(c) 2003 Charles G. Gray1 Telecommunications Regulation: Domestic and International US Regulatory History MSIS 5600 Charles G. Gray

(c) 2003 Charles G. Gray2 Why Regulation? “Natural monopoly” services –Essential services for public welfare –One organization can serve the market most efficiently Substitute for competition –Exclusive (franchised) service areas without competitors Serve the “public interest, convenience and necessity”

(c) 2003 Charles G. Gray3 Regulatory Process Monitor and control providers to insure –Service on demand –Uniform policies to all users –High quality service –Fair rates to customers –Fair return to stockholders US Regulators –Federal - FCC/NTIA –State - PUC/PSC, etc.

(c) 2003 Charles G. Gray4 History of Regulation in US Telecommunications Western Union Telegraph founded 1866 – Post Roads Act – Commerce Clause interpreted to include telegraph A. G. Bell filed patent for “Improvement to telegraphy” –Elisha Gray was 4 hours later Bell Telephone Co. formed - with Hubbard

(c) 2003 Charles G. Gray5 History of Regulation in US Telecommunications Western Union formed the American Speaking Telephone Company 1890 – Sherman Anti-trust Act 1907 – First state agencies in NY and WI 1910 – Mann-Elkins Act (Strengthened the ICC) 1912 – Act to Regulate Radio Communications

(c) 2003 Charles G. Gray6 History of Regulation in US Telecommunications First threat of anti-trust action by the DOJ (Kingsbury Commitment) 1921 – Willis-Graham Act 1927 – “The Radio Act” –Federal Radio Commission (FRC) –Applies only to the United States –Philippines and Panama controlled by Secretary of State

(c) 2003 Charles G. Gray7 History of Regulation in US Telecommunications Communications Act of 1934 – FCC established –Consolidated FRC and ICC functions DOJ antitrust suit filed against AT&T AT&T “Consent Decree” signed with DOJ

(c) 2003 Charles G. Gray8 History of Regulation in US Telecommunications Hush-a-phone decision (action first filed in 1948) 1959 – FCC “Above 890” Decision 1961 – AT&T TELPAK Tariff Carterfone decision (action first filed in 1961) 1968 – AT&T PCA Requirement

(c) 2003 Charles G. Gray9 History of Regulation in US Telecommunications MCI decision (FCC voted 4-3 in favor) 1969 – Private Lines opened to competition 1970 – “Ozark Plan ” Specialized Common Carrier (SCC) Decision “Open Skies” Policy

(c) 2003 Charles G. Gray10 History of Regulation in US Telecommunications 1973 – FCC approved 3 “value added carriers” DOJ antitrust suit filed against AT&T 1976 – Unlimited shared use and resale of private lines 1977 – MCI Execunet Decision (Judge S. Wright)

(c) 2003 Charles G. Gray11 History of Regulation in US Telecommunications 1981 – Resale/shared use of all interstate service “Modified Final Judgment” is agreed 1/1/84 – Breakup of AT&T (The Bell System) 1984 – LATAs implemented FCC begins auctions of PCS frequencies New Telecommunications Law signed (Amendment to TA 34)

(c) 2003 Charles G. Gray12 History of Regulation in US Telecommunications Flurry of mergers and acquisitions 2000 – EU prohibits MCIWorldcom takeover of Sprint – Bankruptcies, failures, suspected criminal activity Note that the telephone industry has a long history of litigation and government regulation

(c) 2003 Charles G. Gray13 US Regulation of the Computer Industry Computer Inquiry I (CI-I) 1981 – CI-II – CI-III “Enhanced Services” are not regulated

(c) 2003 Charles G. Gray14 Common Carriers Supplier who “carries” goods, services or people from one point to another for the public Airlines, trucking companies, bus companies, telephone companies, etc. Accountable to a regulatory agency

(c) 2003 Charles G. Gray15 Tariffs Defined Published rates, regulations and descriptions of services Defines the services offered Establishes the rate the customer will pay States the obligation of the provider and the customer in the provision and use of service

(c) 2003 Charles G. Gray16 Tariff Filing When new services are to be offered Rates for existing services are to be increased or decreased Changes are made in existing services Services are to be discontinued A “Rate Case” is the usual vehicle for filing tariff changes