Factors Leading to Passage of the Telecommunications Act of 1996
The Telecommunications Act of 1996 is the result of many factors. Demand for passage of the Act had been building up in Congress for many years, and Congress had attempted in the early 1990s to pass reform bills. The Republican congressional leadership who took office in 1995 wanted to deregulate cable TV and broadcasting. Through intense lobbying by RBOCs and long distance companies, a compromise was struck. The Act promised to open interexchange competition to Bells after they proved they had opened their networks to competition. The original framers of telecommunications reform hoped that the Telecommunications Act of 1996 would open competitive choices for local services to residential, small businesses and large organizations.
Factors important in pushing passage of the Telecommunications Act of 1996 included:
A desire in Congress to allow competition for local telecommunications services (the “information super highway”) uniformly in all of the states
A government effort to make access to high-capacity telecommunications services universal and affordable
Improvements in fiber optic and signaling technologies
The Bell telephone companies' lobbying efforts for permission to enter interstate long distance and manufacturing
The interexchange carriers' push for entry into the local calling market
Viability of wireless services as a substitute for wired local telephone lines
Increasing demand by customers for telecommunications services to carry data, image, color and video
Regional Bell Companies' Desire to Expand Their Offerings
While the seven (now four) RBOCs wanted to retain their local monopolies as much as possible, they wanted also to expand their range of offerings. They were being hit by competition for their most lucrative customers—big businesses in downtown, metropolitan areas.
Interexchange Carriers', Utility and Cable TV Companies' Desires to Enter New Markets
Demand for voice, Internet access and data services were growing quickly. Bell telephone companies' local and local toll revenues continued to climb. Cable companies, electric utility companies, competitive local exchange carriers, interexchange carriers and resellers all wanted a piece of this lucrative pie. Interexchange carriers were eager to enter new markets as they faced competition from carriers and resellers. Cable TV companies were looking at the telecommunications market as an avenue for growth. They felt they could leverage their existing investment in fiber and coaxial cabling for entry into local and toll calling. Power companies were attracted by the growth potential in telecommunications.
Demand for High-Speed Telecommunications Services
The federal government felt that increasing the amount of competition in the local loop would increase the availability of high-bandwidth services to local businesses and residential customers. In particular, applications such as downloading radio, television and video on demand from the Internet were envisioned, as was the transmission of medical images, such as MRI results. It was felt that competition in the local loop would lead to innovations and the creation of jobs.
Technological Capabilities to Provide High-Speed Services at Low Costs
Technological progress made local competition seem more feasible. Improvements in high-speed computers and fiber optic technologies were bringing down the cost of building telecommunications facilities. This trend started in the 1960s with microwave and continued with T-1, T-3, and wavelength division multiplexing (WDM) fiber optics and wireless local loop technology. It takes less labor and fewer outside cables to transport more data, faster. In addition, the cost and size of switches are decreasing while their power, speed and capabilities are increasing.
The Viability of Wireless Services for Local Exchange Service
In 1993, President Clinton mandated that auctions be held for frequencies within the Personal Communications Services (PCS) airwaves. Frequencies in each metropolitan area would be awarded to the five highest bidders with some awards given to minority and small businesses. This was seen, in addition to adding to the federal coffers, as a way to open up competition to cellular service providers. It was thought that this would drive down the cost of wireless services to the point where people would use their cellular phones for local calling.
The Desire for a Uniform National Policy on Local Competition
Competition for local telephone service proceeded at an uneven rate in the late 1980s to l990s. Different states' public utility commissions took varying stands toward allowing intra-LATA toll competition and approving rates for competing carriers. The northern states allowed more competition than the southern states. Members of Congress felt that it was important to have a uniform policy and guidelines for implementation of connections between local Bell companies and competitors.