telecommunications, has a satellite earth station on the roof of 245 Park Avenue that is used for videoconferencing. Several other firms have their own private earth stations in New York City. There are also many receive-only satellite dishes used for such purposes as internal corporate data communications, videoconferencing, and access to the Reuters information service.

Public Communication Networks

New York City is also a central link for public communication networks that use packet switching to provide corporations with low-cost domestic communications services. By making maximum use of existing communications facilities, these network services provide a large number of small and medium-size firms access to sophisticated computer-based communications. Packet switching stations operate as a common interface for firms that want to link their facilities. Additionally, these public networks can convert incompatible computer protocols and thereby enhance computer-based communications. The major networking services in New York City include the following:

GTE Telenet. GTE Telenet offers comprehensive services to more than 250 cities and more than 40 countries. In addition, GTE operates a hybrid network service that allows organizations to maintain a private network between commonly used points and access to GTE's public network for intermittently used points. GTE's New York packet switching facilities are located at 1 Penn Plaza.

Uninet, Inc. A subsidiary of United Telecommunications, Uninet provides comprehensive service to 275 domestic metropolitan areas and, through an association with international record carriers, to several overseas locations. Uninet's packet-switching facilities are located at 2 Penn Plaza.

Tymnet. A subsidiary of McDonnell Douglas Company, Tymnet offers comprehensive service to more than 500 domestic metropolitan areas and, through association with international record carriers, to more than 50 countries.

ARGO Communications. ARGO is headquartered in New Rochelle, New York. It uses satellites to provide long-distance domestic network services and uses microwave and leased telephone lines to transmit information within a region. ARGO offers fully digital high-speed data services to 11 other American cities.

 

NEW YORK CITY'S INTRACITY TELECOMMUNICATIONS SYSTEMS

New York City has more than 5 million telephones. This is the largest concentration of telephones in any American city, and the third largest in the world, after Tokyo and the Paris area.(6) The copper wire linking New York City's telephones is the only two-way communications link universally available to households and businesses in all five boroughs. The major provider of communications with New York City is New York Telephone, a subsidiary of NYNEX, one of the seven regional holding companies created through the divestiture of AT&T. In addition to copper wire, information is transmitted within New York City by optical fiber, microwave, coaxial cable, and cellular mobile telephone systems.

It is important to recognize that most telecommunications usage is local. Indeed, more than 75 percent of all telephone calls from Manhattan are to points within Manhattan. Similarly, more than 60 percent of the telephone calls from Brooklyn, Queens, Staten Island, and the Bronx are to points within each respective borough. The recent breakup of the city into two area codes, 212 and 718, was designed to reflect in part the localized character of much of the telephone traffic within the city. The large volume of local telephone traffic makes possible and indeed necessary the extraordinarily diverse and dense set of telecommunications facilities and systems.

Fiber Optic Communications within New York City

Fiber optic cable is particularly attractive for use in New York City because it requires relatively little duct space, and underground duct space is a scarce resource. Moreover, fiber is most appropriate to high-volume point-to-point communications, such as connecting telephone switching centers or linking data processing centers. New York Telephone has been quite active in using fiber optics to replace copper wire in its telephone plant. A 48,000 circuit fiber "Ring around Manhattan" (RAM) connects the 12 major switching centers in Manhattan. Ducts have already been laid to increase RAM's capacity by a factor of four if and when demand exists. New York Telephone also has a fiber optic network to provide "Video around Manhattan" that provides Manhattan businesses with enhanced digital services, including wide-band video transmission.

In addition. New York Telephone's Interborough Optical Network connects 31 central offices in Brooklyn, Queens, the Bronx, Manhattan, Nassau County, and Westchester County. The Interborough Optical Network consists of 130 miles of cable with a capacity of 5.8 million voice or data conversations and will tie in with New York Telephone's existing fiber network in Manhattan. This system provides the latest telecommunications services to the boroughs other than Manhattan and will enhance not only the telecommunications infrastructure throughout the city, but also the city's economic development potential outside Manhattan.

