Economic and Political Consequences of the 1996 Telecommunications Act

Abstract:     
The 1996 Telecommunications Act seems to be encouraging competition in key segments of the telephone and cable television industries. Stock price data suggest that the wave of "megamergers" in telecommunications-probably an unanticipated result of the Telecommunications Act-is associated with consumer benefits. Improvements in competitiveness are modest by some standards but impressive when judged against the results of other legislation with the announced goal of increasing market rivalry (e.g., the 1984 and 1992 Cable Acts). Federal policymakers also seem to be reaping benefits from the Telecommunications Act, in that its mandate for extensive rulemaking by the FCC in the transition to competition is associated with increases in political contributions to federal policymakers from telecommunications firms and executives. That is an intended consequence of the act's major reform: removing policy jurisdiction from Judge Harold Green's divestiture oversight and placing it in the hands of the FCC, a regulatory agency answerable to Congress.

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