Telecoms Deregulation ?

Robert Waldmann

There seems to be a widespread view that the US experience with deregulation has been mixed. Financial deregulation was a disaster, but airline deregulation and telecoms deregulation were OK (except for how crowded airports are and irritating advertisements by competing phone companies).

What is this “telecoms deregulation” of which you speak.

I absolutely sincerely ask for information. I recall 2 episodes of newly intrusive telecoms regulation.

First ATT was forced to provide local (last mile) service to competing long distance carriers. This was imposed by the FCC. IIRC it was an application of the Sherman Anti-Trust Act. Yes there was a huge increase in competition, but it was caused by regulation not by deregulation. The purpose of the act was to force companies to compete. Following that decision to interfere with the free market, there was more competition. A regulation served its stated purpose. Clearly this is a case of regulation not de-regulation.

Another FCC ruling that would affect the company [MCI] was the 26 June 1968 ruling in the Carterfone case that deemed AT&T’s rules prohibiting private two-way radio connections to a telephone network were illegal. AT&T quickly sought a reversal of the ruling, and when the FCC denied their request brought suit against the FCC in the U.S. Court of Appeals. The FCC’s decision was upheld thus creating a new industry: privately (non-Bell) manufactured devices could be connected to the telephone network as long as the manufacturer met interface standards.

That ruling, which consisted of the Federal Government telling ATT what it could do with its property, introduced long distance competition. I was actually thinking of a later ruling in which a judge ordered ATT to make sure the interfaces worked (ATT had been trying to use the “as long as” part to restrain trade).

The second episode was breaking ATT up into ATT and the baby bells. This was definitely an act of regulation under the authority of the Sherman act. Just ask ATT.

… an antitrust suit by the U.S. government against AT&T. The suit began in 1974 and was settled in January 1982 when AT&T agreed to divest itself of the wholly owned Bell operating companies that provided local exchange service.

That’s regulation not deregulation.

I suppose there might have been telecoms deregulation too, but that would be only dealing with minor issues left over by the huge acts of telecoms regulation.

Unless I am confused, people are mixing up competitive markets and laissez faire. Under laissez faire ATT could use its natural monopoly to block competition until the US was cabled for TV. The cable companies could offer telephone service (I don’t think they bother). Cable TV wasn’t deregulation. It was a tiny bit of technology and massive investment.

One of the principal aims of economic regulation in the USA has long been the promotion of competition. Sometimes regulation and public intervention over-ruling private property rights achieves its aims. It seems that, in one such case, it is therefore called “deregulation.”

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