BUSY. (Redial.) Busy. (Redial.) Busy. (Redial.) That's the scenario that many small investors experienced throughout ``Black Monday'' when they tried to telephone their broker on a toll-free number. In the late afternoon panic of the free fall, many callers were further exasperated because they couldn't make the largest and most sophisticated telephone system in the world handle a simple transaction. Those busy signals cost lots of little folks billions of dollars. The problem was uncommon - all lines were engaged, sources confirm. The extraordinarily high volume of calls apparently overtaxed the nation's telephone trading system and sent it reeling along with the Dow.
Trying to figure out how such a system could overload and shut out small investors on Oct. 19 proved to be a murky exercise, much like probing through fog.
The American Telephone & Telegraph Corporation, the largest interstate carrier, won't give figures on just how many calls were recorded that day, though they readily admit that the system registered ``extremely heavy calling, especially into New York.'' Their official line was that ``it was nothing the network couldn't handle,'' that ``no network blockage was experienced.''
But small investors had different experiences. Take, for example, the case of one small investor who said he redialed his broker incessantly for two days before he got a recording stating that all trunk lines were busy, so please try to call again later. And that was at 3:15 a.m. Wednesday! Such plights were common. A Money magazine survey confirmed that only 2 percent of the small investors they contacted had sold their securities, no doubt the fortunate few who were able to get through.
While AT&T still wants the public to believe that the phone system has ``no maximum capacity,'' our knowledge of technology says that's a myth. Computers don't have unlimited power - nor do people.
Bell South executives responded to queries with a little more candor, stating that the system is engineered to accommodate immediately 99 percent of all calls measured during the peak hour of the busiest workday.
Blocking within the phone system can occur at any of four junctions: the ``central office,'' an often unmanned switching building; the long-distance carrier; the ``central office'' at the other end of the line; and finally, the central phone exchange (either a PBX or Centrex) of the firm being called. Internally, the caller then has to be switched to an available phone line and operator.
The most familiar block on 800-number lines is the queue, used to tell callers to hang on until the next available operator can accommodate them. A problem arises when the queue fills in the PBX or Centrex of the firm called, rebuffing all other incoming calls. An overload of callers begins to back up in the system, something like a stopped-up pipeline. The only hint of blocking is a fast-busy signal or a recording indicating an overload.
Brokerage firms were quick to admit that they were swamped by the tidal wave of callers on Black Monday. The volume of calls at just one firm, Fidelity Investments, was more than triple a normal trading day. According to a company spokesman, ``On Oct. 19 and 20, the whole system was backed up for a few hours.''
Those delays prompted Fidelity chairman Edward D. Johnson III to write shareholders, assuring them ``that our 1,400 telephone representatives are working round-the-clock,'' while thanking customers for their ``patience and cooperation.'' Mr. Johnson also announced plans to expand Fidelity's telephone capacity by 50 percent.
Much has been made about the computer's role in this recent crash. The computer tracking of the minute-by-minute market fluctuations and its management of a staggering volume of 650 million traded shares was often assessed in the news media. It was also widely believed that the computer-program selling precipitated a drop in stock prices faster than brokers or investors could track. It's certainly true that in this Information Age, through radio and television news, telex, and on-line computer information services, the news of Wall Street's plummet was transmitted around the world at the speed of light.
Curiously, small-investor reaction to the news was not comparably swift. Technology, while commonly thought to be passive and neutral, may have exerted both positive and negative forces. If more than 2 percent of small investors had actually been able to get through to their brokers and sell their investments, the crash might have been even more catastrophic.
While the public might tolerate a brownout resulting in less effective air conditioning on a sweltering day, it is less likely to bear the consequences of a similar overload in the communications system quite so patiently.
If the capacity of the entire phone system is to be expanded to handle a crisis volume, then that expansion will have to come at each point of potential blockage: the local phone companies' ``central offices,'' the long-distance carriers, and the PBX facilities of the brokerage firms. Phone companies are governed by highly political state public-service commissions. Federal regulations governing the capacity of the phone system do not exist.
While it seems unlikely that we will ever know the full implications of whatever problems and anxieties the small investors might have had one day last month, the investment community now has a glimmer of understanding of the limits of the communication system and the harsh reality of phone trading. The ultimate lesson may be to encourage more face-to-face trading until the system is capable of meeting everyone's needs.
John W. English, a professor of journalism at the University of Georgia, and J. Kevin Schuler, a consultant in communications technology in Chicago, are collaborating on a textbook about computer-assisted writing.