hat low-volume, local exchange service is a natural monopoly; Tran 2while, high-volume long-distance service fit the competitive model. Because of the technological change from micro-wave to fiber optic technology, the phone service would be better served as a monopoly. Microwave technology dominated the long-distance industry between the years 1950 to the early 1980s.The base component of the micro-wave technology is a transceiver that can hold up to 12 voice phone calls. The demand for long-distance calls at any one time was clearly greater than 12 calls, which means that multiple links would have to exist. Under this technology, the transmission cost increases with the volume of calls and the average cost per call was generally constant as volume increased. Sub-additivity cannot hold in an industry with constant average costs, so the industry was naturally competitive Due to the nature of microwave technology, competition was essential in the market structure. For this reason AT&T, accused of being a monopoly, was forced into deregulation. The Bell monopoly was forced to break up to make room for competition in the micro-wave technology. While the government was tending to the micro-wave technology, fiber optic technology started to emerge and take over as the means of long-distance transmission. This great technological change proved government intervention in regulating micro-wave technology futile. As the market of telecommunications was undergoing a face-lift, so was the telephone giant AT&T. An anti-trust suit was filed against the company in 1974, and settled in January of 1982. AT&T then entered the divestiture stage on January 1, 1984. The company agreed to the guidelines set by the Federal Communications Commission (FCC), to remove itself from the Bell companies completely, and have nothing to do with local telephone service. This move to divestiture may look like a downfall for AT&T, but do not be fooled. ...
