Still on hold? A retrospective analysis of competitive implications of the Telecommunication Act of 1996, on its 10th year anniversary

Abstract

This study provides a retrospective analysis exploring competition in the US telecommunication industry, a decade after passage of the highly deregulatory Telecommunications Act of 1996. Using history as a guide, it reviews recent merger activity facilitated by the Act, profiles the present state of concentration in cable and telephony and explores prospects for cross-media competition permitted by the Act. Study results suggest that industry concentration in these telecommunication industries has increased dramatically since the mid-1990s, with the top four firms controlling over 60% of the market in each industry. The stand-alone long distance industry has been virtually eliminated by the acquisitions of AT&T and MCI by Regional Bell Operating companies, whose extensive lobbying efforts and lawsuits, challenging service restrictions under the Act and their enforcement, play to RBOC advantages in scale and local loop control. Despite prospects for competition stemming from Internet and wireless alternatives, recent consolidation has been accompanied by hyper-inflationary rate increases in both industries. Recent developments, including AT&T's acquisition by former Baby Bell progeny SBC and its earlier sale of AT&T cable assets to Comcast, may thus signal a new era of competitive “detente” among telecommunication providers. Implications for cross-industry competition between cable and telephone industries for broadband, cable and voice services are explored.