New York Telephone is one of several fiber optic systems, albeit the largest, within New York City. As discussed above, Teleport Communications, Inc., operates a fiber system connecting Manhattan, Staten Island, Brooklyn, Queens, and New Jersey. In addition, major corporate users have installed their own fiber optic systems within specific areas of Manhattan. Examples of such fiber systems include these:

Manhattan Cable Television and Group W Cable. MCT and Group W use fiber optic trunks in their respective head-ends at 120 East 23 Street and 5120 Broadway.

ITT. ITT operates fiber optic cables in the lower Manhattan financial district. These cables are used as a link to ITT's earth station and to ITT's Long-Distance Center at I Whitehall Street.

Citicorp. Citicorp uses fiber optics in its MICRONET system that links its downtown offices (20 Exchange Place, 111 Wall Street, and 55 Water Street) with its headquarters at 399 Park Avenue and Citicorp Center. McGraw-Hill. There is a fiber optic link between McGraw-Hill's headquarters at 1221 Avenue of the Americas and their satellite offices at 1633 Broadway.

SIAC. The Securities Industry Automation Corporation has combined fiber optic and coaxial cable links between SIAC's information processing center at 55 Water Street and the New York Stock Exchange and between the center and the American Stock Exchange.

Western Union. Western Union provides fiber optic communications for customers and for other communications carriers. The company has the legal authority to use public right-of-way for communications systems, such as fiber optics.

Cable Television Systems in New York City

Two cable television systems are operational in New York City. Both are in Manhattan, but plans are underway for cable television systems to be built in Brooklyn, Queens, Staten Island, and the Bronx. Manhattan Cable Television operates from 86th Street on the east side to 79th Street on the west side, south to Battery Park, and including Roosevelt Island. MCT has approximately 207,000 subscribers and provides 33 channels of cable programming. MCT also has a subsidiary, Manhattan Cable Communications Systems, that provides data transmission service to 12 organizations, including Bankers Trust, the Chase Manhattan Bank, Shearson American Express, Morgan Guaranty, and the City of New York.

Manhattan Cable Television data transmission services are not distance sensitive and thus provide an advantage to users between lower Manhattan and midtown Manhattan. Once regarded as unreliable for data transmission, cable television systems have been upgrading their plant, and Manhattan Cable Television has installed a redundant transmission system in the central business district. Furthermore, MCT will soon be linked to the New York and American Stock Exchanges.

Group W Cable operates in upper Manhattan, has approximately 105,000 subscribers, and provides 27 channels of cable programming. Because Group W Cable is located outside the Manhattan Central Business District, its services are primarily limited to providing residential customers with cable television.

An important example of how coaxial cable can be used for internal corporate communications is provided by the Chase Manhattan Bank's "Metronet" system in lower Manhattan. Chase Manhattan uses coaxial cable to link four buildings - 59 Maiden Lane, 80 Pine Street, I New York Plaza, and Chase Manhattan Plaza - for high-speed data transmission among these facilities. In addition. Chase Manhattan uses the coaxial cable for video conferencing between New York Plaza and Chase Manhattan Plaza and plans eventually to use the system for voice communication. The Chase "Metronet" system is connected via Manhattan Cable Television's data transmission system to Chase Manhattan facilities at 350 Park Avenue as well.

Terrestrial Microwave Systems in New York City

Microwave transmission systems are used for point-to-point communications. Transmission occurs over a straight line, and this requires a line-of-sight transmission path. Users of microwave technology include broadcast television stations for their studio-to-transmitter links, AT&T, New York Telephone, RCA, and large commercial banks. The following are among the users of microwave transmission.

Hughes Communication links its Manhattan-based customers to its satellite earth station in Brooklyn.

Broadcast Television Stations use microwave to connect studios to transmitters atop the World Trade Center. Mobile television vans use microwave to transmit "live news" to television studios, and WNET also uses microwave to link its Newark, New Jersey, and Manhattan studios.

