Telephone Deregulation

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Name Instructor Course Date Telephone Deregulation Review According to Temin, the AT&T break-up was motivated by the effort by the US department of justice to eliminate the possibility of cross-subsidies. This was meant to level the cost across all regions and avoid customer misuse. While the AT&T only increased subsidies for the interstate calls, the government felt that it was abusing the monopoly to hike prices and gain more profit. The judge believed that the company was interchanging its services from the local revenues. However, since the divestiture, the department has been unable to contain the flow of the cross-subsides into the local telecommunication service providers. There still are cross subsidies in the telephone and mobile networks, a situation that the government cannot control. By the MFJ alleging that the AT&T subsiding its services was wrong, it based the allegation on misconceptions that led to the reverse process where private companies started imposing their cross subsidies to the local services. The argument that the move could have caused post-divestiture in the AT&T was profoundly correct in that, by forcing the company not to level its incomes by providing a cheaper local service, then they would only compromise the primary market and end up incurring more losses. As a result, the access charges in the local market would be raised else the company closes down some of the branches. As of late, the international prices have considerably increased although cross-subsidies have been lowered. It is notable that cross-subsidization could bring anticompetitive practices like greedy pricing and welfare losses. However, the

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