mine the effect of these failed regulatory policies on the incumbent Bell companies. Effect of the 1996 Act on Incumbent Local Companies here can be little doubt that the incumbent telephone companies have lost subscribers to the new entrants since 1996. Between 1996 and 2000, a period of vibrant economic expansion, these losses occurred against a backdrop of subscriber line growth and a generally buoyant stock market. Now, however, the total number of access lines in the country is declining as residences reduce their use of second lines and some simply rely on wireless service as their only telephone service.1 More important, the equity markets in general have soured on telecommunications. In this environment, the incumbents' loss of retail (end-user) lines to entrants is even more painful than if it had occurred when total line counts were increasing. Between 1984 and 1996, total access lines increased about 3 percent a year (table 5-1). Virtually all of this growth was registered by the incum- bent local companies, principally the Bell companies and GTE. The growth in access lines accelerated after 1996, fed by the demand for second lines due to the Internet, but then slowed after 2000 as broadband services began to replace ordinary voice-grade connections to the Internet and the economy turned sluggish and even became negative after 2001. At the same time, the competitive local exchange carriers (CLECs) trebled their number of access lines, replacing the Bell companies' and other incum- bents' end-user lines with services offered over the incumbents' wholesale lines and over their own lines. In the face of these three forces, incumbents Effect of the 1996 Act on Incumbent Local Companies Table 5-1. Switched End-User Access Lines, Selected Years, 1984-2003 Millions at Year-End Total lines Incumbents Competitive carriers 113.8 151.5 189.5 181.3 192.6 177.6 191.7 172.0 187.5 162.7 181.4 151.8 Source: FCC, Trends in Telephone Service (May 2004), table 7.1; FCC, Local Telephone Competition: Status as of December 