The Telecommunications Industry

By Susan E. McMaster | Go to book overview

3

Federal Regulation: A New Beginning, 1934–1956

As the United States started to emerge from the Great Depression, it simultaneously entered a period of increased government involvement in business. As a result, the telecommunications industry entered a new phase in its history as well. This increased government involvement brought a new regulator to interstate telecommunications: the Federal Communications Commission (FCC). Although the basic structure of the industry had already been formed, the industry did have to adapt to the new regulatory regime. The industry also continued to grow as it served an increasing number of households. In addition, World War II interrupted its development to some extent, and a number of inventions improved and expanded telecommunications service and quality. Some of these technological developments were initially discovered during Western Electric’s research for the War Department and were later applied to telephony, ultimately leading to substantial changes in the industry.

In addition to the regulatory changes and technological improvements, the industry, and in particular AT&T, again faced antitrust action toward the end of the period. The U.S. government accepted the principle of regulation as a means to control AT&T’s actions, first informally and then legislatively, but it never gave up the principle of antitrust. It was never clarified whether the telecommunications industry should be overseen on the basis of efficiency or equity. The FCC watched over the industry using equity as its guiding principle, seeking to ensure that all consumers would have the same opportunity to obtain inexpensive service. The

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