 the long-distance com- panies kept their annual capital expenditures at their 1997 level of $15 bil- lion, they would have spent $36 billion less and would be in somewhat bet- ter financial health today. Had CLECs invested only half as much in wasted collocation facilities and other investments over the 1996-2000 period, they would have spent approximately $21.5 billion less. These more modest growth rates would have reduced U.S. telecom capital expen- ditures by $57.5 billion, or slightly more than required to have generated U.S. capital-spending growth equal to that achieved in the other major OECD countries. Liberalization's Effect on Incumbent Telephone Companies When the telecommunications sector was liberalized in the 1980s and 1990s, most of its assets were in the hands of the national carriers, that is, the incumbent operators. These carriers were privatized slowly and then forced to face a more competitive marketplace. The liberalization process began in North America, but it spread quickly to New Zealand, the United Kingdom, and Japan in the 1980s, followed by the European Union in the 1990s. When Europe liberalized its markets on January 1, 1998, the worldwide tele- com stock market "bubble" was already forming. Thus the incumbent carri- ers were forced to deal with two new but related forces: competition and a frenzied financial climate. Not surprisingly, the managements of these carri- ers formulated a variety of strategies to cope with this new environment. In the European Union, the large incumbent carriers were privatized at very different rates. Telecom Italia, British Telecom (BT), and Telefonica (Spain) became fully private companies fairly quickly. On the other hand, France Telecom (FT) and Deutsche Telekom (DT) still have substantial government ownership. Despite this continued government ownership, the managements of FT and DT were among the most aggressive in pursuing Telecom Reform in Other Countries mergers and acquisitions and in bidding for spectrum. These firms were most affected by t