Citicorp uses microwave transmission to communicate between facilities within New York City and to connect with its satellite facilities in New Jersey.

Manufacturers Hanover uses microwave transmission to link its corporate headquarters at 270 Park Avenue with its computer center at 4 New York Plaza and back office operations located at Hicksville, Long Island.

McGraw-Hill has a microwave link from its headquarters in Manhattan to its corporate data processing and warehouse facilities in Heightstown, New Jersey.

The New York Times uses microwave to transmit "news copy" to its printing presses in New Jersey and to satellite earth stations for distribution to printing presses across the country.

RCA operates a private line voice and data service from its central terminal office at 50 Broad Street to its earth station in Vernon Valley, New Jersey.

American Satellite Corporation has a microwave link from the World Trade Center to its earth station in Vernon Valley, New Jersey.

Eastern Microwave is a common carrier microwave company that provides microwave transmission to a variety of private and public users. It has microwave relays at the World Trade Center, Penn Plaza, the Gulf and Western Building on Columbus Circle, and at other locations in New York City.

At the present time, it is virtually impossible to obtain a low-frequency (and more reliable) microwave transmission path in Manhattan. Either a user must do a search of FCC records and of actual frequency routes before an application is made to the FCC, or a user may lease a frequency from a regional common carrier (such as Eastern Microwave) that has been assigned groups of frequencies.

Cellular Mobile Radio in New York City

Until recently, mobile telephone service in the United States was highly limited. The advent of cellular mobile radio has created a new environment for mobile telephone service, and the Federal Communications Commission has authorized two firms to provide cellular mobile service in New York City, NYNEX and Cellular Telephone Company. NYNEX currently has more than 10,000 subscribers and expects to have 110,000 customers by 1990. The Cellular Telephone Company's system was given FCC authorization in October 1984.

Smart Buildings and Local Area Networks in New York City

A smart building can refer to: 1. an integrated management system for elevators, energy, security, and other building services; 2. an integrated telecommunications network for local, long-distance, and enhanced services (such as voice mail and teleconferencing); or 3. a building that provides integrated telecommunications and building management services. A local area network (LAN) provides a communications link, within a single building or among a number of buildings, for personal and mainframe computers, data storage banks, printers, and other computer and telecommunications equipment. The LAN can be provided by coaxial cable, copper telephone wire, or fiber optic cable, depending on the particular design and use.

Smart buildings usually offer "shared tenant services" (STS), sophisticated telecommunications services that are marketed to building tenants and that provide economies of scale and one-stop convenience for small- and middle-size firms. For real estate developers, shared tenant services offer a service to tenants and a potential source of revenue; in most cases, developers have formed partnerships with telecommunications firms to market and manage such building-based communications services.

Tishman-Speyer is constructing a smart building at 375 Hudson Street in lower Manhattan that will be designed to accommodate the latest telecommunications and computer systems. There will be facilities for satellite transmission from the roof, large floor areas for computer facilities, and vertical duct space for advanced transmission systems. Several other office buildings are under construction in New York City with similar capabilities for shared tenant services.(7)

 

TELECOMMUNICATIONS AND ECONOMIC DEVELOPMENT

From an economic development perspective, the City of New York is vitally interested in the telecommunications market and infrastructure. Information intensive private firms require access to sophisticated telecommunications services and facilities that are competitively priced. To a large extent, continued information sector growth will be dependent on meeting user demands. To date, the high demand for specialized telecommunications services has enabled New York to take the lead in introducing competitive telecommunication services.

