market segments, a heavy volume of complex litigation, sometimes heavy-handed government regulation and various technical and operational obstacles.
The development of the principal traditional telecom markets, communications by wire (telephone, cable and telegraph), and by more advanced means, such as microwave transmissions, (radio and television broadcasting), involved the investment of enormous amounts of private capital which led to private monopolies, such as the Bell Systems control over nearly 100% of all phone service, or the oligopolies held by the three major broadcasting networks, CBS, NBC and ABC. Since the services involved directly affected the public interest, such activities were subjected to extensive federal and state regulation.
State regulators (Public Utility or Service Commissions) in the case of the telephone companies and the FCC in the case of the broadcasters confirmed their exclusive franchises. According to Huber et al. "natural monopoly thus became a self-fulfilling prophecy" (p. 1). The state regulatory commissions approved all capital investments by telephone companies which formed their rate base and the prices, terms and conditions under which their services were sold to consumers. A combination of federal and state laws regulated what products and services they could provide and required them to provide subsidized universal service to residential customers.
The Bell System's monopoly over the industry was attacked by federal antitrust actions initiated in 1949 and in 1974. In settling the first, the Bell System agreed to stay out of the computer market. Under the terms of the federal Modification of Final Judgment in the second, the entire system was broken up into seven separate RBOCs or BOCs (regional Bell Operating Companies) established to provide local service within separate exclusive areas. The BOCs were precluded by law from engaging in the long-distance business outside their ar...