This NMRC report finds that telecommunications consumers have experienced an amazing array of communications options in the wake of the AT&T break-up 20 years ago on January 1, 1984. But the court-ordered divestiture and two decades of ensuing laws and rules has been a decidedly mixed bag for the telecommunications industry. The four report authors find that consumers have experienced a 'rocky road' over the last two decades but now benefit from a plethora of new choices on how to communicate. However, the telecommunications industry has not been so fortunate, suffering through developments such as the Telecommunications Act of 1996 and associated regulation, which are not viewed as strong policy bedrocks upon which the marketplace can flourish.

MEDIA COVERAGE

JANUARY 6, 2004

Miami Herald

AT&T Split Barely Helped Consumers; 20 Years Later
By Samuel Simon

On this 20th anniversary of the breakup of AT&T, lawmakers, industry officials and consumers should pause to ask: Am I better off in the telecommunications marketplace today than I was then? Looking back, it now seems to me that divestiture of AT&T got it wrong. We broke up the telephone company into the wrong parts -- with one part consisting of local service and the other part comprised of long distance/equipment.

The reality is that the court-ordered division isn't holding. Relentless and inexorable market and consumer forces, with the reluctant concurrence of the government, have spent 20 years re-aligning the AT&T breakup into a number of fully integrated national competitors.

Army of companies

While we aren't quite there yet, the day will soon arrive when a new crop of giant companies will have the economic clout to launch and maintain national and international communication systems with state-of-the-art technology available to all people.

The truth of the matter is that those of us who worked on and advocated the breakup of AT&T had no clue what would happen afterward. We certainly did not have a crystal ball at our disposal revealing an impending digital revolution that would change everything in the communications marketplace. Instead, we focused a great deal of our time on such issues as how consumers -- all of whom were still renting their phones -- would be credited if the phones went to AT&T and not the local phone companies! The evolutionary changes that are taking place today in telecommunications are many times more dramatic than the changes that were forced from outside on the telephone system a score of years ago.

Endless options

Consumers now benefit from a plethora of options on how to communicate, technology is exploding, and the biggest changes seem yet to be ahead of us. As a result, the telecommunications world of 2004 bears almost no resemblance to the virtual ''stone age'' of 1984. Consumers today don't merely choose a ''provider'' -- they decide how they want to communicate, whether it's by e-mail, voice mail, Internet, wireless, wireline, cable modem or instant message.

This is not to suggest that no good came from the AT&T divestiture 20 years ago. While it is true that the last two decades have been a rocky road for telecommunications services and for the consumer, the good news is that once widespread fears of skyrocketing local rates never materialized.

In most states, local rates were stabilized by proceedings that set caps for pricing purposes. Long distance rates plummeted after a time, especially when the Federal Communications Commission agreed to shift costs from the long distance companies (access charges) to the consumer at large (subscriber line charges).

In the final analysis, it probably really didn't matter what the U.S. government and the courts did to AT&T. Despite all the rules and laws strewn as obstacles in its path, the telecommunications market ended up largely blazing its own trail over the last 20 years. That outcome may have been as inevitable as it was unforeseeable back in 1984.

Leave government out

If there is a lesson of the last 20 years, it is that the government should get out of the business of micro-management of telecommunications. Legislators and regulators should content themselves to set broad national policies that encourage investment and deployment of new services and then keep a watchful eye out for possible abuses.

I now believe that we would have seen some of the most powerful technologies of the last 20 years -- such as wireless and high-speed broadband -- emerge even faster if the market had been calling the shots instead of regulators and lawmakers protecting special interests.

Samuel A. Simon was a former Ralph Nader staff attorney involved in the AT&T divestiture process, and is chair of the National Consumers League.

JANUARY 5, 2004

Seattle Times

Competition Can End Some Monopolies
By Paul Andrews

Twenty years ago, on Jan. 1, 1984, an order from U.S. District Judge Harold Greene "flipped the switch" to end AT&T's monopoly of the phone business. Ever since, analysts, wags and checkout-line conversationalists have debated its merits.

