government. Buying a local operator is another alternative to for- being primarily used to carry their own traffic, and the excess ming an alliance; a case of 'if you can't beat them, buy them.' capacity being sold. Examples of such operators are the electricity 11/6 The telecommunications industry companies and the railway operators, who often have miles of wave systems. Amongst the FCC's duties are the regulation of optical fibre cable laid alongside the rail tracks. prices, allocation of frequencies and granting of licences to new Telecommunications provision may be considered to be at three operators. levels: infrastructure, i.e. the physical network; transport services, For some time AT&T owned the whole of the US telecommuni- i.e. that which provides the delivery mechanism (often switched); cations network, the Bell system. It also owned a manufacturing and higher level services, also called value added services, which subsidiary (Western Electric) which produced equipment exclu- process the information being transported. The lower the level, and sively for the Bell system. AT&T was therefore a vast private, the more established the technology, the less likelihood that compe- vertically integrated monopoly, the largest privately owned com- tition will occur. pany in the world. Its activities were closely regulated by the FCC. The prime role of regulation is to ensure effective competition. In From this position the major steps in the deregulation of telecom- a monopoly situation regulation is needed to protect the user (e.g. munications within the US were as follows: price cap), and to spur the supplier to improve efficiency. Cost plus pricing should never be used as it encourages 'gold plating'. 1968. The FCC ruled that equipment could be connected to the Competition may be said to benefit everyone. It stimulates the Bell system, even though it had not been produced by AT&T. market so that it grows, ensuring revenue increase even though the This was known as the Carterfone decision. percentage market share