Indiana Bell Telephone Company, Incorporated

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Indiana Bell Telephone Company, Incorporated

240 N. Meridian Street
Indianapolis, Indiana 46204
U.S.A.
(317) 265-2266
Fax: (317) 265-5564

Wholly Owned Subsidiary of Amentech Corp.
Incorporated: 1920 as Indiana Bell Telephone Company
Employees: 5,700
Operating Revenues: $1.17 billion
SICs: 4813 Telephone Communications Except
Radiotelephone

Indiana Bell Telephone Company, Incorporated, is the Indiana corporate legal entity for Ameritech Corporation, which provides a wide variety of advanced telecommunications services in Indiana. As that state’s dominant local telecommunications company, Indiana Bell serves 64 percent of Indiana’s population and 28 percent of its geographic area through 1.9 million telephone lines. The company has been known to its customers as Ameritech since 1993, when Indiana Bell, Ohio Bell, Michigan Bell, Illinois Bell, and Wisconsin Bell took the name of Ameritech as part of that company’s new initiatives to make Ameritech’s new market-driven structure and unified brand identity more visible to its 13 million customers in its five-state region. However, the Indiana Bell name is still used in connection with state regulatory matters, and Indiana Bell continues to own current Indiana Bell assets in the state.

Indiana Bell was one of five state-based Ameritech Corp. subsidiaries that were formerly part of American Telephone & Telegraph Company (AT & T) prior to AT & T’s 1982 court-ordered divestiture of local phone service operations. In accordance with a consent decree arising out litigation preceding the AT & T breakup, Indiana Bell provides two principal types of services: local exchange and intra-LATA (short-haul long distance) toll service and network access in Indiana. In 1990 Indiana Bell dissolved its board of directors and in 1993 became known to its customers as Ameritech

Indiana Bell was incorporated in 1920 to operate Bell Telephone System local toll lines and telephone exchanges in Indiana. Indiana Bell’s roots, though, can be traced to the last quarter of the 19th century and the birth of phone service in Indiana, which arrived in the state less that two years after Alexander Graham Bell’s 1876 invention of the telephone. In 1877, after a telephone demonstration at the Indiana State Fair, the only two existing phones in the state were moved to downtown Indianapolis for the purposes of a practical test. The local coal operation Wales & Company connected the two phones, one placed at the company’s office and one at its coal yard, by means of a telegraph line. In 1877 another local coal dealer, Cobb & Branham, applied for and received Indianapolis City Council permission to construct a permanent telephone line to run between its office and coal yard.

Indiana’s first telephone company, Indiana District Telephone Company, was organized in December 1878. In January 1879 Indiana District Telephone received Indianapolis City Council permission to erect telephone poles and wires on public property, and two months later Indiana District Telephone, utilizing Bell patented equipment, established the state’s first telephone exchange at the corner of Washington Street and Virginia Avenue. In 1880 the company was reorganized as Telephone Exchange Company of Indianapolis, and that same year the second telephone company in Indianapolis, Western Telephone Company, was founded. In 1883 Central Union Telephone Company, a Bell System operation and the direct predecessor of Indiana Bell, was created. During the 1890s competition in the Indiana telephone industry intensified, and new companies, acquisitions, and mergers proliferated. By the turn of the century, Indiana had over 600 independent telephone companies, and many telephone customers in the state had at least two phone companies from which they could choose; as a result, many telephone users found it necessary to have a phone from each service provider in order to communicate with customers of each telephone firm.

The creation of the Indiana Bell forerunner, Central Union Telephone, eventually resulted in the merger of it and the other two existing Indianapolis-based exchanges as well as the acquisition of the majority of telephone exchanges existing in Indiana, Illinois, and Ohio. In February 1920 Indiana Bell Telephone Company, organized to centrally own and operate telephone exchanges and local toll lines of the Bell Telephone System in Indiana, was incorporated; two months later Indiana Bell acquired the Indiana properties of Central Union Telephone, formerly operating in three states, and the properties of Indianapolis Telephone Company, which had been created in 1898. AT & T, which funded the acquisition of Central Union, took control of the stock of Indiana Bell Telephone.

The series of mergers that created Indiana Bell in 1920 were completed by July of that year after Indiana Bell had also acquired and consolidated the properties of United Telephone Company of Bluffton, Indiana; Citizens Telephone Company of Kokomo, Indiana; Indiana Union Telephone & Telegraph Company of Fowler; and Southern Telephone Company of Indiana. Edgar S. Bloom was named the first president of Indiana Bell, which established its headquarters in an eight-story red-brick building formerly serving as the Central Union Telephone headquarters. The newly consolidated company, launched with $15 million in capital, initially controlled the operation of 90 exchanges and 30,000 miles of long distance circuits and served 170,000 Indiana telephones through nearly 5,000 employees.