So it's instructive that attorney and consumer authority Samuel Simon, one of the few key players in the action still alive, chose the 20th anniversary to issue a retraction of sorts. Basically, Simon thinks the divestiture got it wrong in its service-oriented approach, segregating local from long distance (with the equipment business opened up as well).

"In the final analysis, it probably didn't matter what the government and courts did," Simon said in a published statement. "The market, with the reluctant concurrence of the government, has spent 20 years realigning the breakup into a number of fully integrated national competitors."

Simon's take: There is competition in telecommunications these days. But it bears no resemblance to what he and others envisioned would happen.

The advent of personal computing, in tandem with an online communications boom, transformed a tired, fallow landscape into a brave new frontier that no one could have foreseen.

Cable companies supplying phone service? Voice calls over the Internet? Wireless? The Web was still six years from infancy. Even its creator, the recently knighted Tim Berners-Lee, could not have predicted its impact on telecommunications.

It's easy to overlook benefits of the breakup. Remember when phones had to be purchased from the phone company? (The trade-off is they were better constructed.) Remember when a single long-distance call could cost more than an entire month's bill today? (The trade-off was we tended to make a lot fewer long-distance calls.)

But these are minor compared with the costs, both physical and in terms of innovation, of preserving and managing an outdated infrastructure because of divestiture's regulatory hamstrings.

"I believe we would have seen some of the most powerful technologies of the last 20 years - such as wireless and high-speed broadband - emerge even faster if the market had been calling the shots instead of regulators and lawmakers protecting special interests," Simon concluded.

Regulation is always a balancing act, but particularly so with telecom. Government needs to be involved to keep rates reasonable and access fair. But in doing so, the regulatory process often protects special interests at the cost of true competition.

Consider "local service," to the extent it has any meaning left. The advent of Internet calling introduces a host of new providers and competitors. Although (as Simon warns) government needs to monitor against abuse, the voice-over-Internet-protocol market is one area where agencies govern best that govern least. Broadband, which facilitates VoIP, is trickier. Government has to make sure providers don't abuse the rate structure. But regulators shouldn't grant favored status to phone and cable giants.

Although the situation is improving gradually, Internet providers such as EarthLink have difficulty competing on rates with local Bell and cable franchises, which control the infrastructure. So most consumers still have only one choice for DSL and cable, and broadband fees are as much as double the overseas average.

U.S. broadband fees are declining. But they'd do so more rapidly if government forced cable and phone giants to open up their lines to competitors.

As Simon notes, the AT&T divestiture proved that government intervention in markets - - especially when it comes to fast-moving technologies - usually is unnecessary. One need only look at two other big antitrust cases. In January 1982 (on the same day that the AT&T case was settled, ironically enough) the government backed off a breakup of IBM, whose monopoly succumbed to the emerging personal-computer and software industries.

And the (averted) breakup of Microsoft looks less necessary all the time with the rise of open-source software and generic network services.

Paul Andrews is a freelance technology writer and co-author of "Gates." He can be reached at pandrews@seattletimes.com.

Department of Homeland Security, Information Analysis and Infrastructure Protection, Daily Open Source Report

On 20th anniversary of AT&T breakup in U.S., telecommunications is still struggling. Telecommunications consumers in the United States have experienced an amazing array of communication options in the wake of the AT&T breakup 20 years ago on January 1, 1984. But the court-ordered divestiture and two decades of ensuing laws and rules have been a decidedly mixed bag for the telecommunications industry, according to a New Millennium Research Council report released Tuesday, December 30. The four authors of the report find that consumers have experienced a "rocky road" over the last two decades but now benefit from a plethora of new choices on how to communicate. However, the telecommunications industry has not been so fortunate, suffering through such developments as the Telecommunications Act of 1996 and associated regulation that are not viewed as strong policy bedrocks upon which the marketplace can flourish. In general, the authors conclude that a dynamic telecom industry will remain one step ahead of legislators and regulators, who would be best advised to focus their attention on setting broad national policy. The experts also find that flourishing competition in a largely deregulated environment is essential to the future of a healthy and prosperous telecommunications industry. The report is available online:http://www.newmillenniumresearch.org/archive/divestiture-report.pdf Source: (Government Technology, Dec. 31, 2003) http://www.govtech.net/news/news.php?id=83184.

