Telecom in the US in 1960
• AT&T had Operated as an Integrated
Monopoly for Over 50 Years
• New Technologies – Large and Small –
Now Provided Competitive Opportunities
– Microwave Radio Systems for Transmission
– Semiconductor Devices for Switching Systems
– Miniature Connectors for Terminal Equipment
– Tone Signaling
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Regulatory Environment –
1960 -1980
• AT&T was very Large and Growing Fast
• FCC Exploited New Technology to Slow Growth
– Allowed private use of microwave radio (over 880)
– Allowed connections to the network (Carterfone)
– New Entrants (MCI) offered Long Distance service
– Deregulated Terminal Equipment
– Constrained the Provision of Information Services
(Computer Inquiries)
• AT&T Resisted all these Initiatives
• DOJ Filed an Antitrust Suit in 1973
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The Settlement - 1981
• In Mid- 1981, Judge Greene Signaled that AT&T
would probably Lose
• Various Injunctive Relied Options were Explored
but no agreement was reached
• Several Divestiture Options were Explored
– Divest Part of Western
– Separate Competitive (Long Distance Terminal
Equipment and Manufacturing) from Monopoly (Local
Service)
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Pros and Cons of Divestiture
• Pros
– AT&T Kept Bell Labs and could Enter the
Computer Business
– It was a “clean” solution – resolving both long
distance and manufacturing issues
• Cons
– Extremely Complex and Costly
– Effects on Service were Unclear
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Implementation Issues
• Technically, Administratively and
Operationally Complex
– Where was the Point of Interconnection?
– How big were the local service areas (LATAs)?
– How was equipment to be allocated?
– Local switches had to be reprogrammed
– Billing and Private Line Provisioning
– Equal Access for All Long Distance Carriers
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Short Term Effects (Three to
Five Years)
• Monopoly/Competitive Distinction was
soon Abandoned
• Service Levels were Maintained (except for
Private Line Provisioning)
• LD Competition Increased, but AT&T
Maintained its Dominance
• Local Telcos Pressed for Entry into LD
Markets
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Medium Term Effects
(15 Years)
• Telecom Act 0f 1996
– Divestiture Restrictions on BOCs lifted
– Local to become Competitive
• AT&T No Longer Dominant in LD
• AT&T was Unable to Penetrate the
Computer Market
• Telecom Bubble Grew and Collapsed
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Current Situation
• Telcos just one provider of Telecom
• LD Carriers absorbed by local Telcos
• Industry Dominated by Wireless, Internet
and Cable – All Markets are Competitive
• Telephone Equipment Business Overtaken
by IP Technology
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Lessons to be Learned
• Industry Forms may Be Influenced more by
Technology than by Regulation/Legal
Action
• Industry Changes Spawned by Litigation
are Expensive and Disruptive, and may
have Unexpected Results
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