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Telecommunications Divestiture and Competitive Access Providers

Explore the repercussions and requirements of the telecommunications divestiture, including the modification of final judgments, BOC regulations, and the rise of Competitive Access Providers (CAPs) and Competitive Local Exchange Carriers (CLECs). Delve into the impact on rates, services, and the competitive landscape following the divestiture.

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Telecommunications Divestiture and Competitive Access Providers

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Presentation Transcript

  1. Session Objectives • Modification of Final Judgement • Competitive access providers (CAPs) and competitive local exchange carriers CLECs

  2. AT&T Reorganization (per MFJ) • Resources for local exchange functions and yellow pages to BOCs • “Chinese Wall” in BOCs between local exchange and other functions • Terminate BOC ties to AT&T and Western Electric • Appropriate reissue of stock • No electronic publishing by AT&T until 1989 • District Court to approve reorganization plan

  3. BOC Requirements (per MFJ) • Equal access to each BOC by all interexchange carriers and information service providers (i.e., equal to prior access by AT&T); equal access to all interexchange carriers by subscribers (i.e., equal to their prior access to AT&T) • No discrimination by BOCs between AT&T and other persons • May share engineering organization (Bellcore)

  4. BOC Requirements (per MFJ) (cont’d) • Line-of-business constraints • No interexchange services; no information services (latter constraint lifted in 1991) • No manufacture of customer premises equipment, but may provide it • No non-monopoly, unregulated products or services except yellow pages or those beyond monopoly power

  5. Consequences of the Divestiture • Basic thrust • “to separate the natural monopoly functions… into… regulated enterprises.” --Assistant Attorney General William Baxter (1982) • And to deregulate the competitive functions • Long lines became a workably competitive industry. • BOC viability was established.

  6. Consequences of the Divestiture (cont’d) • Local rates suffered some net increase. • BOCs lost generous “separations” from AT&T long lines • BOCs gained access charges from IECs in lieu of “separations” • Consumers pay new subscriber line charge to LECs • BOCs saved high license contract fees to AT&T and high prices paid to Western Electric

  7. Competitive Access Providers • Business purpose • For large firms to bypass the LEC for long-distance calls, thus saving access charges • Technology • T-1 lines or optical fiber in metropolitan areas • Digital transmission • Examples • Metropolitan Fiber Systems (now MFS) • Teleport Communications Group

  8. Competitive LECs • Expansion of CAP business • Business customers to IEC point of presence (POP) • Internet connection for ISPs • Specialized metropolitan data networks • Competitive local exchange service • Interconnection of large cities for long distance • Technology • Co-location of switches with incumbent LEC • Effect: Competitive spur to incumbent LECs

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