Continued growth and innovation will depend upon regulatory policies that contribute to New York City's role as a world center for information-based services. Conversely, economically inefficient regulatory policies could constrain market competition and technological innovation and limit the continued development of the city's telecommunications infrastructure. One major policy issue concerns the growth of competitive technologies that allow large-volume telecommunications users to bypass the public network operated by New York Telephone. Organizations have always been able to bypass the public network (often through services provided by New York Telephone), but the availability of new telecommunications systems and the desire to avoid long-distance access charges have contributed to increased use of bypass technologies. The Federal Communications Commission defines bypass as "the transmission of long-distance messages that do not use the facilities of local telephone companies available to the general public, but that could use such facilities."(8)

It is useful to distinguish between "economic" and "uneconomic" bypass. "Uneconomic" bypass refers to the use of alternative communications facilities whose actual costs are below the telephone company's rates, but that may still be in excess of the telephone company's underlying costs. By contrast, "economic" bypass involves genuinely more efficient telecommunications service by alternative means.

A widely held concern is that new telecommunications systems will permit "uneconomic bypass" by encouraging providers to enter the market primarily to serve businesses with high telecommunications costs located in the central business district and draw them away from the public telephone network. This has serious implications for the financial base of the telephone network, since 1/3 of New York Telephone's long-distance revenues are generated by three tenths of 1 percent of its business customers.(9) New York Telephone reports that one in three of its largest customers already engages in bypass and that more than half of New York Telephone's largest customers plan to bypass in the future.(10) For large users that do bypass, however, many still rely on New York Telephone for a substantial part of telecommunication service.(11)

 

CONCLUSION

The intense concentration of information handling and processing activities in the City of New York has given rise to a sophisticated and diverse telecommunications infrastructure that is unmatched by any city in the United States. Technological advances in conjunction with the deregulation of the telecommunications industry have strengthened the city's information infrastructure and possibilities for economic growth. New communications technologies enhance the productivity of the city's industries by allowing firms to extend their geographic reach and to market new products and services on a global basis. This is essential to the growing international trade that is centered in the world's "gateway" cities.

Although the teleport project on Staten Island has received a great deal of public attention, this chapter has demonstrated that the telecommunications infrastructure in the City of New York consists of a diversity of telecommunications systems that both complement and compete with the services provided by Teleport Communications, Inc. Moreover, it highlights the important role of the private sector in planning and developing new telecommunications systems that encompass fiber optics, microwave, coaxial cable, and satellite, as well as twisted pairs of copper wire. Finally, this chapter provides an important case study of the relationship of teleports to the changing telecommunications infrastructure within cities and the need to understand the system of wires ducts and channels that transmit information within large cities.

 

NOTES

1. Fortune, April 29, 1985, and June 10, 1985.

2. Kenneth L. Phillips, "Telecommunications and New York in the Year 2000," Testimony before the New York City Commission on the Year 2000, May 9, 1985, p. 3-4

3. Congress of the United States, Office of Technology Assessment, Information Technology R & D: Critical Trends and Issues (Washington, D.C.: U.S. Government Printing Office, February 1985), p. 67.

4. A. M. Rutkowski, "Satellite Competition with Optical Fiber," paper presented at Satellite Summit, April 1985.

5. Ibid, p. 3.

6. The World's Telephones: A Statistical Compilation as of January 1983. (Morris Plains, N.J.: AT&T Communications), 1985.

7. Eric N. Berg, "Sharing Telephone Services," The New York Times, August 27, 1985, p.

8. Federal Communications Commission, Common Carrier Bureau, Bypass of the Public Switched Network. December 19, 1984, p. 7.

9. Michael Wines, "Teleports May be the Newest Threat to Bell Companies' Local Dominance," National Journal, November 12, 1983, p. 2352.

10. Supplemental Testimony of Dr. Joseph S. Kraemer, New York Public Service Commission, Case 28710, June 1, 1984, p. 2.

11. Mitchell L. Moss, "Telecommunications Policy Issues for New York State," Report to the Governor's Council on Fiscal and Economic Priorities, December 1985.

 

Originally published in Teleports and the Intelligent City
Andrew D. Lipman, Alan D. Sugarman, Robert F. Cushman, eds.
Dow Jones Irwin, 1986