o 1.0 are Ford and General Motors, while airlines have betas of 1.0 to 2.8. The financial markets apparently viewed the Bell companies as generally less risky, or at least they did SO until recently. Beta values go up to 4.5 for the largest CLECs, which are failing rapidly, but are in the range of 0.7 to 1.4 for long-distance companies. The beta estimates in table 5-3 are provided by a commercial source and are apparently estimated from stock-price movements over a considerable period of time. To examine the recent trend in beta estimates more closely Effect of the 1996 Act on Incumbent Local Companies Table 5-4. Estimates of Equity Betas, 1996-2003 Company 1996-97 1998-99 2000-01 2002-03 Entire period Bell South Verizon Qwest Source: Author's estimates from closing prices on http://finance.yahoo.com. n.a. Not available. (table 5-4), I calculated each company's beta from weekly closing prices for two-year periods between 1996 and 2003 and for the entire eight-year period. Note the relatively high estimates for Bell company equities about the time the telecom act was passed and in the early stages of implementa- tion, in 1996-97. Clearly, this was a period of great uncertainty for these companies. For the next four years, however, the Bell companies' equity betas fell sharply, as they were now confined by the act to their intrastate and local markets and were losing few lines to competitors. Regulation had appar- ently succeeded in bottling up the resources of a large part of the telecom- munications sector and was treating it like a staid trucking company or railroad. The Bell companies were prevented from making the mistakes of their unconstrained fellow telecom companies, but the country was deprived of the potential innovation that might have come from this reser- voir of expertise in telecommunications.8 Once the Bell companies were allowed to offer interstate services and were saddled with ever lower rates for their wholesale services, the risk of holding their stocks rose markedly.' Although not quite back 