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Definitions Edit

General Edit

Unbundling is

a restricted form of separate pricing which provides for pricing computer hardware, utility and applications software, certain engineering services, and most customer education programs separately. The control programs (systems software) and related maintenance were not separately priced.[1]

Telecommunications Edit

Unbundling refers to

the ability to separately purchase communication functions and services that were formerly available only as a single unit.[2]

IBM unbundling of software and services Edit

On June 23, 1969, IBM, under pressure from pending antitrust litigation by various competitors and the U.S. Department of Justice, announced that it would unbundle much of its software and services, and would price and offer many types of software and services separate from its hardware. IBM introduced the distinction between system control programs and program products; the latter became a salable commodity.

Under the announcement:

IBM’s announcement launched the worldwide computer software[4] and services industries.

Telecommunications Edit

"Unbundling" refers to a regulatory requirement that incumbent telecommunications operators (those with dominant market status who control access to the telecommunications infrastructure) or cable companies to give their competitors access to raw copper wire, fiber, or coaxial cable networks so that they can install their own transmission equipment at the incumbent’s central office (local exchange).

Unbundling first appeared in telecommunication with the Carterfone decision of 1968,[5] which allowed customers to add equipment to their telephones as long as they did not adversely affect the operation of the telephone system or its usefulness to others.[6] A clarification of this decision by the FCC in December 1988 extended its provisions to microwave systems and computers. The Carterfone decision ruptured the well-established arrangement whereby AT&T was assigned the responsibility of providing national end-to-end telephone service. Applied broadly, these decisions encouraged the entry of new entrepreneurs who wanted to plug into the network with new kinds of customer premises equipment (CPE) or enhance the value of their private systems by interconnecting with the public network. Thus, they cleared the way for the development of entirely new communication industries.[7]


  1. Information Technology: Acquisition and Use of Software Products for Automatic Data Processing Systems in the Federal Government, at 11.
  2. Global Communications: Opportunities for Trade and Aid, at 2 n.6.
  3. See Burton Grad, A Personal Recollection: IBM/s Unbundling of Software and Services, 24 IEEE Annals of the History of Computing, Jan.-Mar. 2002, at 64 (full-text)
  4. See Stanley Gibson, Software Industry Born with IBM's Unbundling, Computerworld, June 19, 1989, at 6.
  5. AT&T-Foreign Attachments, Tariff Revisions, 15 FCC 2d 605 (1968).
  6. The Carterfone was a device that permitted callers to use the telephone network to communicate directly with others located at remote mobile radio terminals. It was not the first telephone attachment to be developed outside of the Bell System. There had always been inventors developing attachments that could supplement or even substitute for Bell equipment. However, both AT&T and state regulatory authorities strongly opposed the use of such components, viewing them as inimical to the well-established requirement that AT&T provide end-to-end service.
  7. Critical Connections: Communication for the Future, at 57.

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