Describe the industry and explain the general pattern of change of the particular market model.
Industry: telecommunications. For the purposes of this assignment, I will limit my discussion to what had been known as “phone service” and not broadcast entities (TV, radio, etc...) nor shall I dwell on the so-called Cable industry. The analysis shall also be primarily focused on the domestic market.
Throughout the world, historically the communication industry has overwhelmingly been a monopoly. This was also true in the United States. As AT&T evolved from the late 19th century, except for a year as a nationalized company, existed as a national monopoly. In the so- called Progressive era of the 1910’s, the idea that a natural monopoly would be more efficient and economical than competing systems took hold. The idea of universal service, with rural rates being lower than urban rates (price discrimination). While never a “true” monopoly, with its substantial market share, and restrictions on connecting non-Western Electric equipment to its network, AT&T operated as one. The barriers to entry were primarily economic, the expensive right-of-way access and materials for wired connectivity being first among them. The restriction of un approved devices not being allowed on the AT&T network, limited interconnecting between competitors as well as additional connection & maintenance fees contributed to its dominance.
As a monopoly, there were limited phone styles, and little need for deep price reduction through economy of scale or innovation, though state commissions regulated rates. The upside of the additional revenue, Bell Laboratories had been able to fund and develop technologies that are cornerstones of the modern society that are too numerous to mention here. It is debatable if these would have been developed as quickly without this reliable source of research funding.
After the famous consent decree, in 1984 the Bell System was broken up into several arms. Along with the Regional Bell Operating Carriers (RBOC), there were the Competitive Local Exchange (CLEC) Carriers that were thrust into the regional markets. The accompanying government regulations for access and fees ensured a competitive market existed. This was also true for the nascent cellular networks first being deployed. Combined with the “Carterphone decision”1, the agreed upon use of Bell Labs developed AMPS2 (later EIA/TIA-3) and roaming agreements, set the stage for widespread use of wireless devices. Since the mobile handsets were able to be used across the service providers platforms, they met the criterion of a homogeneous product. Indeed, now the voice provider networks are almost commodities. The ease of financing from expected growth made entry relatively simple. Today, as the four main carriers move to LTE networks, their older CDMA/EvDO/GSM equipment can be had for pennies on the dollar to a second tier provider. (moving toward very large numbers.) Third, with spectrum being made more available, either through FCC set-asides, held & unused portions being sold (Comcast,