How The Bells Stole America's Digital Future

Broad-based Incentive Regulation Plans

Beginning shortly after the divestiture of AT&T created the RBOCs, the Bells began a series of state-level campaigns to obtain relief from traditional, cost-based rate-of-return regulation. Their basic pitch was simple: existing, traditional regulation dampens their incentives to deploy new, advanced, but economically risky technology. Change the way the companies are regulated, and they will deliver America's digital future. Regulators did their part; the Bells did not. The promised technical nirvana never materialized, but the Bells happily accepted the higher earnings that were possible as a result of relaxed regulation.

Nationwide, according to the Bells' annual reports and press releases, there should have been almost 44 million households wired to the fiber optic network by 2000. For example, Bell Atlantic was to have had almost nine million households wired with optical fiber loops by 2000. And that isn't counting the two million households that NYNEX was to have upgraded by 1996.[26]

And U.S. West stated:

"In 1993 the company announced its intentions to build a 'broadband,' interactive telecommunications network... U.S. West anticipates converting 100,000 access lines to this technology by the end of 1994, and 500,000 access lines annually beginning in 1995."[27]

Ameritech made similar statements:

"We're building a digital video network capable of delivering multicast and interactive services to six million customers within six years."[28]

As did NYNEX:

"We're prepared to install between 1.5 and 2 million fiber-optic lines through 1996 to begin building our portion of the Information Superhighway."[29]

And Bell Atlantic:

"First, we announced our intention to lead the country in the deployment of the information highway ... We will spend $11 billion over the next five years to rapidly build full-service networks capable of providing these (interactive, multi-media communications, entertainment and information) services within the Bell Atlantic Region.
...
We expect Bell Atlantic's enhanced network will be ready to serve 8.75 million homes by the end of the year 2000. By the end of 1998, we plan to wire the top 20 markets. These investments will help establish Bell Atlantic as a world leader in what is clearly the high growth opportunity for the 1990's and beyond."[30]

The fiber optic networks these companies promised to build were broadband services, capable of transmitting hundreds of times more information for enhanced interactive services. The Internet as it exists today is largely a "narrow band" service, based on existing copper wire phone networks. It's like the difference between a Ferrari and a skateboard.

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