Deregulating Telecommunications

The consent decree that restructured the telecommunications industry by breaking up the Bell System assigned long-distance and equipment manufacturing to AT&T while forbidding the Regional Bell Operating Companies from entering these lines of business. These restrictions were justified by arguments that the local exchange network was a natural monopoly, that the carriers benefited from barriers to entry, that they could leverage their monopoly power into other markets, and that they would use revenues from local service to subsidize their entry into other lines of business. In this Article, Professor Spulber shows that these arguments are no longer valid because of technological and market changes in the telecommunications industry.