Telecommunications in Transition: Unbundling, Reintegration, and Competition

The world economy is experiencing a technological revolution, fueled by rapid advances in microelectronics, optics, and computer science, that in the 1990s and beyond will dramatically change the way people everywhere communicate, learn, and access information and entertainment. This technological revolution has been underway for about a decade. The emergence of a fully-interactive communications network, sometimes referred to as the Information Superhighway, is now upon us. This highway, made possible by fiber optics and the convergence of several different technologies, is capable of delivering a plethora of new interactive entertainment, informational, and instructional services that are powerful and user-friendly. The transition from analog to digital technologies, the expanding bandwidth of the enabling platform, and the shift from regulated to competitive environments have all served to make the 1990s the decade in which the Information Superhighway will be built and used. A true revolution in the delivery of entertainment, information, transactions, and telecommunications services is at hand. This paper outlines these technological changes and explores their implications for competition policy, industry structure, and business organization. Part I introduces competition as an organizational model and discusses the existing structure of the telecommunications industry in the United States. Part II describes recent technological advances that change the conditions underlying the current regulatory structure of the telecommunications industry and challenges the effectiveness and validity of the current regulatory scheme. Part III discusses how innovation impacts what has been considered the natural monopoly of local exchange. Part IV advances five principles that should guide policy modification. Part V explores how eliminating the line-of-business restrictions created by the Modification of the Final Judgment1 between the government and American Telephone and Telegraph Co. will accelerate competition and stimulate the development of the Information Superhighway. Ameritech\u27s Customer First Plan is presented as a viable means to enhance competition, avoid redundant investment, and increase service innovations and technological advances. Part VI discusses the impact of removing interLATA restrictions