In an industry as dynamic and unpredictable as the telecommunications industry, a product with superior design and performance alone can not ensure successful deployment and wide dissemination. Various other factors may have major impact, with a few examples being human reaction to new technology, pricing strategy to gain market share, and standards to provide interoperability. The goal of this paper is to examine the impact of government regulation and policies on the telecommunications industry.
In the United States, free competition has always been advocated. However, at times it may be necessary for the government to lay down guidelines that promote social benefits rather than individual gains. From past history, we have seen the effect of policies in shaping market structures, limiting pricing schemes, and steering technological directions. Regulation has played a significant role in shaping the telecommunications industry first as a natural monopoly and gradually as a competitive market. Furthermore, the government provides incentives for companies to universally provide services to customers. Regulation can also intervene when interconnection or interoperability is avoided as a competitive strategy in a free market -- if it is in the best interest of companies and customers. One of the latest and most influential policies is the Telecommunications Act of 1996 which has impacted every aspect of the telecommunications industry. Its main goal is to encourage competitive market forces to lower prices and better services for consumers, accelerating the deployment of advance technologies throughout the nation, and enable the interconnection of networks.
To illustrate the depth in which the government impacts the industry, we present three case studies analyzing the past, present and (possible) future effects. The first case study focuses on the divestiture of AT&T. We look at AT&T's regulated structure, its rationale for divestiture, and the future of basic telephony service following the Telecommunications Act of 1996. The second case study emphasizes on the crucial role the government played in creating and shaping the Internet which has profoundly changed our lives; and the impact of the deregulation on the success or failure of two competing technolgies, ADSL and cable modems. In the last case study we look at the various government policies that may have indirect effects on the future of network computers, especially regarding spectrum allocation for wireless communication. Regulation also has impact on the other factors of success of failure, and their interactions will be studied as well.
From our studies, we conclude that government policies play a crucial role in the deployment and dissemination of technology, especially in creating large scale infrastructure and providing fair allocation of public goods. In general, the government's role in regulating the industry should be one that encourages competition to develop new services and technologies which bring about greater benefits to the general public, and restores order when the industry seems chaotically fragmented. Otherwise, it should not interfere with the free competition of the industry.