In 1921 Curtis H. Rottger was named president and served the company through the remainder of the decade. Indiana Bell’s early growth-through-acquisition strategy was evidenced during the 1920s by the 1925 purchase of two small telephone operations, Citizens Telephone Company of Edinburg, Indiana, and the Indiana properties of Louisville Home Telephone Company. In July 1929 Indiana Bell acquired the physical property and other assets of several telephone service companies it already owned, including those operating in the Indiana communities of Columbus, Danville, Clinton, Martinsville, Michigan City, Bloomfield, and Rockville.

In 1930 James R. Carroll succeeded Rottger as president. That same year the building housing Indiana Bell’s headquarters was relocated in an engineering feat that received global acclaim. The 11,000-ton building was moved 52 feet south and 100 feet west—all in 30 days while telephone service and business operations continued without interruption. Indiana Bell’s territorial expansion continued in the 1930s with the acquisition of telephone operations in the Indiana towns of Albany, Rosedale, Lawrence, Lebanon, and Dugger.

Indiana Bell’s expansion drive was cooled by World War II and resumed in 1946 with the common stock acquisition of a small telephone concern, West Newton Telephone Company. By that time the company’s revenues had grown to more than $28 million, including $16 million from local services. In 1946 William A. Hughes was named president and served for two years before being succeeded by Harry S. Hanna, who remained president until 1960. In 1948 Indiana Bell constructed its first addition to its headquarters, adding five floors to its facility.

In 1950 Indiana Bell acquired the outside plant of Mt. Summit Rural Telephone Company. By 1951 annual local service revenues had grown to more than $32 million, while total revenues topped $50 million, and the company earned more than $6 million for the first time. After receiving Federal Communications Commission (FCC) authorization, in 1952 Indiana Bell acquired through the estate of J. T. Detchon a group of telephone companies that included the Noblesville Telephone Company, Browning Telephone Corp., Central Telephone Company, Sims Telephone Company, Daleville & Middletown Telephone Company, Citizens Telephone Company, and Union Telephone Company. In 1956 the company changed its named to Indiana Bell Telephone Company, Incorporated.

In 1960 Roy C. Echols was named president, and for the next eight years he guided the company through a period of facility expansion, technological advancements, and financial growth. During the same period the number of independent telephone companies fell below 100 for the first time since the 19th century. Indiana Bell added a 14-story annex to its headquarters in 1961 and a 20-story annex and eight-story addition six years later. During the early 1960s Indiana Bell began relying on increasingly larger public sales of debentures, as well as financial advances from parent AT & T, for expansion purposes; the company issued $20 million in debentures in 1963 and sold $25 million worth of public debt two years later, in part to pay off advances from AT & T.

Technological advances for Indiana Bell during the decade were highlighted by the 1965 completion of a program to convert all company phone exchanges to dial service. In 1968 the company introduced the Bell System’s first 9-1-1 emergency calling system, which connected emergency callers to a central dispatcher serving fire, police, and rescue agencies. By mid-decade Indiana Bell’s earnings had topped $25 million on revenues of more than $89 million, and by 1967 revenues from local services alone topped $100 million as total revenues grew to more than $180 million. In 1968 Thomas S. Nurnberger succeeded Echols as president.

In January 1970 Indiana Bell went back to the public debt market, selling $80 million of debentures which left the company with four issues of long-term debt totalling $165 million. In 1971 the company followed up with $100 million offering— generating enough popularity to put a temporary stop to a drop in the price of seasoned corporate bonds—and used proceeds to help fund its expansion program, repay AT & T advances, and pay off short-term debt. For the 1971 year, the Indiana Bell offering was one of about a dozen public debt sales by Bell System operating companies, whose debt offerings that year totalled more than $1.5 billion.

By 1973 Indiana Bell had completed a program to install direct distance dialing service for all of its customers, and by 1978 touch-tone service was available to all of the company’s customers. In need of additional office space to replace that which had given way to additional telecommunications equipment, Indiana Bell constructed a 20-story office building at 220 N. Meridian, Indianapolis (just south of the original Indiana Bell headquarters at 220 N. Meridian), which was completed in 1975. In 1976 the company, as part of a program to consolidate Indiana Bell and Illinois Bell operations within the respective state territory of each, began serving 11 exchanges in Lake County, Indiana, that Illinois Bell had served since 1920. The exchanges transferred to Indiana Bell included those in Crown Point, East Chicago, Gary, Hammond, Highland, and Merrillville.

