Federal Internet Law & Policy
An Educational Project
Customer Premises Equipment
Part 68 :: CPE
Dont be a FOOL; The Law is Not DIY

Customer Premises Equipment (CPE) is the stuff at the end of the telephone network that is attached to the network. It could be a modem or it could be as simple as a plastic scoop used to help make telephone conversations private. 

Prior to the proceedings discussed on this page, Ma Bell blocked anyone from attaching anything to its network.  Recall historically that Ma Bell started with Alexander Graham Bell's patent of CPE, the telephone, and not a patent for a telephone network or service. Ma Bell's business plan was to sell end-to-end service; Ma Bell would argue that "foreign" devices would harm the network (but then turn around and market the same device at a significantly increased price). Attach a plastic cup to a phone to have a private conversation - AT&T argued that would harm the network. Attach an electronic accoustic coupler to the network so that you could talk to cowboys out riding horses on the ranch - that would harm the network. The argument became so absurd that even if you attached a cover to a phone book - AT&T claimed that would harm the network. [Alven] [Johnson 685 ("A tariff that prohibited a "device" from being "attached" to any of the "facilities furnished by the telephone company" could be interpreted to forbid the use of a plastic book cover on a heavily used phone book-and was so interpreted in North Carolina before being overturned by that state's supreme court.")] [Strassburg]

There are two important regulatory evolutions with regard to CPE:

On broadband Internet networks, the ability of the end users to attach the device of their choice to the network is defined by the FCC's Open Internet rules.

A new regulatory issue has recently emerged in the context of Network Neutrality concerning whether subscribers, particularly wireless subscribers, can attach the CPE of their choice to wireless telecommunications networks.  Reportedly, in the United States carriers lock their systems so that only their handsets can be used where in Europe subscribers simply need to switch SIM cards in order to switch handsets - and therefore the handset market is far more competitive.  SKYPE has petitioned the FCC to apply Part 68 to wireless networks.

Hush a Phone

The Hush a Phone was a scoop like thing that was attached to a telephone handset so that the speaker could talk softly into the phone and not be heard by others. It was a non electric attachment. Hush a phone had been in business since 1920. [Hush a Phone ad] [Picture of a Hush a Phone] [Johnson 688]

In the late 1940s, an AT&T lawyer saw the Hush a Phone in a store window, and decided to sue. AT&T, through its tariffs, refused to allow anyone to attach anything to their network without their permission. AT&T brought suit before the FCC, which agreed that the Hush a Phone posed a technical interference with the network. [Johnson 688 ("The phone company and FCC argued that the device would impair intelligibility by intensifying frequencies below 500 cycles in ways that could, at some point, create distortion or a blasting effect in the mouthpiece transmitter.")] [Huber (referring to this as probably the Commission's "most comical order")]

Hush-a-Phone decided to take a then-unusual step, and appeal the FCC decision to DC Circuit Court. The court reversed the FCC, stating that AT&T's restrictive tariffs were an "unwarranted interference with the telephone subscriber's right reasonably to use his telephone in ways which are privately beneficial without being publicly detrimental." [Hush a Phone v FCC, 238 F2d 266 (1956)] [Johnson 688]

While Hush-a-Phone won, all that was permitted at this point was the attachment of non-electric devices.

Hush a Phone Corporation v US, 238 F.2d 266 (DC Cir. 1956): "The question, in the final analysis, is whether the Commission possesses enough control over the subscriber's use of his telephone to authorize the telephone company to prevent him from conversing in comparatively low and distorted tones. It would seem that, although the Commission has no such control in general, there is asserted a right to prevent the subscriber from achieving such tones by the aid of a device other than his own body. Thus, intervenors do not challenge the subscriber's right to seek privacy. They say only that he should achieve it by cupping his hand between the transmitter and his mouth and speaking in a low voice into this makeshift muffler. This substitute, we note, is not less likely to impair intelligibility than the Hush-A-Phone itself, for the Commission has found that 'whenever an enclosure is placed around the mouth of a person an intensification of frequencies below approximately 500 cycles occurs, and if the intensification is too great, a distortion or blasting effect results in the transmitter.' In both instances, the party at the other end of the line hears a comparatively muted and distorted tone because the subscriber has chosen to use his telephone in a way that minimizes the risk of being overheard. In neither case is anyone other than the two parties to the conversation affected. To say that a telephone subscriber may produce the result in question by cupping his hand and speaking into it, but may not do so by using a device which leaves his hand free to write or do whatever else he wishes, is neither just nor reasonable. The intervenors' tariffs, under the Commission's decision, are in unwarranted interference with the telephone subscriber's right reasonably to use his telephone in ways which are privately beneficial without being publicly detrimental. Prescribing what changes should be made in the tariffs to render them 'just, fair, and reasonable' and determining what orders may be required to prohibit violation of subscribers' rights thereunder are functions entrusted to the Commission."


