The impact of competition, divestiture, and deregulation on the structure of the long distance market

This dissertation concerns a major policy issue before the Federal Communications Commission (FCC), namely, whether or not the Commission should continue to regulate the long distance business of AT&T. Since the divestiture of the Bell Operating Companies from AT&T on January 1, 1984, AT&T has petitioned the FCC for full deregulation of domestic interstate long distance telecommunications services on the justification that its relatively new long distance competitors, the other common carriers (OCCs), have made significant market entry and that AT&T no longer has monopoly power.; In the context of this dissertation, this issue is in the form of a hypothesis that competition to AT&T in the long distance market is significant. If competition in the long distance market is significant and AT&T is no longer a dominant firm, the result implies that the FCC could relax its regulatory constraints on AT&T. If competition is not significant, then this hypothesis should be rejected and the FCC should continue its traditional rate-of-return regulation of AT&T.; Industry data is analyzed to determine the significance of competitive impact and the implications for public policy. The relationship of important policy variables controlled by the FCC have been analyzed, and the growth of AT&T in relation to that of the new carriers has been examined. The dissertation analyzes the impact of the FCC's elimination of the access charge discount on OCCs, as equal access to the divested Bell Operating Companies' (BOCs) local telephone plant was effectively implemented. Also, the impact of AT&T's price reductions as mandated by the FCC is analyzed.; The results of this dissertation imply that competitive impact on AT&T has been significant and that the FCC could embark on a program of further deregulation of AT&T's long distance business, such as the FCC's present program to replace rate-of-return regulation with a form of rate-cap regulation of AT&T's long distance rates. The analyses also imply that AT&T remains dominant with the ability to price anti-competitively absent oversight by the FCC, and that the other long distance carriers remain vulnerable to any price decreases by AT&T.