Trends in Telecommunications
The rapid advances in telecommunications technology that have occurred since World War II along with a regulatory policy that ignored economic logic resulted in economic pressures that eventually forced the breakup of the national telephone monopoly in 1984. Telecommunications markets in the United States are artifacts of government regulation, and regulation is shaped by the evolving body of law. The relevant law is based on the history of the resolution of economic disputes that, in turn, often arise in the course of business firms responding to technological opportunities. Therefore, responsive changes in telecommunications markets lag years behind the continually unfolding technological advances that cause the changes.
Almost all observers believe that future telecommunications markets in the United States will be more competitive and less subject to regulation at state and federal levels, but government regulation will continue to play a key role in many areas, often taking new forms. This chapter reviews the effects that present technological trends are likely to have on the future cost and demand characteristics of telecommunications products and services, and consequently on the form future regulation is likely to take.
Regulation will continue in situations where the potential abuse of market power by monopolistic firms is evident or the public interest demands it, but the experience of the recent past has educated everyone to the necessity for forward-looking regulatory policies that encourage economic efficiency and technological progress rather than static policies