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

¶ … 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 to see that the issue was diminishing in importance in the midst of the proliferation of cell phones. To be sure, the attempt in 1996 was nobly attempted and was analogous with the "the divestiture of AT& T ... To encourage AT& T. To compete in long-distance telephone services." (Dutton, and Peltu 288) However, the reality soon became evident as the consumer focus became less about long distance expense as it did about high speed internet access. Each subsequent year that passed from 1996 served as a technological revolution that greeted lawmakers and consumers with amazing and desirable internet speeds which led to the ultimate drive toward broadband which subsequently became the focus of companies working to enter the market.

But provisions had not been made in the Telecommunications Reform Act of 1996 for improving the infrastructure in ways that would be necessary for providing consumers with the means necessary for accessing the internet at the speeds at which the improved technology had provided. Instead of helping consumers, the law actually served as a new barrier for big telecom companies who had to change their focus to upgrading their infrastructure to provide DSL lines on copper wires for faster internet connection. Nevertheless the equipment being implemented was far from the fiber optic lines necessary for creating broadband speeds and a gap between what was available and what could be provided was soon evident. In addition, since no mandated regulation had been articulated in the 1996 law, telecoms were under no obligation to improve the service.