STATEMENT OF JOHN J. HANSELMAN, ASSISTANT VICE PRESIDENT, AMERICAN TELEPHONE & TELEGRAPH CO.

Mr. HANSELMAN. My name is John J. Hanselman, and, as has been stated, I am assistant vice president of the American Telephone & Telegraph Co. in the operation and engineering department in New York City. For most of my telephone career I have had supervisory responsibility for assisting the associated Bell System companies in the commercial development of the telephone business.

Let me say at the outset that we very much appreciate this opportunity to come here and talk with you very briefly about telephone communications and its place in the social, business, and governmental activities of this country.

I will proceed with this statement, if you agree.

Telephone service today is a vital factor in practically all of our activities. Perhaps the best way to appreciate its impact and importance is to consider what would happen if we should suddenly be without telephone service. It is quite obvious, I believe, that all government, business, and social activity would almost immediately be slowed down and very shortly come to a standstill.

In a relatively short span of years, the telephone has grown from a useful device for the few to a vital everyday necessity for all. Hardly any business is so small as to be without telephone service, and larger business firms may have several thousand telephones at a single location. Today, 4 out of 5 families have telephones in their homes.

There are now over 64 million telephones in the United States. This is three times as many as in 1940. Since 1920 there has been a 400 percent growth in telephones, while population has increased only 60 percent.

Telephone service here has also been growing much faster than households. Today 78 percent of the households have telephone service, which is more than twice as many as in 1940.

Not only is the number of telephones growing rapidly, but perhaps even more importantly, the use of the telephone has grown equally dramatically. Every day there are 230 million local telephone conversations, and, in addition, 10 million long-distance conversations. This comes to a total of about 80 billion telephone conversations per year.

The average annual telephone conversations per person in the United States has grown from 161 in 1920 to 246 in 1940, and today stands at 460. This further indicates the increasingly intimate relationship between the growth in telephone usage and the growth and development of this country.

Close to 85 percent of the telephone service in the United States is provided by the Bell System and its associated companies. The remainder is provided by some 4,100 independent telephone companies, practically all of which interconnect with the Bell System and with each other.

Incidentally, some 55 percent of the world's telephones are in the United States, even though we have only 6 percent of the world's population. Virtually all of the world's telephones can be reached by any telephone in this country.

There are many reasons why telephone service has developed so rapidly. For example, the spreading out of our population to all four corners of the country, the increasing size of towns and cities, the tremendous development of suburban areas, good roads and automobiles, have all contributed their part.

Also, the steadily increasing tempo of business, the Nation's demand for a wide variety of products and services, the keen competition for the consumer's dollars, the increasing complexity of the means of production and distribution, have combined to make the telephone more and more of a necessity. To illustrate:

Government, in order to carry on effectively and exercise its functions in the public welfare, uses the telephone.

The Defense Department, in preparing for the national defense, uses the telephone.

The farmer who wants to make an emergency repair on his tractor or find the best market for his produce, uses the telephone.

The manufacturer who wants to order more raw material or arrange for a shipment of his product, uses the telephone.

The oil company that wants to confer with its geologist regarding the location of a new oil field, uses the telephone.

The chemical company that wants to discuss a new and valuable formula with its research laboratories, uses the telephone.

The financial house which wants to arrange a loan or market securities, uses the telephone.

The consumer, whether businessman or housewife, uses the telephone.

The telephone is used for all these and many other business purposes, whether on a local or long-distance basis, because it provides an immediate, direct, private means of communication that is almost the equivalent of a face-to-face conversation. The telephone shatters distance because it is equally effective whether the other person is in a nearby office, across the continent, or overseas.

The telephone is likewise used for a wide variety of family_and social purposes. Here the intimate, personal quality of the telephone has made it possible to keep in touch with parents or children at distant points, to give encouragement or sympathy to loved ones, to hold families together, to make new families grow, to keep in touch with friends, both new and old.

Another reason for the rapid growth of the use of the telephone is that telephone service is continually being improved.

The average long-distance connection took 14 minutes to complete in 1920. The speed of completing connection in 1930 was reduced to 2 minutes, but today the average long-distance call is completed in only 72 seconds.

In 1920, the quality of transmission was equivalent to 2 people talking to each other while they were some 50 feet apart. In 1940, improved transmission brought the 2 talkers within 20 feet. Today transmission has been further improved to a point equivalent to their talking to each other face-to-face, that is, only 6 feet apart.

Another example of service improvement is that the percent of Bell telephones with dial service has gone from 32 percent in 1930 to 60 percent in 1940, to 76 percent in 1950, and about 92 percent today. Rapid progress is also being made in arrangements which permit customers to dial long-distance calls.

Business telephones have always been largely on an individual line basis. But in recent years the greater privacy and availability of individual lines has put them in great demand for residence service also. Four-party service is being rapidly eliminated and more residences have individual line service now than ever before. Rural service has also been improved by reducing the number of parties on the line, providing full metallic circuits, and eliminating the old handcrank telephone.

Telephone service has also been made more convenient by means of new and improved telephone instruments. A great variety of telephone arrangements are available for the office and place of business. In the home, extension telephones in color are now located in the bedroom, kitchen, living room, or other handy locations. Extensions make it easier to originate calls, as well as to answer incoming calls promptly.

Finally, telephone service is attractive because of its low cost. While telephone rates have been increased somewhat in recent years, the increases have been low as contrasted to price increases of other commodities and services and the overall cost of living. For example, to pay the average monthly bill for minimum local service in the larger cities required 3.7 hours of work for the average factory worker in 1940, and only 1.7 hours in 1957. The relatively low rates for telephone service bring it within the reach of practically everyone. They have been made possible, in spite of increased wages and increased material costs, through continuous improvements in the art of telephony and the more efficient management of the business.

