The Telecommunications Act of 1996

History

In the early part of the twentieth century, the general idea was that all Americans should have phone service. The other general idea regarding phone service was that the government should assist in promoting this as well. As a result of these general ideas the telecommunications industry became a natural monopoly. AT&T, which traces its routes to the founding of the telephone, promoted a Single Policy, Single System geared towards Universal Service. Thus by 1920, AT&T emerged as the dominant telecommunications company. Until 1934 AT&T was highly regulated by the states with price control per the government’s request to protect consumers from abuses often associated with monopolies. The Telecommunications Act of 1934 created the Federal Communications Commission, which took regulation to the federal level.

AT&T retained its natural monopoly status for years until the government realized that AT&T was partaking in monopolizing the telecommunications industry with no controlling factors. The problems began with the accusation that AT&T practiced illegal exclusion because they only purchased equipment from Western Electric. This was the first of two anti-trust suits against AT&T. As a result of the suit United States vs. Western Electric filed in 1949, AT&T retained ownership of Western Electric with the restriction and promise of not entering into the computer industry.

The second anti-trust suit filed in 1974, United States vs. AT&T, had two major issues. The first was that AT&T’s relationship with Western Electric, which AT&T retained in the 1956 settlement, was illegal. The second issue ignited by MCI who was attempting to penetrate the large business market was the fact that AT&T monopolized the long distance market. In 1982, as a result of the lawsuit, AT&T agreed to spin off the regional local telephone companies into seven Regional Bell Operating Companies (RPOCS) in exchange for retaining its Long Distance services and the ability to enter the computer services industry.

Breakthroughs in microwave transmissions led to great profits for AT&T. The microwave transmitters significantly reduced costs in the long distance services. The local companies requested permission from the government to be able to compete in the long distance industry from which they found themselves excluded by the settlement in 1974. The government approved the request and the Regional Bell Operating Companies were able to begin competing in the long distance markets if they proved to have opened their local markets to competition. This ruling is the building block of the Telecommunications Act of 1996. The government felt that the telecommunications industry needed a makeover to modernize with the new telecom technologies of the late 20th century and to encourage competition in the local areas of the Regional Bell Operating Companies

General Description of Effect

On February 8, 1996, President Bill Clinton signed the Telecommunications Act of 1996 into law. The new law, which was the first major Telecommunications related change in law in over 60 years, encouraged new competition and competition between the Regional Bell Operating companies. The new law also removed state restrictions in local and long distance service and set forth rules for “Universal Service”

This law paved the way for companies like MCI and Sprint to begin offering local telephone service and companies like SBC and Bell Atlantic to offer Long Distance. . Local Exchange Carriers could also provide long distance service if they met a 14-point checklist.

Items included in the 14-point checklist included interconnection, access to network elements, access to poles, conduits, and poles. Unbundled services, directory listings, emergency services, numbering administration, number mobility, local dialing parity, reciprocal compensation, and resale are included in the 14-point checklist.

Interconnections forced RBOCs to open their networks to those carriers requesting access. Carriers can connect to the RBOC network by any means, at any available connection on the network, and must be the same quality offered by the RBOC.

The telephone network consists of many network elements like loops, circuit switches, and devices for interfacing. The RBOC must provide access to these elements at reasonable and just rates. The RBOC has to provide access to the poles, conduits, and ducts that house the wires and cables for the network for competitors.

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