Expansion and technological advances translated into continued and consistent financial growth for Indiana Bell in the 1970s, and in 1975 annual revenues climbed above $400 million for the first time as income topped more than $50 million for the second consecutive year. In early 1977 Indiana Bell and three other AT & T operating subsidiaries, in an innovative and unusual financial move to save the companies an aggregate $60 million, offered to repurchase at premium prices high-cost old debentures from public holders. The offer was made to acquire the debentures before their first redemption date in order to trim interest expenses and hold down telephone rates and was made at a time when long-term interest rates were falling and market prices of long-term debt outstanding were rising. In late 1977, following the early redemption offer, Indiana Bell sold $90 million worth of new debentures. By the end of 1977 Indiana Bell’s annual earnings had climbed to more than $84 million, on revenues of $572 million, and by the end of the decade the company’s annual income was more $100 million.

In 1982 the U.S. Department of Justice (DOJ) brought to a close a 13-year-old antitrust suit against Indiana Bell’s parent, AT & T, which had grown into the world’s largest corporation. In a landmark decree designed to demonopolize the telecommunications industry and allow for equal access to long distance exchange facilities, the DOJ ordered AT & T to divest itself of its 22 operating subsidiaries, which were divided among seven newly created regional holding companies, which became known colloquially as Baby Bells.

Between 1970 and 1983 Indiana Bell named eight new presidents: David K. Easlick, James E. Olson, John W. Arbuckle, D.C. (Bud) Staley, William L. Weiss, Philip A. Campbell, William P. Vititoe, and Ramon L. Humke, who was named president in 1983 after Vititoe left to head up Michigan Bell. In 1983, Indiana Bell’s last year as part of an AT & T-controlled local telecommunications system, Indiana Bell earned $137.8 million on revenues of $942 million. The regional telephone holding company formed from AT & T units in the Midwest was named American Information Technologies Corp., or Ameritech, and included Indiana Bell, Illinois Bell, Michigan Bell, Ohio Bell, and Wisconsin Bell. Headquartered in Chicago, Ameritech began operating as Indiana Bell’s parent in 1984. That same year William L. Weiss, who had once served as president of Indiana Bell, returned from a stint as president of Illinois Bell to serve as Ameritech chairman and CEO.

Ameritech began its existence touting a high-tech communications system and was the first Baby Bell to start a cellular mobile phone service, in the Chicago area. From its outset, Ameritech—exemplified by Indiana Bell—was considered to have one of the most favorable regulatory environments to operate in, with only Ohio Bell in the Ameritech territory facing a stringent regulatory climate. Indiana Bell’s favorable working relationships with state regulators, coupled with the company’s tight control over finances, helped the Ameritech subsidiary enjoy favorable ratings on its debentures during the mid-1980s.

By 1984 Ameritech and other regional holding companies and their operating subsidiaries were already facing off against AT & T in competition for the fast-growing market for business systems, known as private branch exchanges, or PBXs. At the heart of PBX competition was equipment manufacture; while AT & T marketed its own PBX systems, the Baby Bells and their local operating concerns sold those made by AT & T’s principal rival, Northern Telecom Ltd., or those from other manufacturers. In 1986 Indiana Bell launched its Integrated Information Network (INN), which represented a transition toward the cutting-edge integrated services digital network (ISDN) technology, and INN that year helped the company land two five-year contracts, worth about $22 million total. Those contracts were with pharmaceutical giant Eli Lilly & Co.—at the time one of Indiana Bell’s top five customers, generating more than 45 million voice calls per year—and U.S. Steel’s Gary, Indiana, plant. In securing the contracts, Indiana Bell went up against competition that included AT & T’s voice-data PBX systems and services that bypassed local networks such as that of Indiana Bell.

In 1987 Indiana Bell debuted an enhanced 9-1-1 service, in Hammond, that allowed vital information about callers’ locations to be displayed on a computer screen at a public-safety answering facility. In 1988 Indiana Bell, in competing for PBX business, became the first company in the country to offer an office-based automatic call distribution system service. In 1989 Ameritech began consolidating marketing operations into one division, Ameritech Services; Ramon Humke assumed the duties of president of that operation and was succeeded as Indiana Bell president by Richard C. Notebaert. The consolidation represented the first in a series of steps by Ameritech that eventually led to consolidation of numerous business functions under the Ameritech Services moniker, including auditing, financial services, and marketing.

