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Chapter 4. Local Competition and The Tel... > Regulations Prior to the Telecommuni...

Regulations Prior to the Telecommunications Act of 1996

Competition for interstate long distance services and on-site telephone systems began in the 1960s and was given a boost by the January 1, 1984 divestiture, which separated the Bell telephone companies from AT&T. (See Table 4.1 for an overview of regulatory highlights). In 1982, when the Justice Department mandated that AT&T divest itself of the local Bell telephone companies, the Justice Department took the stand that interstate, out-of-local-region long distance, was a competitive service, but that local telephone service was a natural monopoly. This view eroded gradually during the 1990s, when competition gained a foothold in metropolitan areas, but was not generally available in more rural areas. Technological advances played a role in furthering competition for local calling services.

Specifically, the growing availability of fiber optic cabling and wireless technologies increased the viability of competition in the local loop. Instead of laying miles of individual copper for each customer, competitive telephone carriers now supply a few strands of fiber capable of serving the needs of large corporations. Moreover, improvements in signaling technologies brought down the cost of providing local service by requiring fewer and less sophisticated switches to route calls. Powerful computers with databases containing customer telephone numbers and telephone service configurations are provided in networks. Telephone company switches, which share the databases, therefore do not require a high degree of complexity. These innovations have decreased the cost of competing for local telephone service.


  

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