Derived From: From Jason Oxman, FCC Working Paper 31:  The FCC and the Unregulation of the Internet Text | Word97 | Adobe | Press Release | July 1999

Source: Wikipedia

At about the same time the Commission launched its first Computer Inquiry, it released a short order addressing the complaint of Thomas F. Carter and his company, the Carter Electronics Corporation, against AT&T. [Carterfone  In 1959, Carter invented a device, which he named for himself, that permitted users of mobile radio systems to interconnect their landline telephone with the radio system to permit mobile and fixed users to communicate with each other. [Picture of a Carterfone]   Consider, for example, the ability to use a Carterfone to link a marine radio to the telephone line, allowing someone on a boat to talk to someone on a telephone. [Johnson 686 ("Tom Carter's challenge involved the question of how to place and receive phone calls while riding his horse or otherwise getting about on his cattle ranch when the phone was back in the ranch house.")] [Strassburg 5 (there were other modem companies at that time, but they sold to the government and the military)]

AT&T advised its customers that the Carterfone , if used in conjunction with an AT&T telephone, would subject the end user to penalties pursuant to AT&T's FCC tariff number 132, which provided that:

No equipment, apparatus, circuit or device not furnished by the telephone company shall be attached to or connected with the facilities furnished by the telephone company, whether physically, by induction or otherwise ....

[Strassburg 4-5 ("the administrative hearing and the time and the cost involved that, to a small entrepreneur with a piece of equipment, it discouraged people. It discouraged the market from developing, and that's why, I think, the United States was so far behind other countries, because, in terms of customer premise equipment, simply because there was no entrepreneurship out there, the entrepreneurship was blunted and discouraged by this institutionalized practice of saying: "You can't connect with us."")] [Ismail 13]

Carter filed a private antitrust suit against AT&T, and the District Court referred the matter in 1966 to the FCC. [Strassburg 6] [Johnson 683 (Carter sold off his Texas cattle ranch to pay for lawyers during the AT&T litigation)]

Before the FCC, AT&T again failed to demonstrate how competitive CPE would harm the network. The Commission concluded that AT&T's tariff was unreasonable and discriminatory and ordered the restrictive tariff provisions stricken. [1968 Order]   The Commission was troubled by the tariff provision that would have permitted end users to install AT&T-manufactured equipment with exactly the same functionality offered by the Carterfone, but not the Carterfone itself. The Commission determined that a customer desiring to improve the functionality of the telephone network by interconnecting a piece of equipment not manufactured by the phone company should be permitted to do so, so long as that equipment does not harm the network. [Strassburg 7 ("there was sufficient evidence to demonstrate that the tariff was inherently unsound and should be declared unlawful, as unjust and unreasonable")] The Commission also rejected AT&T's arguments that opening the network to competitive CPE would have adverse economic impact on AT&T's telephone service. [Strassburg 5 (AT&T responded to Carterfone with the Protective Connecting Arrangement)] [Strassburg 8 (Carter "didn't get much out of the settlement.")]

FCC Commissioner Nicholas Johnson who wrote the Carterfone decision: "One of my many jobs as a teenager was that of a watchman and cleaning person at the local gas and electric company's downtown office in Iowa City... What I remembered from that experience... was that the utility did not feel a necessity to manufacture, own, and sell to its customers everything that plugged into the electric grid. If an electric company could figure out a way to do that, with all the risks of electricity causing shocks, fires, and possibly blowing out a company transformer, I did not see why the phone company could not do the same with an acoustic coupler. There was a little more to my analysis, I suppose, but that was the heart of it." [Johnson 695]

As stated by Huber, Kellogg, and Thorne, "Unvarnished claims of threatened harm to the network would no longer suffice;" from here out, AT&T would have to demonstrate specific harm to prohibit competitive CPE. [Strassburg 9 ("AT&T wasn't going to be able to stand still with its traditional practices. They were going to have to make the network more accessible and flexibly adaptable to things other than voice communication")]

Use of the Carterfone Device in Message Toll Telephone Service; Thomas F. Carter and Carter Electronics Corp., Dallas, Tex. (Complainants), v. American Telephone and Telegraph Co., Associated Bell System Companies, Southwestern Bell Telephone Co., and General Telephone Co. of the Southwest (Defendants), Docket Nos. 16942, 17073, Decision, 13 FCC 2d 420 (1968) (Carterfone), recon. denied, 14 FCC 2d 571 (1968).

