Preparing Competition for the 21st Century: The U.S. Telecommunications Act of 1996

Abstract

The main purpose of the 1996 Act was to transform the monopoly local telephone market into a free-competitive market. However, the operation of most of the Act's rules was delayed by the proceedings before the courts and the FCC. Nevertheless, the telecommunications market underwent these years huge changes. But they were mainly the result of the significant technological changes which took place during these years in that industry. In this respect, technology largely outperformed legislation. A revolution in electronics and digital compression technology reduced the cost of providing a wide array of telecommunications services. Digital technology has improved the quality of wireless phones, which led to a spectacular increase in their market penetration during these years. The possibilities of competition between wireless and wireline telephones are analyzed. The main conclusion is that wireless telephony may become a significant competitor of traditional fixed-line telephony in a near future. In such a case the main concern of the regulator should be how to make sure that there is effective competition and avoid collusion between wireline and wireless telephony providers. Given the increasing development of different forms of competition within the telecommunications industry, the center of gravity of regulatory activity is being displaced to the universal service issue.