They didn't want competition for their (much more profitable) T-1 market. Then, once the Telecommunications act passed in '96, they stonewalled as much as they could to keep competitors out of their markets...
Side note: Locally, QWorst (Damn, I miss Useless Worst...) has recently gotten the go-ahead from the state Utility commission to offer long-distance service.
This despite the fact that their service still sucks, AND they haven't been expanding their DSL offerings at all.