The Divestiture of AT&T and the Telecommunications Act of 1996 had a major impac
ID: 3806839 • Letter: T
Question
The Divestiture of AT&T and the Telecommunications Act of 1996 had a major impact in the United States. The Divestiture of the Bell Operating Companies from AT&T was one of the critical events of the 1980s that continues in importance today.
Give a brief description of the rationale for divestiture, how it relates to the AT&T Consent Decree and other legal actions, and recent consolidation in the industry.
Build a matrix of three pro and three con arguments concerning the break-up of AT&T.
Describe the impact of the Telecom Act of 1996 on
local phone service
cable TV
long-distance phone rates
Discuss the impact of the Telecom Act on:
Mergers and partnerships
Services
Competition
Explanation / Answer
Give a brief description of the rationale for divestiture, how it relates to the AT&T Consent Decree and other legal actions, and recent consolidation in the industry.
Divestiture is meant to do financial growth in a company business for focusing to resources in market it judges to be more profitable, or promising.
A company can divest assets to wholly owned subsidiaries. It is a process of selling an asset. The largest and likely the most famous corporate divestiture in history was the 1984 U.S. Department of Justice mandated breakup of the Bell System into AT&T and the seven Baby Bells.
The breakup of the Bell System was mandated on January 8, 1982, by an agreed consent decree providing that AT&T Corporation would, as had been initially proposed by AT&T, relinquish control of the Bell Operating Companies that had provided local telephone service in the United States and Canada up until that point.
Pro's of the breakup of the “Bell System”
Con's of the breakup of the “Bell System”
Describe the impact of the Telecom Act of 1996 on
local phone service
The Telecommunications Act 1996 reduced local residential and business monthly telephone rates and connection charges, reduced the cross subsidization of residential telephone customers by business telephone customers, increased the number of fixed line telephone connections, improved labour productivity in the fixed line and wireless segments and led to modest increases in entry in local telephone markets.
cable TV
The Act had significant impact throughout the communications industry, the impact on broadcasters was profound, and is still being debated. The Act made changes for broadcasters in several major areas:
long-distance phone rates
The law allowed long-distance telephone companies such as AT&T, as well as cable television and other start-up companies, to begin entering the local telephone business. It said the regional monopolies had to allow new competitors to link with their networks. To encourage the regional firms to welcome competition, the law said they could enter the long-distance business once the new competition was established in their domains.
Discuss the impact of the Telecom Act on:
Services
The BOCs were permitted to provide immediately upon the 1996 Act's enactment, without prior FCC authorization. These include "out-of region" long distance - long distance services originating in a state in which the particular BOC provides
no local landline telephone service and for which the originating party chooses the long distance carrier and certain "incidental" services, such as audio, video, and other programming services, wireless telephone services, and data storage and retrieval.
Competition
In an effort to ensure that actual competition does emerge in both the telephony and multichannel video services markets, the 1996 Act prohibits buy-outs between cable operators and in-region local exchange carriers, whether the latter are BOCs or independents. Generally speaking, local exchange carriers and cable operators with overlapping service areas are prohibited from acquiring more than a 10% financial interest or any management interest in one another.
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