JANUARY 1, 2004

Los Angeles Times

The New Phone Game

AT&T goes head-to-head with the regional carriers it once owned -- seven Baby Bells that have turned into four powerful rivals
By James S. Granelli, Times Staff Writer

Until 1984, people like Mary Quintana and Laer Pearce rarely thought about their telephone service.

There was one company - AT&T Corp. - and it charged one basic price for local calls. Long-distance service cost extra and was too expensive not to watch the clock while talking.

Then a federal court mandate turned the telecommunications industry upside down, and millions of Americans suddenly had to start paying attention.

In breaking up AT&T's monopoly, a court-approved antitrust settlement that took effect 20 years ago today forced Ma Bell to turn over its local phone businesses to seven regional Baby Bells and open up its long-distance network to rivals.

The result was "too much complexity" for average consumers, Pearce said recently. For her part, Quintana said dealing with two companies and two bills was "awful."

Now, the company founded by Alexander Graham Bell is trying to recapture a big part of its past. New technologies and regulations are helping the world's biggest long-distance carrier again woo the local callers it once held tightly in its grip.

This time, AT&T is the upstart, going head-to-head with the local phone companies it once owned and the long-distance companies that thrived after its break-up. After some consolidation, AT&T's local-phone spinoffs have become: BellSouth Corp., Qwest Communications International Inc., SBC Communications Inc. and Verizon Communications Inc. Still, the market is so cluttered that AT&T almost merged last spring with BellSouth.

The consumer phone market is "an intensely competitive space," said Maribel L. Dolinov, chief telecom analyst at Forrester Research Inc. in Cambridge, Mass. "They're going to be challenged by the regional Bells and others, and it's going to be hard for AT&T to differentiate itself when it doesn't have a large consumer base."

But AT&T has a big advantage: its storied name.

"Communications technology is just so vital that I don't feel comfortable trusting it to someone I don't know," said Pearce, a Laguna Hills media consultant for the building industry. He has always had AT&T long-distance and is considering switching his local service to the company.

As retiree Quintana of Oceanside put it: "It's something I recognize."

AT&T Chairman David Dorman is counting on brand recognition as the company navigates massive changes in the telecom industry. The federal Telecommunications Act of 1996 threw open local markets with the intent of spurring competition, and now wireless and cable companies are rushing in with the long-distance and other rivals. Deals abound for consumers, but the market is littered with dead companies and billions of dollars of wasted investments.

"It's still true that we have an enormous brand reach and brand presence and unaided awareness," Dorman said. "But we can't take that for granted."

Unlike in its monopoly days, analysts say, the new AT&T must be slimmer and nimbler to succeed at offering local, toll and long-distance service in one package. The company, leasing Baby Bell equipment in 35 states covering 60% of the national market, is going after the critical mass needed to ensure it stays in the local market "for the long term," Dorman said. "We believe the consumer franchise has the ability to survive and actually grow."

In the last two years, AT&T has picked up nearly 4 million local residential phone lines, including about 600,000 in California, the nation's biggest telecom market. It's adding about 7,000 customers a week nationwide.

Still, that pales in comparison with the Bells, which own the local lines and still control 85% of the local market nationwide. In California alone, SBC, which bought Pacific Bell to become the state's dominant local carrier, serves 17.3 million lines, and Verizon, the state's second-largest local carrier, has 4.6 million lines.

With the Baby Bells gaining long-distance customers and able to free themselves from regulated pricing by installing fiber-optic cable to homes, some analysts think that AT&T's days are numbered. "I doubt AT&T will be an independent entity in four or five years," said analyst F. Drake Johnstone of Davenport & Co. in Richmond, Va.

But Dorman believes the company has the flexibility and cash flow to stay the course. He sees the residential market as a key to AT&T's success. Its consumer unit, through the first nine months of 2003, posted a $1.6-billion operating profit on $7.3 billion in revenue.

"So it's not a small business," Dorman said. "But right now, it's sort of viewed as, 'Well, that business is going away.' Obviously, the facts belie that."

