Telecommunications Regulation: An Introduction

This paper examines the justifications, history, and practice of regulation in the US telecommunications sector. We examine the impact of technological and regulatory change on market structure and business strategy. Among others, we discuss the emergence and decline of the telecom bubble, the impact on pricing of digitization and the emergence of Internet telephony (VOIP). We also examine the impact of the 1996 Telecommunications Act on market structure and strategy in conjunction with the history of regulation and antitrust intervention in the telecommunications sector. After discussing the impact of wireless technologies, we conclude by venturing into some short term predictions. We express concern about the derailment of the implementation of the 1996 Act by the aggressive legal tactics of the entrenched monopolists (the local exchange carriers), and we point to the real danger that the intent of Congress in passing the 1996 Act to promote competition in telecommunications will never be realized in local telecommunications in the fashion that the 1996 prescribed. The decision of AT&T to stop marketing both long distance and local services to residential customers is a direct result of the derailing of the 1996 Act that has allowed the local service monopolists (i) to enter long distance while the local market was still monopolized; and (ii) to leverage their monopoly power in the local market to the long distance market. We also discuss the wave of mergers in the Telecommunications and cable industries, the telecom meltdown of 2000-2003, and issues that arose from the triennial review by the FCC of implementation of the 1996 Act.