In 1989 Indiana Bell surpassed $1 billion in revenues for the first time and earned more than $155.3 million. August 1989 brought labor concerns to several Baby Bells, including Ameritech, which was struck by 40,00 members of the Communications Workers of America, who joined 160,000 other members striking three Baby Bells. After 17 days, Ameritech workers in five states began returning to work. Indiana Bell and Michigan Bell were the last to reach agreements with striking workers. Upon returning to work, employees received nine percent wage increases over three years as well as improvements in profit sharing plans, pension job-training programs, and family care packages.

In 1990 Indiana Bell achieved its “most successful win during its 70-year existence,” according to Telephony, when it was chosen to coordinate the quickest installation of a statewide lottery network in American history. In helping to establish the Indiana lottery, Indiana Bell was responsible for the installation of a private-line lottery network that included phone lines to 1,200 lottery sales sites and the coordination of 800 more sites. Indiana Bell received a five-year guarantee to provide a constant two-way communications system between the lottery’s central system and each of its 2,000 terminals, and the lottery in its first year became one of the company’s largest customers, generating an average of $1,500 in ticket-purchase transactions each minute.

By 1990 Indiana Bell’s number of lines had grown to 1.6 million. Since 1984, the company had grown at a rate of 285 percent, tops among Ameritech operating companies. Only 38 independent telephone companies remained in Indiana by 1990; in addition, along with Indiana Bell, three other major companies were operating in the state: GTE North, Contei, and United Telephone of Indiana. Despite the falling number of independent telephone companies, Indiana Bell faced heightened competition from well-funded independent companies utilizing fiberoptic technology. As a result of this and similar competitive threats in other states, Ameritech entered the 1990s with plans to construct fiberoptic cable rings in major market areas, including Indianapolis. In 1991 Indiana Bell, through its Ameritech parent, was among the first telecommunications operations in the country to be involved with experiments to transmit telephone and cable TV signals to homes over the same fiberoptic lines in Columbus, Indiana.

To reduce overhead and remain competitive with nonunion independent operations and large long-distance companies, during the early 1990s Ameritech and Indiana Bell made several rounds of reductions in its work force. In 1991 Indiana Bell unveiled one of the first programs that allowed PBX systems to install a location-identification system that could determine a caller’s station number and specific address. In 1992 Indiana Bell participated in the Ameritech rollout of voicemail service by introducing it in Indianapolis. Other custom-calling features Indiana Bell introduced and expanded upon during the early 1990s included Call Waiting, Call Forwarding, Three-Way Calling, Speed Dialing, Call Screening, Caller ID, Automatic Callback, and Repeat Dialing.

To improve its telecommunications infrastructure, between 1988 and 1992 Indiana Bell spent more than $1 billion, and in the process, the company completed a program of computerizing all of its switching facilities. The company also boosted to about 60 percent the number of its lines served by the faster and more reliable digital call-handling systems, replacing older analog equipment. By the end of 1992 Indiana Bell had installed 54,000 miles of fiberoptic cables, which were capable of transmitting substantial volumes of data and were more resilient to water damage than traditional copper cables.

During an 18-month period in 1992 and 1993, William Weiss guided Ameritech through a major corporate reorganization aimed at making the corporation more competitive by reducing the size of the work force and focusing marketing efforts on customer products rather than geographic territories such as that under Indiana Bell’s domain. In May 1992 four top Ameritech executives resigned or retired during a management shakeup. Thereafter Notebaert was named to head up Ameritech Services and Thomas J. Reiman replaced Notebaert as Indiana Bell president. By the end of 1992 Ameritech’s staff had been cut by nearly 25 percent from its size a decade earlier, with the majority of those cuts made between 1990 and 1992.

In March 1993 Ameritech, after months of analyzing its operations, unveiled a restructuring plan that set the stage for the company to enter other markets. The reorganization plan was unique for a regional telecommunications corporation in that it proposed entrance into the areas previously barred to the seven Baby Bells, including long-distance service and cable television operations. Ameritech additionally announced intentions to diversify into interactive video services, including home office services, healthcare networks, public safety systems, electronic libraries, and home security. The Bell names of Indiana Bell and the other four Ameritech operating subsidiaries were all but eliminated as they began operating under the Ameritech name and logo, although continuing to exist as legal entities.

In exchange for an entrance into the long-distance market, Ameritech proposed opening up local phone service to competition. In line with this proposal, in May 1993 Indiana Bell asked the Indiana Utility Regulatory Commission to change the way the company’s earnings were regulated, allowing the company to funnel its profits into construction of a telecommunications network that would be more competitive, in exchange for regulation of basic service rates. In addition, Indiana Bell offered to connect with fiberoptic cables all interested government centers, schools, and hospitals by the end of the decade and freeze basic rates until late in the decade.

