Ma Bell’s Breakup: 25 Years Later, Everything Old Is New Again

By Tara Seals Comments
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The break-up of Ma Bell in 1984 had a goal of greater efficiency, lower prices and more rapid technology development thanks to competition. It’s been 25 years since Judge Harold Green ended AT&T Inc.’s monopoly of the phone business, and while the industry has indeed seen unprecedented innovation, the state of competition continues to fail the consumer. Because after all, like the mercury-like Terminator in T2: Judgment Day, you can break Ma Bell apart, but it always seems to come back together. And it’s after you.

AT&T in 2009 looks a lot like AT&T in 1984, only bigger (motto: “local, long-distance and now introducing wireless!”). It’s also more global and more capable. In fact, Ma Bell in general is back, albeit in a three-headed form that comprises the powerful Verizon Communications Inc., Qwest Communications International Inc. and AT&T itself. It raises the question: Is there still room for competitors? And what should those competitors look like? A look at history could lead to the answers.

Regulatory Failures

The reconstitution of the Bell pseudo-monopoly has been slow and some would say insidious, aided and abetted by pro-consolidation and pro-RBOC regulatory decisions that have limited the number of local residential service providers in a given market.

Consider the Telecom Act of 1996, which created the era of non-facilities-based CLECs. The idea was admirable but the model was flawed: Force the LECs to unbundle their local loops in order to lease them at a discounted rate to competitors. The RBOCs had no interest in doing any such thing, and amid heavy lobbying and cries for the need for free market economics in the industry, the death of government-mandated UNE-P pricing came in March 2006.

Facilities-based CLECs were left standing to provide choice in the market, but to this day they’re hobbled by the need for affordable last-mile solutions outside of their coverage footprints. Microwave solutions and fiber-based carrier’s carriers can fill in some of the blanks, but viability remains an expensive business, particularly when faced with the branding and marketing machines of the incumbents. No wonder most CLECs focus on regional business niches.

Meanwhile, cable companies have become the main residential competitors, engaged in a pitched battle with the ILECs for the hearts and minds within the home. Here, too, regulators have failed consumers, by preventing the cablecos themselves from competing with each other in the same markets. One LEC, one cableco: That’s what constitutes choice for most American homes.

What about those that want to cut the home line cord and go wireless? Ma Bell wins again: AT&T and Verizon are the two largest wireless providers in the United States. The FCC attempted to create a new national wireless player with last year’s 700MHz spectrum auction; but the big winners were, you guessed it, the RBOCs.

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