stry titans. Similarly, the U.S. rail- roads have passed through a long period of consolidation and turmoil in the twenty-fiv years since they were more or less deregulated. Clouds of uncertainty also surround recent attempts to open the U.S. electricity sec- tor to competition. Deregulation or market liberalization in these sectors, however, does not face the same profound technological revolution that is occurring in telecommunications. Hence the 1996 act simply exacerbated a turmoil that seemed bound to occur in any event. In this book, I attempt to look past the regulatory debates of today to the likely evolution of the telecom sector in the next few years. This is a hazardous enterprise under any circumstances, but it is particularly risky in the unsettled regulatory and market conditions of 2005. I try to distinguish the survivors from those who will likely fail, while providing a policy analy- sis along the way. My conclusion is that "deregulation" requires deregula- tion: that is to say, the telecommunications sector has been overregulated in the past nine years. Despite having the best of intentions, regulators have not facilitated competition but have likely delayed it. Furthermore, they have failed in their attempt to allow new or established companies to sur- vive without their own connections to customers. Forcing the incumbent local companies to offer their facilities at regulated, wholesale prices to entrants is not only a mistake; it is an exercise in futility. Opening Telecom Markets: The 1996 Telecommunications Act efore 1996 the U.S. telecommunications sector was mired in a policy morass from which there appeared to be no escape. Though never formally shown to be a "natural monopoly," it was heavily regulated by politically responsive officials intent on using their powers for income redistribution. In this pursuit, the regulators often protected the monop- oly power of incumbents SO as to have monopoly rents to shift among con- stituent groups.2 In the 1950s, however, the courts began to get i