For decades prior to 1984, the Bell System provided both local and long distance service throughout most of the United States. In the 1970s, the U.S. Federal Government came to believe that this was an illegal monopoly and sued to break it up. The government won, and on January 1, 1984, AT&T was broken up into AT&T Long Lines, 23 BOCs (Bell Operating Companies), and a few other pieces. The 23 BOCs were grouped into seven regional BOCs (RBOCs) to make them economically viable. The entire nature of telecommunication in the United States was changed overnight by court order (not by an act of Congress).
The exact details of the divestiture were described in the so-called MFJ (Modified Final Judgment, an oxymoron if ever there was one—if the judgment could be modified, it clearly was not final). This event led to increased competition, better service, and lower long distance prices to consumers and businesses. However, prices for local service rose as the cross subsidies from long-distance calling were eliminated and local service had to become self supporting. Many other countries have now introduced competition along similar lines.
To make it clear who could do what, the United States was divided up into 164 LATAs (Local Access and Transport Areas). Very roughly, a LATA is about as big as the area covered by one area code. Within a LATA, there was one LEC (Local Exchange Carrier) that had a monopoly on traditional telephone service within its area. The most important LECs were the BOCs, although some LATAs contained one or more of the 1500 independent telephone companies operating as LECs.
As part of the MFJ, the IXCs were forbidden to offer local telephone service and the LECs were forbidden to offer inter-LATA telephone service, although both were free to enter any other business, such as operating fried chicken restaurants. In 1984, that was a fairly unambiguous statement. Unfortunately, technology has a funny way of making the law obsolete. Neither cable television nor mobile phones were covered by the agreement. As cable television went from one way to two way and mobile phones exploded in popularity, both LECs and IXCs began buying up or merging with cable and mobile operators.
By 1995, Congress saw that trying to maintain a distinction between the various kinds of companies was no longer tenable and drafted a bill to allow cable TV companies, local telephone companies, long-distance carriers, and mobile operators to enter one another's businesses. The idea was that any company could then offer its customers a single integrated package containing cable TV, telephone, and information services and that different companies would compete on service and price. The bill was enacted into law in February 1996. As a result, some BOCs became IXCs and some other companies, such as cable television operators, began offering local telephone service in competition with the LECs.
One interesting property of the 1996 law is the requirement that LECs implement local number portability. This means that a customer can change local telephone companies without having to get a new telephone number. This provision removes a huge hurdle for many people and makes them much more inclined to switch LECs, thus increasing competition. As a result, the U.S. telecommunications landscape is currently undergoing a radical restructuring. Again, many other countries are starting to follow suit. Often other countries wait to see how this kind of experiment works out in the U.S. If it works well, they do the same thing; if it works badly, they try something else.
The exact details of the divestiture were described in the so-called MFJ (Modified Final Judgment, an oxymoron if ever there was one—if the judgment could be modified, it clearly was not final). This event led to increased competition, better service, and lower long distance prices to consumers and businesses. However, prices for local service rose as the cross subsidies from long-distance calling were eliminated and local service had to become self supporting. Many other countries have now introduced competition along similar lines.
To make it clear who could do what, the United States was divided up into 164 LATAs (Local Access and Transport Areas). Very roughly, a LATA is about as big as the area covered by one area code. Within a LATA, there was one LEC (Local Exchange Carrier) that had a monopoly on traditional telephone service within its area. The most important LECs were the BOCs, although some LATAs contained one or more of the 1500 independent telephone companies operating as LECs.
As part of the MFJ, the IXCs were forbidden to offer local telephone service and the LECs were forbidden to offer inter-LATA telephone service, although both were free to enter any other business, such as operating fried chicken restaurants. In 1984, that was a fairly unambiguous statement. Unfortunately, technology has a funny way of making the law obsolete. Neither cable television nor mobile phones were covered by the agreement. As cable television went from one way to two way and mobile phones exploded in popularity, both LECs and IXCs began buying up or merging with cable and mobile operators.
By 1995, Congress saw that trying to maintain a distinction between the various kinds of companies was no longer tenable and drafted a bill to allow cable TV companies, local telephone companies, long-distance carriers, and mobile operators to enter one another's businesses. The idea was that any company could then offer its customers a single integrated package containing cable TV, telephone, and information services and that different companies would compete on service and price. The bill was enacted into law in February 1996. As a result, some BOCs became IXCs and some other companies, such as cable television operators, began offering local telephone service in competition with the LECs.
One interesting property of the 1996 law is the requirement that LECs implement local number portability. This means that a customer can change local telephone companies without having to get a new telephone number. This provision removes a huge hurdle for many people and makes them much more inclined to switch LECs, thus increasing competition. As a result, the U.S. telecommunications landscape is currently undergoing a radical restructuring. Again, many other countries are starting to follow suit. Often other countries wait to see how this kind of experiment works out in the U.S. If it works well, they do the same thing; if it works badly, they try something else.