The government's actions set off a fierce public debate. Proponents of the Justice Department's trust-busting suit argued that breaking up AT&T would allow more companies to enter the market place, thus spurring greater innovation and competition. Opponents countered that AT&T should be exempt from antitrust rules in order to maintain uniform standards in telecommunications services. Breaking up Ma Bell, they said, could lead to a fragmented, disorganized telecom industry.
"AT&T provides the very cheapest service possible," Carl Glick, a telecom analyst, told Time Magazine. "Justice gets so wrapped up in its rhetoric about the advantages of competition that it loses sight of the economic implications of its moves."
After years of legal wrangling, AT&T eventually agreed to a settlement on the government's terms in 1982. Under the agreement, AT&T would be allowed to keep its long-distance operations, Western Electric and Bell Laboratories in exchange for divesting from its 22 local phone monopolies. Since then, AT&T has had incremental success at gaining back some of its previous clout, as the company was allowed to merge with BellSouth, one of the RBOCs that formed after AT&T had been forced to divest from its local phone services.
CLECs vs. BellsIt's been more than a decade since Congress passed the 1996 Telecommunications Act with the intent of helping competitive exchange carriers compete against the regional Bell companies. In that time, however, competition for local phone services has gotten significantly weaker.
The 1996 telecom legislation mandated that incumbent carriers allow CLECs to use their existing infrastructure to provide last-mile connectivity to their customers. Additionally, the act charged the FCC with deciding what bundles the incumbent carriers would be required to provide CLECs, as well as the wholesale rates they could charge for access to their networks.
The Bells, however, were not ready to play nice. Employing a two-pronged strategy of simply refusing to comply with the act and of challenging the act's constitutionality in court, the Bells were largely successful in warding off competition from CLECs, which also suffered from poor market conditions in the early part of the decade. Between 2000 and 2003, roughly one-third of all CLECs nationwide filed for bankruptcy, leaving the incumbents firmly in command of most local telephone service markets.
CLECs have been reasonably successful in the more urban markets, however, where having potential customers clustered closely together made it profitable for CLECs to build out their networks. In the cases where CLECs have gained significant market share, incumbents have indeed felt obliged to offer more discounts for customers, just as the '96 telecom act envisioned. However, recent incumbent-friendly rulings issued by the FCC, which limit what network elements the incumbents are required to share, indicate that the going might not get any easier for CLECs for some time.
PBX v. CentrexCentrex may have lost the debate to PBXs but the service technology refuses to be silenced.
At first, Centrex was pushed as a fair tradeoff for a business-owned and managed PBX phone switch. The service was viewed as comparatively expensive, dependent on carriers to make management changes and, depending on the carrier, having limited features.
PBXs had none of these shortcomings, but customers had to lay out the cash to buy the switch, manage and maintain it and buy the trunk lines that connect corporate sites into a private phone network. And they had to pay for annual maintenance and periodic software upgrades.
Such PBX virtues also explain the tenacity of Centrex particularly among smaller businesses that have limited resources for a telecom staff to take care of their own phone networks. They simply can't afford an investment in running a private phone network.
With service providers providing and managing all the gear Centrex requires, capital outlay is minimal, as is the level of expertise needed to make the phones work.