"Build it and they will come" was whispered throughout the telecommunications industry in the late 1990s. Following passage of the Telecommunications Act of 1996 and into the new millennium, the telecom sector rode the high-tech current of an economic expansion that, in retrospect, appears to have been built on blind faith. Industry titans like AT&T and the Baby Bells spent enormous sums of money to protect their lead against a growing list of competitors and to keep up with technological advances in broadband data delivery, wireless communications, and fiber optics.

New companies, too, were inspired. Hopefuls such as WilTel Communications (formerly Williams Communications), Global Crossing, and McLeodUSA spent investor money enthusiastically on the promise of opportunities. In the five years that followed passage of the 1996 legislation, the telecom industry received $1.3 trillion from investors, according to Forbes magazine, yet since then the industry has lost more than $1 trillion in market value. The telecom industry was at the center of the collapse of technology in late 2000 and 2001 that has led to global economic recession.

This turn-of-the-century telecom boom has its roots in the courtroom. As a result of the 1974 antitrust suit against AT&T, 22 Bell telephone companies were reorganized into seven Regional Bell Operating Companies (RBOCs). These "Baby Bells" took over local telephone services that were divided by the creation of 197 local access and transport areas (LATAs). The RBOCs were allowed to offer local calling and toll calling within an assigned LATA (intraLATA). Interexchange carriers (IXCs) and competitive local-exchange carriers (CLECs) provided phone calls that were made between these areas (interLATA calls).

Roadblocks to competition led to: 1974 - November 20, antitrust suit against AT&T brought by US Justice Department 1982 - January 8, Modified Final Judgment (MFJ) announced 1984 - January 1, effective date of divestiture By almost all accounts the breakup of Ma Bell has had a positive effect on the long-distance market. The cost of placing long-distance calls has dropped dramatically since 1984, and by most accounts, the level of service has improved.

Yet the business is still dominated by the Tier 1 carriers: AT&T, Sprint, and WorldCom. (AT&T's share of the US long-distance market has dropped from about 70% in 1984 to about one-third today.) Not all of the positive changes can be credited to antimonopoly policies, though. Increased use of wireless communications and data services such as e-mail and the Internet has lowered dependence on traditional long-distance phone service.

Because earlier attempts at regulation fell short of their desired effect to increase competition in the local services market, the US Congress came up with the Telecommunications Act of 1996. This bit of lawmaking was designed to force the Baby Bells to give up their monopolies on local services. It allowed the sale of local and toll calling by CLECs and IXCs and opened the market to a host of other potential competitors, including cable companies, broadcasters, gas and electric utilities, and wireless service operators.

The legislation required the RBOCs to open their networks to competitors. In return for making their infrastructure available to competitors, the RBOCs gained the right to sell cable and TV services and phone equipment and to provide out-of-LATA long-distance calling. The legislation also granted the RBOCs the right to sell interLATA long-distance if they could pass a 14-point test designed to ensure that their territories had been opened to competition. A wild scramble ensued, and at times it seemed as though everyone was grabbing a piece of the telecom pie.

But these regulatory initiatives have succeeded only in part. There are now only four RBOCs: Verizon Communications, BellSouth, SBC Communications, and Qwest Communications International . These companies still dominate local phone services and largely control the rollout of broadband access via DSL (digital subscriber lines). The RBOCs also are making inroads into the long-distance business. However, a list of companies struggling to compete against them (Birch, Sage, Covad) can be dwarfed by a list of companies that have failed trying (Winstar, NorthPoint, e.spire, RSL Communications, STAR Telecommunications). As more and more of us began using the Internet in our work and at home, technology has made it easier and faster. Excited over the promise of broadband -- more data transmitted faster, media streaming, and enriched content -- traditional carriers and competitors have built networks designed to meet the expected demand.

In the past two decades, US telecom firms have constructed more than 90 million miles of fiber-optic cables at a cost of some $30 billion. Most of that network capacity, as much as 90% by some estimates, remains dark, as in unused. Wholesale prices have plummeted and capital spending in the sector has screeched to a halt. Companies like Global Crossing, Williams Communications, and others have suffered under the crush of huge debt loads from the high costs of network development. No one knows how long it will take the market to absorb the glut in network capacity. But the telegraph and the 14.4 Kbps modem aren't coming back.

Someday, the telecom industry will deliver on its pre-bust promises.

Glossary:
Bandwidth: the amount of data that can be transmitted across a backbone network in a fixed amount of time; the measure of the capacity of a communications channel.

Broadband: a data transmission method where multiple transmissions share a common communications path.

Compression: reduction of the size of the data, image, voice, or video file sent over a communications path.

Dark fiber: fiber-optic cables without any electronics.

Dense wavelength-division multiplexing (DWDM): a way of increasing the capacity of fiber-optic networks; DWDM carries multiple wavelengths, or colors of light, on a single strand of fiber.

Fiber-optic cable: a non-electric cable made from glass rather than copper.

Gigabit Ethernet (GigE): a high-speed method for Internet access and data communications using fiber-optic cabling.

Multiplexing: a technique that allows multiple communications devices to share a single transmission line.

Photonics: all of the elements of optical communications, including fiber, lasers, optical switches, and all elements used to transmit light over fiber.

Synchronous optical network (SONET): a standard for multiplexing digital bits onto fiber-optic cabling; converts electronic impulses to light impulses and vice versa.

Streaming media: a means to play a message while the rest of it is being copied. Streaming uses compression to allow voice, video, and data to be transmitted in less time.

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