The long distance telephone services market in the United States is an example of a monopoly which became an oligopoly, and which is now undergoing additional transformation. Until 1984, American Telephone & Telegraph (AT&T) enjoyed a monopoly on long distance telephone service and most local telephone service in the United States. AT&T argued that it had invested large amounts of capital to build one of the most advanced telecommunications networks in the world, and to open the market to competition would be to give new entrants unfair advantage since they did not have to support the research and development that AT&T had taken on previously. However, in 1984, under a suit brought some years earlier by MCI Communications, AT&T was broken up into eight companies: AT&T kept its name and its long distance service as well as Bell Labs, which manufactures equipment. In addition, seven regional Bell operating companies (RBOCs) were created to provide local telephone service.
MCI Communications wasted no time in taking full advantage of the breakup of AT&T; it entered the long-distance carrier market with an aggressive marketing strategy that continues even today. The strategy has paid off in two ways: the company has become the nation's second largest long-distance carrier (behind AT&T), and it has successfully discouraged other companies from competing in this market (Reimer, 1995, p. 758). The company has also put considerable effort into its research and development effort, establishing a 3,556 million circuit-mile microwave and fiber network which offers greater quality of service.
Sprint Corporation, which offers long-distance service through its U.S. Sprint group, is the third largest long distance carrier, but it has adopted a strategy different from MCI's and more similar to AT&T's in the years since the breakup of AT&T. Where MCI has concentrated on long-distance service as its core business, Sprint has sought growth...