Regulation was put in place in the first place because the phone company (The Bell System) was basically given a state and federal subsidized monopoly to build and own the ONLY phone system that existed. Even after the breakup of AT&T into smaller companies (which is now 75% back together again as SBC, how odd is that?), the baby bells, as they were called, still had a monopoly on wired phone services, still subsidized in many ways by federal, state, and local governments. Those companies owned assets that were, as pointed out in a post above, paid for by state and federal tax breaks, subsidizes, and a government controlled monopoly. (city and state governments still owned most of the polls for example and controlled who had access.) As such, in order to promote fair competition for new service providors, these monopoly companies were required by law to sell at "wholesale" their network to companies that wanted to play in the game as well.
As an EX-SBC director, I can tell you that SBC from day one inflated their "costs" of running these networks to the government so that they could offer their own services cheaper than could anyone who "leased" the product and resold it. Gee, who would have guessed? So they publicly complained about having to sell the network access; They publicly complained that they lost money doing it (a lie!); and they continued to undercut any competitor trying to compete in their space. AND, all the while, still had the monopoly position from which to play in an uneven playing field. You would not believe the tax breaks these phone companies were (and probably still are) getting.
The complaint from SBC and other baby bells, and the complaint still, is that this regulation stifles competition. They cry "...let them build their own networks..." forgetting that the network they have was built with heavy subsidizes under a monopoly. From inside the company, it was a big joke. They knew damn well that none of the small new start-ups could afford to build a new network, and this was just fine. And of course, any large competitor that could build a competing network could not get past all the local and state government regulations to do so. How convenient for the baby bell.
In one way, I have to agree though. If a competitor can simply buy at discount the network they need, then the services never get any better than what already exists from the largest Bell Company in that area. Why build at billions of dollars when you can lease cheaply.
That said, we WERE building a new network at Pacific Bell/SBC, a hybrid fiber and coax network to carry phone, TV, and data to the customer. And as much as we complained that we were building with our own money, the government insisted from day one that we offer the network to competitors at wholesale rates. Suffice it to say, I believe this is one main reason SBC stopped deploying the network and sold these assets to then AT&T, those same assets now owned by Comcast Cable. Basically to avoid having to build one of the most advanced networks in the state at the time, and then "sell the services at a loss" (so they claimed, it was not true) to competitors that wanted a free ride into all the homes.
Strangely enough, we DID build the system from day one to easily allow competitors into all three spaces: TV, high speed data, and phone service, and if the system that Comcast now deploys is anywhere similar, which I believe it is since they bought it from SBC indirectly, it is still set up that way, so easy competition should not be a problem.
Just for the record, the ONLY reason we were allowed to build a new network in large cities is because we were Pacific Bell/SBC, the local phone company. We had government pull that allowed us to build a cable network as a phone system which competed directly with the local cable company. In most places, most new companies will never be allowed to build a new network, wireless or wired, into a city that already has a very cozy deal with the established provider.
Because they are given a government subsidized monopoly in a region. The local governments will not allow a second system in most cases, and they are JUST like the phone company was.
Slashdot Mirror
How do I do that?
Regulation was put in place in the first place because the phone company (The Bell System) was basically given a state and federal subsidized monopoly to build and own the ONLY phone system that existed. Even after the breakup of AT&T into smaller companies (which is now 75% back together again as SBC, how odd is that?), the baby bells, as they were called, still had a monopoly on wired phone services, still subsidized in many ways by federal, state, and local governments. Those companies owned assets that were, as pointed out in a post above, paid for by state and federal tax breaks, subsidizes, and a government controlled monopoly. (city and state governments still owned most of the polls for example and controlled who had access.) As such, in order to promote fair competition for new service providors, these monopoly companies were required by law to sell at "wholesale" their network to companies that wanted to play in the game as well. As an EX-SBC director, I can tell you that SBC from day one inflated their "costs" of running these networks to the government so that they could offer their own services cheaper than could anyone who "leased" the product and resold it. Gee, who would have guessed? So they publicly complained about having to sell the network access; They publicly complained that they lost money doing it (a lie!); and they continued to undercut any competitor trying to compete in their space. AND, all the while, still had the monopoly position from which to play in an uneven playing field. You would not believe the tax breaks these phone companies were (and probably still are) getting. The complaint from SBC and other baby bells, and the complaint still, is that this regulation stifles competition. They cry "...let them build their own networks..." forgetting that the network they have was built with heavy subsidizes under a monopoly. From inside the company, it was a big joke. They knew damn well that none of the small new start-ups could afford to build a new network, and this was just fine. And of course, any large competitor that could build a competing network could not get past all the local and state government regulations to do so. How convenient for the baby bell. In one way, I have to agree though. If a competitor can simply buy at discount the network they need, then the services never get any better than what already exists from the largest Bell Company in that area. Why build at billions of dollars when you can lease cheaply. That said, we WERE building a new network at Pacific Bell/SBC, a hybrid fiber and coax network to carry phone, TV, and data to the customer. And as much as we complained that we were building with our own money, the government insisted from day one that we offer the network to competitors at wholesale rates. Suffice it to say, I believe this is one main reason SBC stopped deploying the network and sold these assets to then AT&T, those same assets now owned by Comcast Cable. Basically to avoid having to build one of the most advanced networks in the state at the time, and then "sell the services at a loss" (so they claimed, it was not true) to competitors that wanted a free ride into all the homes. Strangely enough, we DID build the system from day one to easily allow competitors into all three spaces: TV, high speed data, and phone service, and if the system that Comcast now deploys is anywhere similar, which I believe it is since they bought it from SBC indirectly, it is still set up that way, so easy competition should not be a problem. Just for the record, the ONLY reason we were allowed to build a new network in large cities is because we were Pacific Bell/SBC, the local phone company. We had government pull that allowed us to build a cable network as a phone system which competed directly with the local cable company. In most places, most new companies will never be allowed to build a new network, wireless or wired, into a city that already has a very cozy deal with the established provider.
Because they are given a government subsidized monopoly in a region. The local governments will not allow a second system in most cases, and they are JUST like the phone company was.