Adam Smith Assaults Ma Bell with His Invisible Hands: Divestiture, Deregulation, and the Need for a New Telecommunications Policy

80 Pages Posted: 10 Mar 2013 Last revised: 26 Dec 2018

Date Written: 1988

Abstract

Without amendment of the legislative policy which directed American telecommunications for half a century, an overzealous Justice Department and a maverick federal judge dismantled American Telephone and Telegraph (AT&T), the North American telecommunications giant, scattering its dismembered body across the land. The Federal Communications Commission (FCC) supplemented divestiture with partial deregulation. Like the Great Fish, Americans now bask in the sun of divestiture and deregulation.

During the past decade, neo-classical economists have stood at center stage in the White House.' They gazed into their crystal ball and saw wondrous things: if the dead hand of regulation was amputated, then Adam Smith's invisible hands would reach out from his grave and bring perfect competition to the land, allowing us to grow and prosper in a Camelot of allocative efficiency. Thus, they tailored fine garments for Presidents Carter and Reagan, garments of divestiture and deregulation whose beauty only the very wise could perceive.

This Article begins with a description of the historical development of and justifications for regulation. It proceeds to an analysis of the legal and political developments which ushered in divestiture and partial deregulation, as well as their principal empirical results - the economic and social costs and benefits of the new regime. Because the path taken is as important as the results achieved, this analysis is directed at both the means and the ends of divestiture and deregulation.

The Article examines the three legal regimes that govern telecommunications today - Judge Harold Greene, the FCC, and the state Public Utility Commissions (PUCs) - and discusses Congress' failure to step forward and shoulder its share of the responsibility. Finally, this Article will endeavor to identify the proper objectives of a national telecommunications policy and the means for accomplishing such goals.

America is now faced with a public policy dilemma of tremendous consequences. Neither the extremes of laissez faire nor rigid governmental regulation are desirable alternatives. While all the King's horses and all the King's men can never put the Bell System back together again, we need to move forward to a new blending of enlightened regulation and healthy competition. The time has come for Congress to amend the Communications Act of 1934, setting forth a new national telecommunications policy reflecting the contemporary needs of the nation. This Article will attempt to identify the principal components of public policy in government regulation of this important infrastructure industry.

Keywords: Telecommunications Industry, Telecommunications, Telecommunications Regulation, Economic Regulation, Deregulation, Divestiture, Monopoly, Universal Service, Cross-subsidization, Antitrust, AT&T, FCC, Bell System

Suggested Citation

Dempsey, Paul Stephen, Adam Smith Assaults Ma Bell with His Invisible Hands: Divestiture, Deregulation, and the Need for a New Telecommunications Policy (1988). Hastings Communications and Entertainment Law Journal, Vol. 11, No. 4, 1988-1989, Available at SSRN: https://ssrn.com/abstract=2230630

Paul Stephen Dempsey (Contact Author)

McGill University - Faculty of Law ( email )

3690 Peel Street
Montreal, Quebec H3AIW9
Canada

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
35
Abstract Views
691
PlumX Metrics