[daily tech] Monopolies are getting harder and harder to maintain today
The U.S. Federal Communications Commission has approved a measure that could force wireless operators to open their towers to competitors, including small operators, for the first time. The vote was divided directly on party lines with the Democratic majority voting to approve the measure.
Ostensibly the new rules are designed to promote competition comes at a time when America will soon have only three big wireless operators -- Verizon Communications, Inc. (VZ); Sprint Nextel Corp. (S); and the merged AT&T, Inc. (T)/T-Mobile (DTE). These players tend to make decisions, including pricing in mass, forming a virtual oligopoly or triopoly -- depending on your preferred term.
The decision to force them to relinquish part of their chokehold on America's communications services isn't news that they took kindly to. But it represents the latest step in a long and reoccurring federal effort to try to break the large wireless carriers that the feds allowed, and even promoted the formation of.
I. Opening the Lines -- A Brief History
The year was 1956 and it was an important time in pop culture. Icon Jackson Pollock died in a tragic car crash; Elvis Presley introduced the controversial burner "Hound Dog"; and Bob Barker made his debut on the game show circuit. But for the corporate world it was also a landmark year.
The first major event was the passage of the Federal Highway Aid Highway Act, which gave birth to the Interstate Highway System (today known as the National Highway System). Many conservatives viewed the move at the time as an inordinate and burdensome expansion of government, but Republican President Dwight D. Eisenhower's decision to break ranks left a lasting legacy that is today an integral part of our society.
Equally important was the year's U.S. Supreme Court decision in the case Hush-a-Phone v. United States, in which the court ruled that third parties could legally connect their devices to the telephones of the American Telephone and Telegraph company. That decision opened the doors to the possibility of competition at a time when AT&T held a monopolistic death grip on the U.S. phone market.
A following decision in a 1968 Cartfone case allowed third parties to directly attach equipment like phones to AT&T wires. And just like that, small players could enter the market, without having to worry about gathering billions in capital to build wires. The decision also somewhat lessened AT&T's ability to locally undercut nascent operators in prices in a bid to force them out of the market.
Then in 1976 the U.S. Department of Justice decided to break up AT&T (known as "Ma Bell" at the time) into seven smaller companies -- regional "Baby Bells". This approach worked -- somewhat. The resulting companies were small enough to offer some competition on a national scale. But at a local scale they were still big enough to use their power to try to force would-be competitors out of town.
Thus many of the areas of the U.S. were still stuck with a monopoly/duopoly.
In 1996, under Democratic President Bill Clinton, the Federal government yet again tried to do something about the lack of competition. It passed the Telecommunications Act of 1996 that forced the phone giants to clear the way for smaller third party operators to interconnect with their networks.
Before, the burden was on the carriers to figure out how to connect their devices -- now it was on the networks. And the bill gave a legislative backbone to the 1968 Cartfone decision, which had served as an early mandate for interconnectedness.
But for all that work, the efforts were largely washed down the drain. By the turn of the twenty-first century cell phones were fast looking to surpass landlines and early implementations of mobile data networks were starting.
All those rules mandating interconnectedness for landlines did not apply to cell phone towers. In other words, it was virtually impossible for a small player to enter the market and provide a decent service to customers.
Meanwhile, the wireless operators began consolidating. By 2005 there was only four players in the market -- Verizon, Sprint (who acquired Nextel and Boost Mobile), AT&T, and T-Mobile. Now it looks like there will only be three.
And the market has hardly become more open to new entrants.
Verizon, AT&T Fight Federal Plan to Open Cell Towers to Small Operators