FISA topic: How did the Telecoms get SO powerful anyway??

Was the Telecom Act of 1996 a boon or bomb for U.S.?

Jim Carlini • Published 02/08/06

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The Telecom Act of 1996 was enacted to promote competition. It was supposed to create certain funds for universal service and to develop a better infrastructure. Ten years later, can we say this was good for America?

How much money was wasted? Did we ever really achieve the open competition the act was intended to establish?

Wednesday is the tenth anniversary of the act. Especially for those who may not know the roots of all of these controversies surrounding competition and the development of broadband infrastructure capabilities, it would be good to look back and see how we got here.

The revestiture of AT&T

Twelve years before the telecom act in 1984, AT&T spun off its Bell system into seven regional Bell operating companies (RBOCs): Ameritech, Bell Atlantic, Bell South, NYNEX, US West, Southwestern Bell and Pacific Telesis. AT&T spun off 22 operating companies into these seven RBOCs. This was called the divestiture of AT&T. At the time, it was thought to be a good idea.

Throughout the years, the seven RBOCs became recognized as the local exchange carriers (LECs), the legacy telephone companies and the incumbents.

So many names were given to these local phone company entities across the years as competitors battled with them for market share and control of the local markets. The RBOCs wanted to dominate the local markets. Even though the intent was to break up telecom monopolies, there were some who still wanted to cling onto the idea.

AT&T, Sprint and MCI wanted to gain access to the local markets with new market plans and some RBOCs like Ameritech had strategies of getting a piece of the long-distance markets. Because they weren't successful, some started merging.

Southwestern Bell started buying up other companies and soon acquired Pacific Telesis. It also shortened its name and bought out Ameritech. You could slowly see that the seven RBOCs were combining into larger and larger entities. In effect, it was a “revestiture” of the Bell system.

A pork chop bill

The Telecom Act of 1996 was enacted before some of these big mergers happened. It was supposed to open up the doors to more competition. Instead, we saw mergers and less competition.

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