20TH ANNIVERSARY OF THE TELECOMMUNICATIONS ACT OF 1996 Lessons Learned from the U.S. Unbundling Experience

I. Introduction Prior to 1996, one of the key unresolved issues in telecommunications restructuring was competition over the "last mile" - i.e., that last segment of the network necessary to connect the customer. 1 Although the Federal Communications Commission ("FCC") had opened some monopoly telecommunications markets to entry by the late 1980s (e.g., Customer Premise Equipment ("CPE") and "long distance" services), 2 the Communications Act of 1934 3 still reflected a presumption that local telecommunications markets were natural monopolies subject to regulation by both the FCC and state public utility commissions. 4 Indeed, despite the somewhat regular deployment of state-of-the-art national and regional long-haul networks and metropolitan fiber rings by a number of carriers, the deployment of alternative wireline networks ended when they reached into the local exchange, leaving dominant control of most switching and transport facilities, and particularly the "last mile" of the local exchange network, to the Incumbent Local Exchange Providers or "ILECs." 5 Frustrated by the lack of local competition, Congress passed the landmark Telecommunications Act of 1996. 6 At the centerpiece of the 1996 Act was the most ambitious regulatory intervention ever attempted: i.e., to stimulate local competition by forcing the ILECs to make unbundled network elements available to competitors at regulated rates. 7 The notion of stimulating facilities-based competition via a mandatory wholesale model was not without precedent, however. In large part, Congress's plan was to replicate the experience of competitive development in the U.S. long-distance market a decade before, ...