Robert W. Crandall
It has become the conventional wisdom that technological forces are propelling all communications media towards a single, ubiquitous digital network that can be called an "information superhighway." Many assume that the myriad of companies in the local telephone, long-distance telephone, and cable television industries is about to coalesce into one large, interactive terrestrial network with a variety of interconnected wireless adjuncts. While this view may ultimately prove to have some merit, it is also possible that the fragmentation of the past 15 or 20 years will actually accelerate. In fact, I doubt that anyone can predict the evolution of telecommunications in the next 10 or 20 years any more than he or she could have predicted in 1974 that the AT&T dynasty would end in 1984, that a pair of copper wires could deliver a television signal, or that everyone would be able to carry a portable telephone handset weighing only a few ounces and costing less than $200. Communications technology is changing so rapidly and is opening up so many new potential applications for which we have little or no information on consumer demand that all forecasts must be taken as something between speculation and an informed guess.
In this article, my task is more modest than that of predicting convergence, divergence, or even chaos. It is to identify the economic forces that are driving the market and the rhetoric toward convergence even though the political forces may, as in the past, prevent these economic forces from dictating the structure of this very important sector.
The current structure of the telecommunications sector in the United States and, indeed, in most countries, reflects a series of governmental actions and historical accidents. The telephone industry remained a monopoly far longer than technology and demand conditions required. Broadcasting was cartelized by a series of regulatory decisions, beginning with the allocation of the electromagnetic spectrum in the 1950s. Cable television was delayed for decades to protect broadcasters. International satellite communications were monopolized for no____________________