Notice that the Computer I Inquiry was happening at the same time. The two proceedings, and the comments filed in them, influenced the outcome of each proceeding. [Strassburg 7]

Obituaries, Thomas Carter,67, Who Beat A. T.& T In Lawsuit,Is Dead, N.Y. TIMES, Feb. 26, 1991. 

Part 68

“Today, the benefits of competition in the CPE market are tangible. Consumers can buy telephones of all shapes, sizes and colors with a bewildering array of features and functions. They can buy telephones with built-in answering machines, telephones with memory, telephones with speed dialing, and cordless telephones.”

“Since deregulation, prices for this equipment have fallen, and as prices declined, sales increased. Sales of cordless telephones, for example, increased from approximately 4 million units in 1985 to 9 million units in 1992.” - Reed E. Hundt, Statement, Committee on Commerce, Science, and Transp., U.S Senate, February 23, 1994.

The principle of consumer usage of non-telephone company manufactured equipment with the public switched telephone network, outlined by the Commission in Carterfone, would later be codified as Part 68 of the FCC's rules.  In restraining the boundaries of AT&T market power and opening the network to competition, the FCC believed that it was advancing the public interest.

[W]e find the interconnect competitive marketplace has been characterized by innovation on the part of both interconnect and telephone companies, thereby affording the public a wide range of choices regarding the terminal device or private communications system which best serves their needs. Benefits include availability of new equipment features, improved maintenance, and reliability, improved installation features including ease of making changes, competitive sources of supply, option of leasing or owning, and competitive pricing and payment options. Although it is difficult to predict future innovative developments, because so much is dependent on new product lines and new marketing strategies adopted by the telephone carriers in response to competition, it appears likely that the public will continue to benefit from the competitive interconnect marketplace in terms of innovation in the immediate future [1976 Report para 246]

Part 68 was first adopted in 1975 as part of the Commission's WATS rulemaking, [WATS] in response to telephone company slowness in modifying tariffs to permit consumers to attach their own equipment to the public network.  Part 68, which addresses connection of terminal equipment  to the public telephone network,[33] permits consumers to connect equipment from any source to the public network if such equipment fits within the technical parameters outlined in Part 68.  Competitive manufacturers of equipment were able, by means of the Commission's equipment registration and certification procedures, to build and deploy an incredible variety of voice and data equipment for use with the public network, without seeking prior permission from either the Commission, or more importantly, the monopoly telephone companies.

Through Carterfone and Part 68, the Commission opened the door to manufacturers of devices that interconnected with the telephone network and offered value-added services and capabilities.  Most important for the growth and development of the Internet, the Commission's deregulation of customer premises equipment, or CPE, cleared the way for the rapid deployment of the modem.  The modem allows any consumer with a computer and a telephone line to access data services, requiring no network alterations by the telephone company.  Residential modem use, in turn, has driven the growth of Internet applications as consumer use of the Internet has increased.  In fact, without Part 68, users of the public switched network would not have been able to connect their computers and modems to the network, and it is likely that the Internet would have been unable to develop. [See Wu p 9]

As the application of Moore's law to computer processing speeds witnessed an exponential growth in computing capabilities, the modem followed suit.  Analog modem speeds rose from 300 baud to 28.8 kilobits/second, and then to today's nearly standard 56 kilobits / second.   Digital modems and codecs,  using such technologies as digital subscriber line (DSL), promise multiple increases in speed that will create demand for even more innovative Internet-based resources and tools.  As a result, consumers will continue to be exposed to an endless variety of Internet-based applications that meet their increased bandwidth capabilities.

The Carterfone decision enabled consumers to purchase modems from countless sources, to install and use the modem without permission from the telephone company, and to use these modems to take advantage of an array of data services offered by a diverse assortment of service providers over their home telephone service.  Without easy and inexpensive consumer access to modems, the Internet would not have become the global medium that it is today.


The Marconi company refused to communicate with radio stations that were not outfitted with Marconi equipment. This resulted in the US Navy Department, then in charge of US radio communications, to adopt a policy against permitting installations of radio stations that refused such interconnection.

"Early in 1902 an incident occurred which caused the German Government to take official cognizance of the situation. Prince Henry of Prussia, brother of the German Kaiser, was returning to Germany, in the S.S. Deutschland , after a visit to the United States. Soon after sailing, he desired to send President Roosevelt a radio message thanking him for the numerous honors and courtesies which had been accorded him. The Deutschland transmitted this message to the Marconi station at Nantucket, but that station refused to accept it because the ship was fitted with Slaby-Arco radio equipment. The irate Prince brought the matter to the attention of his brother. Kaiser Wilhelm thereupon instructed his government to initiate action in an attempt to establish international control over radio communications. [Howeth] The US Navy, with jurisdiction over American radio at that time, adopted the policy of preventing the installation of radio stations which would block the receipt of messages.

See Early Radio History.



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