Telecommunications Policy Reform in the United States and Canada

The Telecommunications Act of 1996 marked a fundamental departure in U.S. regulation. Monopoly market structures were officially deemed inefficient, and extensive rules were authorized to jump-start competition. Canada opened long-distance markets to entrants in 1992, and did likewise with local telephone access five years later, but employed distinct tools from those utilized by U.S. regulators. In this paper we compare and contrast the two alternative approaches to deregulation. The conventional wisdom is that telephone competition in the U.S. has lagged under the Telecommunications Act. Rates are alleged to have risen for most customers, just the reverse of what was promised by policy makers. We examine broad trends within the sector, and conclude that the Act, while flawed, actually scores well in comparison to previous reform measures. We prefer the approach taken in Canada, however, which is less regulation-intensive in the transition to competition.