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Telecommunications Regulation:Domestic and International

US Regulatory History

MSIS 5600

Charles G. Gray

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Why Regulation?• “Natural monopoly” services

– Essential services for public welfare– One organization can serve the market most

efficiently

• Substitute for competition– Exclusive (franchised) service areas without

competitors

• Serve the “public interest, convenience and necessity”

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Regulatory Process• Monitor and control providers to insure

– Service on demand– Uniform policies to all users– High quality service– Fair rates to customers– Fair return to stockholders

• US Regulators– Federal - FCC/NTIA– State - PUC/PSC, etc.

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History of Regulation in US Telecommunications

• 1856 - Western Union Telegraph founded• 1866 – Post Roads Act

– 1878 - Commerce Clause interpreted to include telegraph

• 1876 - A. G. Bell filed patent for “Improvement to telegraphy”– Elisha Gray was 4 hours later

• 1877 - Bell Telephone Co. formed - with Hubbard

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History of Regulation in US Telecommunications

• 1878 - Western Union formed the American Speaking Telephone Company

• 1890 – Sherman Anti-trust Act

• 1907 – First state agencies in NY and WI

• 1910 – Mann-Elkins Act (Strengthened the ICC)

• 1912 – Act to Regulate Radio Communications

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History of Regulation in US Telecommunications

• 1913 - First threat of anti-trust action by the DOJ (Kingsbury Commitment)

• 1921 – Willis-Graham Act

• 1927 – “The Radio Act”– Federal Radio Commission (FRC)– Applies only to the United States– Philippines and Panama controlled by Secretary

of State

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History of Regulation in US Telecommunications

• 1934 - Communications Act of 1934 – FCC established– Consolidated FRC and ICC functions

• 1949 - DOJ antitrust suit filed against AT&T

• 1956 - AT&T “Consent Decree” signed with DOJ

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History of Regulation in US Telecommunications

• 1956 - Hush-a-phone decision (action first filed in 1948)

• 1959 – FCC “Above 890” Decision

• 1961 – AT&T TELPAK Tariff

• 1968 - Carterfone decision (action first filed in 1961)

• 1968 – AT&T PCA Requirement

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History of Regulation in US Telecommunications

• 1969 - MCI decision (FCC voted 4-3 in favor)

• 1969 – Private Lines opened to competition

• 1970 – “Ozark Plan”• 1971- Specialized Common Carrier (SCC)

Decision

• 1971 - “Open Skies” Policy

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History of Regulation in US Telecommunications

• 1973 – FCC approved 3 “value added carriers”

• 1974 - DOJ antitrust suit filed against AT&T

• 1976 – Unlimited shared use and resale of private lines

• 1977 – MCI Execunet Decision (Judge S. Wright)

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History of Regulation in US Telecommunications

• 1981 – Resale/shared use of all interstate service

• 1982 - “Modified Final Judgment” is agreed 1/1/84 – Breakup of AT&T (The Bell System)

• 1984 – LATAs implemented• 1995 - FCC begins auctions of PCS

frequencies• 1996 - New Telecommunications Law signed

(Amendment to TA 34)

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History of Regulation in US Telecommunications

• 1997-2000 - Flurry of mergers and acquisitions

• 2000 – EU prohibits MCIWorldcom takeover of Sprint

• 2000-2002 – Bankruptcies, failures, suspected criminal activity

Note that the telephone industry has a long history of litigation and government regulation

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US Regulation of the Computer Industry

• 1971 - Computer Inquiry I (CI-I)

• 1981 – CI-II

• 1986-7 – CI-III

“Enhanced Services” are not regulated

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Common Carriers

• Supplier who “carries” goods, services or people from one point to another for the public

• Airlines, trucking companies, bus companies, telephone companies, etc.

• Accountable to a regulatory agency

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Tariffs Defined

• Published rates, regulations and descriptions of services

• Defines the services offered

• Establishes the rate the customer will pay

• States the obligation of the provider and the customer in the provision and use of service

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Tariff Filing

• When new services are to be offered

• Rates for existing services are to be increased or decreased

• Changes are made in existing services

• Services are to be discontinued

• A “Rate Case” is the usual vehicle for filing tariff changes