Indeed, the nine-month operating profit was slightly higher than that for the business unit, which caters to large corporations and brings in two-thirds of annual revenue.

AT&T and other telecom firms have suffered through two years of declining sales as slack demand, overcapacity of fiber-optic lines and stiff competition have driven prices lower. Dorman said cuts in expenses and gains in local customers helped AT&T maintain margins in 2003.

Credit Suisse First Boston analysts at a December conference weren't wowed by the company's consumer plans. They focused instead on Dorman's estimate that the crucial big-business unit would suffer a 6% drop in sales this year, instead of the expected 5% drop, because of pricing pressures.

They downgraded the stock to "neutral" from "outperform."

Analyst Vik Grover of Needham & Co. in New York is more optimistic, putting a "buy" recommendation on the stock. "We believe the company is the main beneficiary of a flight to quality," he wrote in an October report. AT&T rose 27 cents Wednesday to $20.30 on the New York Stock Exchange. They have lost 22% of their value for the year.

Analysts such as Grover credit Dorman for AT&T's aggressive move into voice over Internet protocol, a technology that transmits voice along the high-speed lines that data travel. The company plans to roll out VoIP in the nation's 100 largest markets by the end of March.

The technology, which promises lower-cost phone service with worldwide calling at no extra charge, will come with a host of features that probably will be priced as options. AT&T won't divulge pricing plans yet, but analysts warn that U.S. consumers don't like paying more for features.

"This is the kind of new technology that will prove the naysayers are wrong when they say long-distance companies and, in fact, the whole telecom industry is in trouble," said independent analyst Jeff Kagan of Atlanta. "They are only in trouble if they do not embrace and adapt to new technologies."

AT&T's roll-out would be the most aggressive of all the carriers. Baby Bells SBC, Verizon, BellSouth and Qwest are making plans to offer consumer VoIP service. AT&T and long-distance carriers Sprint Corp. and MCI, a unit of WorldCom Inc., already offer the technology to large corporations.

Among the features AT&T will be offering are ones that block certain calls and junk faxes, allow multipoint conference calling, send voicemail to e-mail and - in what analyst Dolinov calls a "killer" application - switch a call from a home land-line phone to a cellphone in mid-conversation.

"IP is a PacMan, and everything in its way is going to be eaten," said Hossein Eslambolchi, AT&T's chief technology officer.

A big glitch for AT&T in California is that VoIP at home requires a broadband Internet connection. SBC, which controls most of the wiring to homes in California, will allow a competitor's broadband service only to customers who buy SBC's local service. In some states, the Bells are required to offer DSL regardless of which company provides local service.

AT&T, like MCI and other Bell rivals, has joined with Covad Communications Group Inc., the nation's largest independent DSL provider, to get around the Bell restrictions. But AT&T has rolled out the Covad service in only 11 states so far. Plans to offer Covad DSL in California this fall were delayed, and neither company would say when it would be available.

Eslambolchi is testing several technologies to get around that so-called last mile of copper wire connecting homes to Bell central offices, but they may take several years to roll out on a mass scale.

But eventually, combinations of those new technologies are going to bypass the Bells' lines into homes and are "literally going to change the game," he said.

Meanwhile, AT&T has to rely on regulated rates to lease lines from the Bells.

The Bells have complained vociferously that the regulated prices are below their own costs. The Bells have mounted a $40-million lobbying campaign to try to end such price regulation.

The Bells' lobbying group, the U.S. Telecom Assn., is taking the occasion of the 20th anniversary of AT&T's break-up to argue for an end to wholesale price regulations, implying that it is time to take AT&T and other rivals off regulated rates and let them sink or swim.

"It's been an extraordinary journey from the AT&T monopoly to today's competitive marketplace," said Walter B. McCormick Jr., president of the association. "But in the modern marketplace, it is time for a new communications policy that empowers consumers to determine market winners, rather than regulators."

Consumer advocate Samuel A. Simon, a lawyer in Washington, D.C., who urged the break-up of AT&T, said that, in hindsight, the company should have been split into a number of national competitors, each with local and long-distance service.

