Competition versus Regulation: "Mediating Between Right and Right'* in the Wireless and Wireline Telephone Industries

I. INTRODUCTION II. THE RISE AND FALL OF AT&T THROUGH GOVERNMENT REGULATION A. The Growth of AT&T in the Telecommunications Industry as a "Natural Monopoly" B. The Beginning of the End: The Breakup of AT&T C. Post-Divestiture Developments in the Long-Distance Market III. COMPETITION, DEREGULATION, AND THE WIRELESS MARKET A. The Development of the Regulatory Scheme in the Wireless Phone Industry B. Wireless Number Portability: The Last Piece of the Puzzle. 1. The Seven-Year Struggle over the Implementation of Number Portability 2. Possible Effects of WLNP IV. WIRELINE REGULATION V. WIRELESS COMPETITION A. The Methods of Control: A Brief Overview of the Regulatory' Approaches Taken in the Wireless and Wireline Industries B. Different, but Why? An Analysis of the Regulatory Approaches Taken in the Wireless and Wireline Industries. 1. Policy Goals behind the Development of the Wireline Regulatory Framework 2. A Shift in Focus: A Different Scheme Emerges 3. Regulation Sets the Stage for Competition V. THE NEW ROLE OF THE FCC VI. CONCLUSION I. INTRODUCTION In November 2003, wireless telephone providers in the 100 largest Metropolitan Statistical Areas ("MSAs") began allowing customers to transfer, or "port," their telephone numbers to different companies when switching providers. Though wireline telephone providers began offering number portability in 1998, the new wireless portability has met with much fanfare, as many believed that the last barrier to wireless phone competition had finally been lifted. (1) Wireless local number portability ("WLNP") is one of many provisions stemming from the Telecommunications Act of 1996 ("Telecommunications Act"), (2) a bill that by its own description was designed to "provide for a pro-competitive, de-regulatory national policy framework ... by opening all telecommunications markets to competition, and for other purposes" (3) The Telecommunications Act ended over sixty years of regulatory policy and introduced sweeping changes to both the telecommunications and broadcasting industries. (4) Where regulation had once been seen as the best way for these industries to flourish, competition and an open market were now gaining favor among politicians and others inside the telecommunications industry. When the Telecommunications Act was passed, the wireless industry had already evolved into a competitive market, though the traditional telephone industry had been heavily regulated for nearly 100 years. (5) While this regulation created arguably the most sophisticated and complete telephone system in the world, many felt that regulation had been a failure and the only way to "fix" the situation was through increased competition. (6) This Note argues that differing policy concerns are responsible for the different regulatory approaches taken in each industry. Furthermore, regulation and lack of competition were beneficial to the creation of the wireline telephone industry. Had the wireline industry been open to direct competition from its inception, as the wireless industry essentially has, the wireline industry would not be as strong as it is today. As a result of this weakness, the growth and success of the wireless industry, as well as many other peripheral industries, would have suffered. Part II details the history of regulation in the wireline telephone industry. It begins by noting the telephone industry's early status as a "natural monopoly," it continues through the breakup of AT&T in 1984, and concludes with an analysis of the post-breakup period. Part III provides background information on the wireless industry, with a brief discussion of the implications of the number portability requirement. Part IV analyzes the different regulatory approaches used in these two industries, and illustrates the reasons for and benefits of treating the two industries differently. …