This ability to develop a valuable service at reasonable rates has in turn attracted to the Bell System alone more than 1,600,000 shareowners, whose investment in the business makes available the capital needed to support its growth and development.

In conclusion, then, telephone service has grown far more rapidly than population and many other criteria of growth, such as general business activity. It uniquely meets the current communication needs of government, business, and the home. Telephone service has been continuously improved and tailored to better fit in with the wide variety of its customers' needs. It is fast, dependable, and economical. Its employees, both management and nonmanagement, have the respect and esteem of the communities in which they work and live. Anything that would detract from the confidence which the public has in the privacy of telephone service would be a serious blow, not only to the telephone industry, but, perhaps more importantly, to the country as a whole.

Senator JOHNSTON. I would like to ask just a few questions at this time, after listening to the fine statement that you have presented here.

Is it not your opinion, as an official of the telephone company, that Americans today use the telephone for local and long-distance calls in connection with their families, their personal, and private relationships, as well as for social, business, and professional matters? Mr. HANSELMAN. Yes, indeed, that is true.

Senator JOHNSTON. Now, that being so, what procedures has the telephone company followed to prevent its own employees from listening in on private telephone conversations? When I ask that ques

tion, I mean its own employees, of course, operators and other personnel.

Mr. HANSELMAN. Of course, only a relatively small proportion of the total employees have access to equipment which would permit listening in on telephone conversations. That is primarily the operators and also the plant installation and maintenance people. Of course, as you know, more and more of our telephone service is on a dial basis, both local and long-distance.

Now, with regard to the procedures the telephone company follows, I might say this: In the first place, the telephone company is exceedingly careful in the choice of its employees. I am not completely sure of these figures, but out of 30 applicants for plant jobs, I think only 1 is taken, for a variety of reasons.

Likewise, in our selection of traffic people, a very careful process is gone through, including a review of the person's background and other circumstances, which would insure that the telephone company has a responsible, competent individual.

Following such a careful selection, the telephone company makes available to all employees a part (sec. 605) of the Communications Act, which tells what the requirements are with regard to maintaining the secrecy of telephone communications and the prohibition against divulging any information which they may happen to hear.

Those people who are directly associated with line equipment and switchboards, in most cases are asked to sign a statement in which is outlined what the requirements are with regard to the secrecy of telephone service. In this way we are sure that our employees not only have the written material before them, but, in fact, that they have read it.

In addition, the supervisory people continuously watch the people to make sure that there is no listening in.

Perhaps more importantly, as far as our traffic people are concerned, there is no reason why they would listen in on telephone calls. They are instructed and trained, the minute the connection is up, to cut out of the connection. That is necessary, because they have to go on and work on the next call.

As a general proposition, with the very close supervision we have of both our traffic and plant people, there is very, very little opportunity for listening in. We feel that with the training and instruction given to our employees, they very carefully observe the regulations of the Federal Communications Commission, and such state requirements as there may be.

Senator JOHNSTON. Now, what steps does the telephone company take to prevent other people from listening in on private telephone conversations? I mean by "other people," of course, in that question, people other than telephone company employees.

Mr. HANSELMAN. Well, in the first place, our operating buildings are closely guarded for a variety of reasons, so that an outside person does not have access to that part of our equipment which would permit him or her to listen in on connections.

An outside person would not be allowed in the telephone company building unless he had passed certain security regulations, and in most of our buildings, a person not a telephone company employee is re

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quired to either wear a badge to designate him individually to other employees that are around, or be continuously accompanied by a supervisory person.

Mr. SLAYMAN. Mr. Chairman, with your permission, I would like to ask a few questions along the line of your last question.

Senator JOHNSTON. Proceed.

Mr. SLAYMAN. Then, moving a step further, Mr. Hanselman, what steps does the telephone company take to insure the privacy which you mentioned in your prepared statement to the paying customers of the telephone service? What steps do you take?

You have described how you keep other people out of the building, but what steps do you take with regard to the telephone lines themselves and junction boxes into a business building? How do you protect the customer from wiretapping by anybody other than employees of the telephone company?

Mr. HANSELMAN. I am afraid you are getting somewhat outside of my personal field, because I am a commercial businessman, and these questions you are raising are more directly related to our plant operations.

But I could say this from my broad general knowledge of the business: I know that we have our own employees continuously examining and working on the outside plant, and if at any time they should find any irregularity, they take such appropriate steps as seem desirable to eliminate it.

I might say that it is an extremely rare occasion for the telephone company employees to find any irregularity in the operation of the facilities.

Senator HRUSKA. Will the chairman yield?

If anything were observed by way of tampering with junction boxes themselves, what steps would be taken by your employees?

Mr. HANSELMAN. They would report it to their supervisory people, and they in turn would report it to the appropriate law-enforcement officials if there seemed to be any reason for it.

Senator HRUSKA. Is there any inspection of these boxes for this eventuality, or is there anything else which would draw to their attention anything which would be irregular in any of these connections?

Mr. HANSELMAN. So far as I know, such inspections are made, of course, at any time anyone believes or feels that for some reason there may be a tap on his wire. In that case, the telephone company does make a special investigation of that customer's line.

Senator HRUSKA. There are occasions, are there not, for routine checkups and service calls of other kinds, which, as a byproduct, would probably disclose anything that was irregular? Would that be true?

Mr. HANSELMAN. Yes, that is quite true, and I had intended to cover that in my first comment, that in the day-to-day operations, our employees are all cautioned to be aware of any irregularities in the outside plant or the terminal boxes.

Senator JOHNSTON. Do you do anything in the field of educating your customers to tell when a wire might be tapped, a buzzing or just a sound so that they can tell when it is tapped? Do you do anything in that field whatsoever!