Regulation, new laws and market forces are creating four or five giant companies anyway, he said, though "we aren't quite there yet." He believes it would be good for consumers and the economy to halt government's "micro-management" of the industry and to allow those large companies to develop.

Had the court in 1984 formed those integrated giants, he said, the nation could have avoided two decades of tortuous regulations, legislation and court challenges.

The only thing lost, he said, would have been AT&T, "because no single entity would exist to claim the AT&T brand."

DECEMBER 31, 2003

Salt Lake Tribune

Consumer News

AT&T breakup was mixed bag for industry

WASHINGTON -- Telecommunications consumers have experienced an amazing array of communication options in the wake of the AT&T breakup 20 years ago, but the court-ordered divestiture and two decades of ensuing laws and rules have been a mixed bag for the telecommunications industry, according to a New Millennium Research Council (NMRC) report released Tuesday.

In "Reflections and Directions: Twenty Years After the Divestiture of AT&T," the NMRC report found that consumers have experienced a "rocky road" over the past two decades but now benefit from a plethora of new choices on how to communicate.

The telecommunications industry has not been so fortunate, suffering through the Telecommunications Act of 1996 and associated regulations not viewed as strong policies upon which the marketplace can flourish.

In general, the report concluded a dynamic telecom industry will remain one step ahead of legislators and regulators, who would be best advised to focus their attention on setting broad national policy. The report's authors also found that flourishing competition in a largely deregulated environment is essential to the future of a healthy and prosperous telecommunications industry.

Communications Daily

Wireline

The divestiture of AT&T 20 years ago was designed to promote full long distance competition, an "elegant economic theory [that] has been shown to be unsound," Henry Geller, ex-FCC gen. counsel, said Tues. Geller and 3 others offered their views in a report issued by the New Millennium Research Council. The authors said the telecom industry had thrived "despite - not because of -- divestiture and 2 decades of reliance on rigid laws and rules." The other authors were Richard Adler, principal of People & Technology; Joshua Mindel, San Francisco State U. asst. prof.; and Samuel Simon, Issue Dynamics pres. -- www.newmillenniumresearch.org.

Telecom A.M.

AT&T Divestiture Based on 'Unsound' Economic Theory, Report Says

More industry voices marked the 20th anniversary of AT&T's breakup by criticizing the long-term results. The divestiture of AT&T was designed to promote full long distance competition, an "elegant economic theory [that] has been shown to be unsound," Henry Geller, ex-FCC gen. counsel, said Tues. Geller and 3 others offered their views in a report issued by the New Millennium Research Council. The authors said the telecom industry had thrived "despite -- not because of -- divestiture and 2 decades of reliance on rigid laws and rules." The other authors were Richard Adler, principal of People & Technology; Joshua Mindel, San Francisco State U. asst. prof.; and Samuel Simon, Issue Dynamics pres. www.newmillenniumresearch.org.

DECEMBER 30, 2003

Communications Daily

Wireline

In light of the 20th anniversary Jan. 1 of the AT&T breakup, telecom groups and associations rushed to express their opinions on the impact the divestiture had on the telecom industry. Telecom Research & Action Center (TRAC) Chmn. Samuel Simon said the Bell system breakup "got it wrong. We broke up the telephone company into the wrong parts - local on one end, long distance and equipment on the other."

He said a lesson to learn from the last 20 years was that "the government needs to get out of the business of micromanagement of telecommunications regulation." He said the focus should be on setting broad national policies that encouraged investment and deployment of new services and "to then keep a watchful eye out for possible abuses. I believe that we would have seen some of the most powerful technologies of the last 20 years -- such as wireless and high-speed broadband -- emerge even faster if the market had been calling the shots instead of regulators and lawmakers protecting special interests."

In a separate statement, USTA Pres. Walter McCormick said with competition being "on a far grander scale than ever could have been envisioned in 1984," it's "time for a new communications policy that empowers consumers to determine market winners, rather than regulators." He urged the govt. to "end telecom's status as virtually the last major U.S. industry not permitted to fully participate in the nation's free-market economy... and pass the reins to consumers."

