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Economics Essay

The Department of Justice felt that a vertically integrated company that provided both local and long distance services had other offsetting gains from their divestiture. The vertical structure of the company provided an opportunity for unfair competition against other providers of long distance services. By charging high local rates, AT&T can harm other long distance competitors. The same goes for if they were to provide poor local service to other providers of long distance service.

Another once of the Department of Justice was the difficulty of monitoring cost-shifting among AT&It’s regulated telephone and other unregulated businesses. Its huge system of cross-subordination that resulted from subsidizing local with long distance created barriers to entry and generally distorted competition in the long distance market. The 1984 breakup introduced a dramatic increase in competition, resulting in greater consumer choice and innovation, if not necessarily lower prices. The breakup led to multiple types of telephone handsets and new technologies.

Long distance became much cheaper;partially because AT;It’s higher long distance prices had previously subsidized local land service, and partly because of competition from companies such as MIMIC and Sprint. Today, the long distance market is shrinking dramatically due to cell phones and Voice over ‘P. AT;T has

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since been purchased by one if its own spiffs, CBS Communications, the company that had also purchased two other Robots(Regional Bell Operating Companies) and a former AT;T associated operating company, and that later purchased another

A consequence of the divestiture was in how both national broadcast ROBS. Television and radio networks distributed their programming to their local affiliate stations. Prior to the breakup, the broadcast networks relied on AT;T Long Lines’ infrastructure of terrestrial microwave relay and coaxial cable. Another consequence of the breakup is that local residential service rates, which were formerly subsidized by long distance revenues, rose faster than the rate of inflation. Long-distance rates have fallen due to the end of the subsidy and an increased competition.

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