- -The FCC's sweeping program launched in 1997 to reduce interna- tional "accounting rates" and to increase competition in international services. - -The replacement of other forms of competitive local entry with the "UNE Platform" as AT&T, WorldCom, and others responded to the deep discounts that states offered for leasing (essentially reselling) the incum- bents' networks. 17 All of these changes occurred just as Internet and telecommunications stocks began to soar. Equity and debt capital poured into the sector, fund- ing many hastily constructed investment plans by firms eager to establish a presence in the market. The regulatory upheaval served to compound the problems created by this bubble. The First Eight Years under the New Law Explaining the Slow Growth of Output and Revenues There are at least three explanations for the revenue slump experienced by wire-based telecom carriers after 1996. First, the demand for traditional telecommunications services is price inelastic. When prices fall, total ex- penditures also fall unless these services are put to important new uses to generate exogenous growth, and thereby to offset the effect of price de- clines. Second, the revolution in wireless communications has siphoned enormous amounts of traffic from the wireline network, particularly from the overpriced long-distance traffic. Third, regulation may have reduced the incentive to invest in the facilities required to deliver risky new services that are essential to creating revenue growth. Household Spending Growth Approximately 60 percent of all end-user telephone expenditures are made by households. As census data show, the share of household expen- ditures devoted to telephone service remained remarkably constant throughout the 1980s, at about 2 percent of their overall expenditures. 18 Beginning in 1993, this share rose gradually to 2.3 percent. In nominal dollars, the average household spent $877 in 2000 compared with $658 in 1993. 19 However, all of this increase reflected a growth in spending on wireless,