Meanwhile, Teletruth provided "29 reasons to not celebrate the 20th anniversary of the Baby Bells" - www.newnetworks.com/TelecomRiotActof2004.htm. It said customers were disconnected by the Bell monopolies that controlled the wires and it was "now clear that America put its trust in companies who essentially allowed corporate greed to overtake the public interest." -- SP

Telecom A.M.

Telecom Groups Mark 20th Anniversary of AT&T Breakup

Noting the 20th anniversary Jan. 1 of AT&T's breakup, several telecom associations weighed in on the long-term impact of the divestiture. Telecom Research & Action Center (TRAC) Chmn. Samuel Simon said the Bell system breakup "got it wrong. We broke up the telephone company into the wrong parts -- local on one end, long distance and equipment on the other." He said a lesson to learn from the last 20 years was that "the government needs to get out of the business of micromanagement of telecommunications regulation."

Meanwhile, Teletruth provided "29 reasons to not celebrate the 20th anniversary of the Baby Bells." It said customers were disconnected by the Bell monopolies that controlled the wires and it was "now clear that America put its trust in companies who essentially allowed corporate greed to overtake the public interest."

GovTech News

On 20th Anniversary of AT&T Breakup in U.S., Telecommunications Still Struggling

News Release

Telecommunications consumers in the United States have experienced an amazing array of communication options in the wake of the AT&T break-up 20 years ago on January 1, 1984. But the court-ordered divestiture and two decades of ensuing laws and rules have been a decidedly mixed bag for the telecommunications industry, according to a New Millennium Research Council (NMRC) report released yesterday.

Entitled "Reflections and Directions: Twenty Years After the Divestiture of AT&T," the four authors of the NMRC report find that consumers have experienced a "rocky road" over the last two decades but now benefit from a plethora of new choices on how to communicate. However, the telecommunications industry has not been so fortunate, suffering through such developments as the Telecommunications Act of 1996 and associated regulation that are not viewed as strong policy bedrocks upon which the marketplace can flourish.

The New Millennium Research Council invited four telecommunications experts and scholars, some of who commented on the divestiture process in 1983, to present their views of the 20th anniversary of the historic decision that lead to the AT&T divestiture. Those contributing to the NMRC paper are: Richard P. Adler, principal, People and Technology; Henry Geller, former general counsel to the Federal Communications Commission; Joshua L. Mindel, assistant professor, College of Business, San Francisco State University; and Samuel A. Simon, who is president of Issue Dynamics Inc. and chairman of the Telecommunications Research and Action Center.

In general, the diverse group of authors concludes that a dynamic telecom industry will remain one step ahead of legislators and regulators, who would be best advised to focus their attention on setting broad national policy. The experts also find that flourishing competition in a largely deregulated environment is essential to the future of a healthy and prosperous telecommunications industry.

What has gone wrong since the break-up of AT&T 20 years ago? Henry Geller explains: "The 1984 'big bang' -- divestiture of the local Bell operating companies from the rest of AT&T -- was designed to promote full and effective long distance competition ... This elegant economic theory has been shown to be unsound. The distinction between local and long distance is rapidly eroding. With no certainty, investment in infrastructure is discouraged. There is asymmetric regulation of cable and telecom in the broadband field, which cannot be justified since both are starting from zero."

The NMRC report authors note that the telecommunications industry has thrived despite -- not because of -- divestiture and two decades of reliance on rigid laws and rules. Richard P. Adler describes this process as follows: "While the break up of AT&T has had a real impact, it is the combination of this event with the continuing evolution of technology that has fundamentally reshaped the telecommunications landscape. In particular, the emergence of the Internet, along with the shift from analog to digital media on many fronts, has changed the competitive environment and led to the introduction of new types of services."

The result is a regulatory and legal structure of telecommunications that is constantly in a "catch-up" mode. Joshua L. Mindel points out in his essay that, " ... many telecommunications policy analysts would agree that the current legislative framework in the U.S. still does not serve the telecommunications sector well. It relies on historical market structure and technological traits, wherein it should be based upon service and current market definitions."

