From Sector-Specific Regulation to Antitrust Law for U.S. Telecommunications: The Prospects for Transition

Abstract:     
In the United States, a vigorous debate has developed around the questions of whether, and if so to what extent, telecommunications regulation should move from the sector-specific jurisdiction of the Federal Communications Commission to the more general regime of antitrust law. The debate so far has focused mostly on whether the FCC should continue to have a role in reviewing telecommunications mergers. But the question of whether the Commission should retreat entirely from regulation of telecommunications carriers has also emerged as a serious question for long-run policy. The impetus for these public discussions comes principally from the wave of consolidation in the U.S. telecommunications industry, and from the failure of competition in local exchange service to develop as quickly as some had expected, in the years following passage of the Telecommunications Act of 1996. This paper examines the debate over eliminating sector-specific regulation for telecommunications mergers and then addresses the prospects for a more general retreat from industry-specific regulation of telecommunications. This paper concludes, first, that while there has been a significant shift away from sector-specific regulation of telecommunications mergers, the FCC will continue for the foreseeable future to retain at least a formal role in the merger review process. The important substantive role has mostly shifted, however, to the general antitrust authorities at the Justice Department and at the Federal Trade Commission. Second, this paper concludes that, although the development of competition since the 1996 Act may appear slow, changes in the legal and economic environment of U.S. telecommunications are in fact creating the conditions necessary for significantly reducing regulation of telecommunications carriers and that the transition to regulation via general competition policy is likely to continue, albeit slowly, in the foreseeable future.

Keywords: U.S. Federal Communications Commission, antitrust, sector-specific regulation, mergers, local exchange service.

Working Paper Series