Impact on Data Communications of Divestiture and the Telecommunications Reform Act of 1996 Term Paper

Communications

In 1996 the promise of low priced long distance calls and improved customer service that would naturally result from a planned increase in competition was a siren song for legislators and yet, as law makers would discover in the ensuing years, the Telecommunications Reform Act of 1996 not only had little impact on the long distance price issue but also stymied growth in the development and availability of internet technology. This effect grew out of the reforms that led to the break up of Bell in the 1980's in which anti-trust efforts created a new telecommunications landscape and formed many smaller companies out of what had become known as Ma Bell. The outcome of both the 1980's effort and the reform act passed in 1996 left consumers with inexplicable rate plans, an underdeveloped infrastructure and legal entanglements between corporations and the federal government that proved to be both frustrating and limiting. To understand the impact of the Telecommunications Reform Act of 1996 it is important to explain what circumstances prevented the act from accomplishing its purported objective and to make note of the technologies that have been bottled up as a function of the unintended consequences of the law.

When lawmakers set about the process of improving service to consumers by forcing Bell to share its switches and copper wires with potential competitors there were a number of natural impediments to the effort. The lumbering bureaucracy was the perfect camouflage for Bell executives to hide their frustration with the new law and to prevent implementation. In addition, the barriers to entry, though lowered as a result of the act, were still high enough that jumping into the market proved difficult at best. These two elements served the existing service providers well as they dragged their feet in providing access and balked at demands made on them by the federal government. This stalling tactic did have a price associated with it however as the Bells were fined more than $300 million in 2001 for failing to comply with regulations. (Cannon 57)

Nevertheless when the act was passed, lawmakers failed to appreciate how the telecommunications landscape was changing. As legislators hoped to provide constituents with more affordable long distance they neglected…