DIVESTITURE AND REGULATORY POLICIES - IMPLICATIONS FOR RESEARCH, DEVELOPMENT AND INNOVATION IN THE UNITED-STATES TELECOMMUNICATIONS INDUSTRY

This article reviews recent changes in the structure of the US telecommunications industry and in public policies following the divestiture of AT & T, and examines their implications for R&D and innovation. A brief review of changes in the organization of R&D in the former Bell system is followed by a consideration of the effects of market structures on R&D incentives and organization. Finally the article examines the effects of the line-of-business restrictions imposed on the regional holding companies by the Modification of Final Judgment, the FCC's requirement for open network architecture, and rate-of-return regulation by state utility commissions. The central conclusion of the article is that US telecommunications policies may undermine incentives for R&D by the Bell operating companies while providing considerable incentives for them to turn to foreign manufacturers for new technology. © 1990.