In 1994 Weiss relinquished his titles of Ameritech chairman and chief executive to another former Indiana Bell president, Richard Notebaert. That same year Kent Lebherz succeeded Reiman as Indiana Bell president. Job cuts continued at Ameritech and Indiana Bell in 1994 and 1995, and Ameritech planned to further reduced nonmanagement workers by 6,000 by the end of 1995.

In mid-1994 Indiana Bell was granted basic rate price regulation approval in exchange for reductions and a short-term cap on basic rates and its agreement to link schools, public safety agencies, and government centers to fiber-optic technology. Following this approval, Indiana Bell rolled out a host of new services, including discount calling plans, customized telephone networks featuring abbreviated dialing between multiple locations, intercom calling, six-port teleconferencing, and specialized billing reports for business customers. Indiana Bell also unveiled toll restriction services allowing residential customers to block out all outbound long distance calls except those to 800 area codes, and pay-per-use repeat dialing and automatic callback services.

Before the close of 1994 all five of Ameritech’s Bell operating subsidiaries had received basic service price regulation approval in exchange for profit deregulation, making Ameritech the first regional telecommunications concern to completely replace profit regulation. In another step to fulfill its reorganization proposals, in late 1994 Ameritech won approval from the Department of Justice to provide trial long-distance service in Chicago and Grand Rapids, Michigan, beginning in 1995. In late 1994 Ameritech also won necessary federal approvals to provide a commercial television delivery system in its five-state territory and announced plans to construct a cable network to deliver television signals to customers, with that network expected to serve six million customers by 2001.

Indiana Bell’s own network by the end of 1994 included more than 65,000 miles of fiberoptic cables, with all of the company’s access lines being served by computerized call-handling systems and three-quarters of those served by digital systems. Due to restructuring charges, Indiana Bell lost $83.7 million in 1994 on revenues of $1.17 billion; a year earlier the company had earned $163.2 million on revenues of $1.4 billion.

Ameritech entered 1995 as a much different company than that which had came away from the AT & T breakup. The regional corporation was offering information services, such as highspeed access to the Internet for businesses; was building a $4.4 billion interactive video communications network to provide competitive alternatives to cable television; was preparing to take on its former parent and others for long-distance business; was operating overseas; and was offering a full range of telephone services, including custom-calling features and cellular and paging services. During its evolution, Ameritech had formed partnerships with the likes of Walt Disney Company and Random House, while its competition had grown to include AT & T and MCI as well as Time-Warner, Telport, and Jones Intercable.

In August 1995 the United States House of Representatives approved legislation representing a major overhaul of the country’s telecommunications laws, which would allow Ameritech and other regional telecommunications companies to provide long-distance service and allow long-distance companies such as AT & T to provide local phone service. In June 1995 the U.S. Senate had approved similar legislation, with the differences between the two pieces of legislation slated to be worked out in the fall of 1995. President Bill Clinton threatened to veto the legislation if approved; however, amendments and the wide margins by which both bills passed led analysts to suggest the president might sign modified telecommunications legislation.

As the nation’s lawmakers were debating changes in telecommunications laws, the Communications Workers of America were threatening to strike Ameritech and three other Baby Bells in early August 1995. The most contentious issue involved job security in the light of Ameritech’s plans to use increasing numbers of temporary workers and move more work to outside contractors. At the same time, Ameritech was negotiating with 11,500 members of the International Brotherhood of Electrical Workers, which, with the CWA, represented about 40,000 Ameritech employees. By mid-August Ameritech had staved off a strike threat and reached an agreement with both the CWA and the IBEW that granted workers a 10.9 percent wage increase over three years and job security provisions that would protect CWA members from involuntary layoffs. According to the Chicago Tribune, pending telecommunications legislation may have dampened Ameritech’s drive to get a better deal from its union workers, as the company may have wanted to avoid undue attention. “But if the competition in local phone service comes to pass and non-union competitors steal lucrative business, Ameritech may one day insist on a confrontation with unions,” according to the Tribune.

As Indiana Bell moved toward the close of 1995, Ameritech continued its move to focus operations around customer-product groups rather than geographic areas and pending legislation that would further muddy the territory of the regional Bells. Historically Indiana Bell had been a stronghold in the Midwest for both AT & T and Ameritech, with both companies having frequently drawn upon executive talent developed at Indiana Bell when looking for leaders for the parent corporation. Indiana Bell had also been run with tight controls over finances and remained profitable, prior to the loss in 1994 due to restructuring costs, and had maintained favorable relations with state regulating authorities. But as Indiana Bell moved toward 1996 with federal regulation pending that could allow greater competition in Indiana, the 75-year-old Indiana Bell certainly faced a rapidly changing telecommunications industry.