In the days before regulation, there was so much competition it wasn't even funny! Oh wait, there was only one phone company: AT&T. Then they were broken up and the industry became a little more heavily regulated and suddenly there was finally some competition.
Regulation doesn't just appear out of nowhere. It happens because bad things were happening before the regulations were put in place.
Based on some quick Wikipedia reading, it was a patent-based monopoly from 1876 to 1894, then "the telephone market opened to competition and 6,000 new telephone carriers started while the Bell Telephone company took a significant financial downturn" until 1907 when AT&T bought out most competitors. Then in 1913 AT&T became a government-regulated monopoly until 1984 when it was broken up by the government. http://en.wikipedia.org/wiki/Bell_System So the relationship between regulation and competition isn't all that clear.
Regulation doesn't just appear out of nowhere. It happens because bad things were happening before the regulations were put in place.