Competition and Diversification Trends in Telecommunications: Regulatory, Technological and Market Pressures

In this paper, I examine: (i) regulatory, technological and economic trends driving telecommunications diversification and competition; and (ii) substantial investments and marketing efforts of telecommunications firms to diversity and enter each others' markets via vertical integration, joint ventures, and mergers. The Telecommunications Act of 1996 and ongoing regulatory, market and technological trends have addressed concerns that local exchange company (LEC) ownership of essential facilities may hinder diversification into local markets and stimulated substantial competition across historically distinct markets. (For example, long distance companies have entered local markets.) The entry of one LEC into the Connecticut long-distance market demonstrates that the benefits of competition—lower rates and service innovation—will be realized when Bell operating companies are allowed to enter long distance markets.