2 percent. With real income growth of 19 percent over this period, much of this decline could have been offset by rising incomes. As table 3-2 shows, the average house- hold's long-distance bill fell by about 40 percent between 1996 and 2002, but about 4 percent of the local-carrier bill is the increase in long-distance services due to Bell company entry into interLATA services. 24 Therefore household spending on long-distance services declined by 34 percent between 1996 and 2002, or by 42 percent in real terms. This is far more than the 14.2 percent prediction based on falling real prices. The reason for the large discrepancy, as shown in chapter 6, is that a substantial amount of long-distance spending has been diverted to wireless services. The Dynamic Growth of Wireless The 1996 act instituted major policy changes in the wireline telecom- munications sector, but it largely ignored the wireless sector. 25 Although competition in the delivery of mobile wireless services had been limited to two carriers per local market by FCC policy since the 1970s, liberalization The First Eight Years under the New Law was thrust on this sector by the 1993 Omnibus Budget Reconciliation Act, which instructed the FCC to auction spectrum for commercial wireless uses. The first auctions were held in 1995, and construction of the new digital personal communication services (PCS) networks was just begin- ning when the 1996 act was passed. The 1993 legislation virtually eliminated price regulation of mobile wire- less (or "cellular") services. States may now regulate these rates only if the carriers have "market dominance," an unlikely condition in today's wireless sector, even in rural areas. 26 The auctioning of 120 megahertz of spectrum allowed four or more new entrants into wireless services in each local mar- ket to compete with the two carriers already operating there. Since 1996 mergers and consolidations have transformed the wireless industry into one with five large national carriers, including a firm-Nextel-that operates on