Local exchange competition and the Telecommunications Act of 1996

Abstract

The Telecommunications Act of 1996 is intended as a comprehensive national policy for local exchange competition. Capital market data for nineteen carriers beginning one year prior to the enactment of the Act and ending one year after the FCC’s implementation orders, provide mixed evidence that the Act has had its intended effect: the Act produced no excess returns, positive or negative, for the ILECs; it produced slightly positive excess returns for the CLECs, totalling 1.2 percent of their market value, and slightly negative excess returns for the IXCs, totalling 0.6 percent of their market value. These results are consistent with the frequent claim that the ILECs’ acted to protect their local markets. In all cases these are relatively small effects, not an indication of a major restructuring of local exchange competition.