Deregulation Of Telecommunications In The U. S.

Until the 1980s in the United States, the term "telephone company" was synonymous1 with American Telephone Telegraph"'

. AT&.T controlled nearly all aspects of the telephone business. Its regional subsidiaries. known as "Hay Hells." were regulated monopolies, holding exclusive' rights to operate in specific areas. The Federal Communications Commission' regulated rates on long-distance calls between slates, while stale regulators had to approve rates for local and instate long-distance calls. Government regulation was justified on the theory that telephone companies, like electric utilities, were natural monopolies. Competition, which was assumed to require stringing multiple wires across the countryside, was seen as wasteful and inefficient. That thinking changed beginning around the 1970s, as sweeping technological developments promised rapid advances in telecommunications. Independent companies asserted" that they could, indeed, compete with AT&-T. I kit they said the telephone monopoly effectively shut them tint by refusing' to allow them to interconnect with its massive network Telecommunications deregulation came in two sweeping stages. In 1984, a court effectively ended ATc'-T's telephone monopoly- forcing the giant to spin off1 its regional subsidiaries. ATo-T continued to hold a substantial share of the long-distance telephone business, but vigorous competitors such as MCI Communications8 and Sprint Communications'1 won some of the business, showing I the process that competition could bring lower prices and improved service. A decade later, pressure grew to break up the Baby Bells' monopoly over local telephone service. New technologiesincluding cable television, cellular (or wireless) service, the Internet, and possibly othersoffered alternatives to local telephone companies. But economists said the enormous power of the regional monopolies inhibited the development of these alternatives. In particular, they said, competitors would have no chance of surviving unless they could connect, at least temporarily, to the established companies' networkssomething the Baby Bells resisted in numerous ways. In 1996, Congress responded by passing the Telecommunications Act of 19961". The law allowed long-distance telephone companies such as AT&-T, as well as cable television and other startup companies, to begin entering the local telephone business. It said the regional monopolies had to allow new competitors to link with their networks. To encourage the regional firms to welcome competition, the law said they could enter the long-distance business once new competition was established in their domains". At the end of the 1990s, it was still too early to assess the im-pact of the new law. There were some positive signs. Numerous smaller companies had begun offering local telephone service, especially in urban areas where they could reach large numbers of customers at low cost. The number of cellular telephone subscribers'" soared. Countless Internet service providers sprung up to link households to the Internet. But there also were developments that Congress had not anticipated or intended. A great number of telephone companies merged, and the Baby Bells mounted numerous barriers to thwart compeVmon. The regional firms, accordingly, were slow to expand into long-distance service. Meanwhile, for some consumersespecially residential telephone users and people in rural areas whose service previously had been subsidized by business and urban customers deregulation was bringing higher, not lower, prices.

by: Kinhomchan

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