Competitive Debacle in Local Telephony: Is the 1996 Telecommunications Act to Blame?
64 Pages Posted: 21 Aug 2003 Last revised: 24 Feb 2009
This article challenges the conventional wisdom that the Telecommunications Act of 1996 is to blame for the lack of competition in local telephony, and that somehow the federal courts are complicit in this failure. It begins by highlighting the continued importance of local wireline infrastructure and how little competition exists. Moving to the 1996 Act's network disaggregation provisions, the article argues that while the statute itself is sound, the regulations promulgated under it evince basic economic confusion that has harmed not only the incumbent telephone companies, but ironically, the new competitors whom the regulations were designed to help. A new regulatory approach is proposed to overcome the current impasse. The piece next considers provisions to open long distance to local telephone monopolies, and finds again that implementing regulations, not the Act itself, is to blame. A new regulatory paradigm is offered. Finally, the argument shifts to the thorny issue of federalism to find that Congress in fact devised a rather elegant and innovative new scheme that has been misunderstood. The article parts company with most critical commentary to suggest that tossing out the 1996 Act is altogether too draconic - rather the focus of regulatory reform should be to develop regulations that coincide with economic reality.
Keywords: telephony, telecommunications, regulation, competition, law and economics
JEL Classification: K10, L10, L50
Suggested Citation: Suggested Citation