ommunications Sector, 1987-2001 Index, 1996 = 100 Investment Gross product 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: BEA (2003). Productivity Growth Perhaps the most striking aspect of the IT revolution of the late 1990s was the decline in productivity growth in wired telecommunications ser- vices (see figure 3-6). In the nonfarm sector, the average rate of growth of U.S. productivity exploded in 1996-2000, rising by more than two-thirds Figure 3-4. Total End-User Telecom Revenues, 1996-2003 Billions of dollars Total Excluding wireless Source: FCC, Telecommunications Industry Revenues, 2002 (March 2004). The First Eight Years under the New Law Figure 3-5. Output in U.S. Telecommunications, 1987-2001 Index, 1996 = 100 Constant dollars Current dollars Source: BEA (2003). from its 1987-96 level.¹6 In the unregulated wireless sector, labor produc- tivity not only grew about twice as rapidly as in the wire-based sector, but it accelerated sharply. As explained in chapter 4, the disappointing perfor- mance of wire-based firms is due largely to the entry of new local carriers, who added greatly to industry employment but not to output. Regulatory Changes In any newly liberalized market, many business plans will prove unsuc- cessful as entrepreneurs struggle to find a strategy that works. However, telecom's fast-advancing technology, soaring Internet, and lower interna- tional barriers to communications created even more opportunities for mistakes than arose during previous episodes of liberalization or deregula- tion, such as those in the airline or trucking industries. For the most part, the telecom havoc of the 1990s can be traced to the following regulatory changes: -Opening of wireless communications to competition for the first time in 1993 and deregulation of wireless rates. -Government auctions initiated in 1995 to provide the requisite spec- trum for new wireless competitors. The First Eight Years under the New Law Figure 3-6. Labor Productivity Growth in U.S. Telecommunications Pe