The relay receives power from the fuse box when you turn on the ignition key. The relay receives ground from either the ww williams switch, or the ecm at the appropriate throttle position/engine load. When given ground, the relay coil energizes, flipping the switch and sending power to the modulator coil, pushing the plunger out and giving the transmission full modulator pressure.
There is no designed fail safe of it being on all the time. And the only immediate telltale of failure would be softer, sloppy shifts, no kickdown, and no automatic downshift when going up a grade. 98% of drivers would be oblivious if any of those symptoms happened. Then, after having no modulation for a while, the soft shifts take their toll, and the transmission becomes worn out and needs rebuilt. Typically, it isn't rebuilt though, and the thing ends up slipping a bunch, ruining the fluid, and burning itself up in catastrophic failure.
The new/rebuilt transmission is thrown in, the modulator operation was never checked, and you burn the next transmission up in a short amount of time. Then everyone blames the at545 for being a junk transmission.
Don't get me wrong, the at545 isn't a great transmission by any imagination. It gets the job done, but it's adequate at best. We've replaced several behind the cummins isb, and those used a cable modulator. My bus has a at545 w/ cable modulator, and I had to adjust it right after I bought it, because I noticed it had soft, early shifts.
The electric modulator compounds the issues, with it's unreliability and the weak nature of the at545 it's required to work for any hope of the transmission lasting. Adjusted it and it's running perfect.
The more robust mt643 isn't as impervious to a failed modulator, but it isn't immune to it either. Without him noticing the engine lugging going up a grade, simplicity would likely have never known his modulator had failed.