What Telecom Reform?

The merger negotiations between AT&T and SBC Communications reflect the dawning truth that the Telecommunications Act of 1996 is turning out to be a colossal failure. It has not opened up local phone service to competition. Indeed, it appears to be actually bolstering the monopoly power of the regional Bells. AT&T's decision to buy into the huge local phone company that includes the former Southwestern Bell Telephone Co. and Pacific Telesis Group is an admission of defeat. AT&T doesn't think it can successfully compete locally so it is simply buying into the monopoly.

This isn't good for the economy and it isn't good for the consumer. The Telecom Act was supposed to usher in a new era of competition, generating new products and services, lowering prices. But it now appears that Congress wrote legislation that was too partial to the Baby Bells. Some state regulators then protected their hometown companies. And the Bells have used the courts to keep outsiders out. There is nothing "natural" about local phone monopolies. They are creatures of lobbyists, politicians, judges, and regulators--and legislators.

The Telecom Act of 1996 has to be rewritten.

    Before it's here, it's on the Bloomberg Terminal.