Since the current telecommunications regulatory and legal structure is not keeping pace with the market, there is a need to rethink the whole way that government oversees the telecommunications industry. In his essay, Samuel A. Simon writes, " ... if there is a lesson of the last 20 years, it is that the Government should get out of the business of micro-management of telecommunications. Legislators and regulators should content themselves to set broad national policies that encourage investment and deployment of new services and then keep a watchful eye out for possible abuses."

TMCnet.com Online

20 Years After AT&T Break-Up, Consumers See Some Benefits, But Telecommunications Industry Is Bogged Down Under Restraints
News Release

Telecommunications consumers in the United States have experienced an amazing array of communication options in the wake of the AT&T break-up 20 years ago on January 1, 1984. But the court-ordered divestiture and two decades of ensuing laws and rules have been a decidedly mixed bag for the telecommunications industry, according to a New Millennium Research Council (NMRC) report released yesterday.

Entitled "Reflections and Directions: Twenty Years After the Divestiture of AT&T," the four authors of the NMRC report find that consumers have experienced a "rocky road" over the last two decades but now benefit from a plethora of new choices on how to communicate. However, the telecommunications industry has not been so fortunate, suffering through such developments as the Telecommunications Act of 1996 and associated regulation that are not viewed as strong policy bedrocks upon which the marketplace can flourish.

The New Millennium Research Council invited four telecommunications experts and scholars, some of who commented on the divestiture process in 1983, to present their views of the 20th anniversary of the historic decision that lead to the AT&T divestiture. Those contributing to the NMRC paper are: Richard P. Adler, principal, People and Technology; Henry Geller, former general counsel to the Federal Communications Commission; Joshua L. Mindel, assistant professor, College of Business, San Francisco State University; and Samuel A. Simon, who is president of Issue Dynamics Inc. and chairman of the Telecommunications Research and Action Center.

In general, the diverse group of authors concludes that a dynamic telecom industry will remain one step ahead of legislators and regulators, who would be best advised to focus their attention on setting broad national policy. The experts also find that flourishing competition in a largely deregulated environment is essential to the future of a healthy and prosperous telecommunications industry.

What has gone wrong since the break-up of AT&T 20 years ago? Henry Geller explains: "The 1984 'big bang' -- divestiture of the local Bell operating companies from the rest of AT&T -- was designed to promote full and effective long distance competition ... This elegant economic theory has been shown to be unsound. The distinction between local and long distance is rapidly eroding. With no certainty, investment in infrastructure is discouraged. There is asymmetric regulation of cable and telecom in the broadband field, which cannot be justified since both are starting from zero."

The NMRC report authors note that the telecommunications industry has thrived despite -- not because of -- divestiture and two decades of reliance on rigid laws and rules. Richard P. Adler describes this process as follows: "While the break up of AT&T has had a real impact, it is the combination of this event with the continuing evolution of technology that has fundamentally reshaped the telecommunications landscape. In particular, the emergence of the Internet, along with the shift from analog to digital media on many fronts, has changed the competitive environment and led to the introduction of new types of services."

The result is a regulatory and legal structure of telecommunications that is constantly in a "catch-up" mode. Joshua L. Mindel points out in his essay that, " ... many telecommunications policy analysts would agree that the current legislative framework in the U.S. still does not serve the telecommunications sector well. It relies on historical market structure and technological traits, wherein it should be based upon service and current market definitions."

Since the current telecommunications regulatory and legal structure is not keeping pace with the market, there is a need to rethink the whole way that government oversees the telecommunications industry. In his essay, Samuel A. Simon writes, " ... if there is a lesson of the last 20 years, it is that the Government should get out of the business of micro-management of telecommunications. Legislators and regulators should content themselves to set broad national policies that encourage investment and deployment of new services and then keep a watchful eye out for possible abuses."

ABOUT NMRC
Established in 1999, the non-profit New Millennium Research Council (NMRC) is composed of a network of policy experts who seek to develop workable, real-world solutions to the issues and challenges confronting policymakers. Its work has focused primarily in the fields of telecommunications and technology. For more information on the NMRC please visit: http://www.newmillenniumresearch.org.