It could have been different. The 1996 Telecommunications Act, although deeply flawed, was designed to encourage local telephone competitors to invest in modern facilities where it made sense to do so (e.g., switches, servers, etc.) and lease the piece-parts of the incumbent’s network (unbundled network elements—”UNEs”) at marginal cost where necessary (distant switches, local lines, etc.).
Unfortunately, the FCC, led by Reed Hundt (Al Gore’s college room mate), destroyed competitors’ incentive to invest in new facilities by allowing them to lease ALL facilities from the incumbent at marginal cost (the UNE “Platform”). Why buy a $2 million switch when you can use the incumbent’s for less than total cost (marginal cost excludes most common costs—overhead)?
Hundt did this, in my opinion, to create the appearance of competition. Hundreds “competitor” phone companies materialized—most of which were nothing more than a billing and marketing operation with zero telecom facilities of their own.
The effect of Hundt’s action was twofold. First, as noted above, it discouraged new entrants from investing in new facilities. Second, it discouraged incumbent telcos from modernizing their networks. What company will invest the billions required for a modern network if it is required to lease it competitors at prices below actual cost?
Most of the pretend competitors died out as a result of two events. First, when the dot.com bubble burst, investors realized that reliance on BS marketing without creating value was not a sustainable business model.
Second, regulators grudgingly realized that UNE Platform discouraged investment by incumbents as well.
We’re back on track now. However, we lost over 10 years largely due, in my opinion, to Al Gore’s room mate’s creation of a “Potemkin Village” of telecom competition.
It’s a similar “fake” competition in the Electricity market in Texas. There a tons of “marketing and billing” companies, but only one real electricity transmission provider.