It's true. In fact, some people still rent their phones. http://blogs.computerworld.com/node/3538
I still have the first phone I ever bought, in 1985 right after the rules changed. (And because it was made by Western Electric in the good old days, it still works!)
Not really. The breakup of the Bell monopoly helped, but Hush-a-Phone vs. US helped set the stage for competing long distance carriers like MCI. It set the stage for devices like the Carterfone ( http://en.wikipedia.org/wiki/Carterfone ). Things really didn't take off much until the breakup, because of the monopolistic practices of Ma Bell; even though interconnect was legal, they brought insane market pressure to bear.
I was pretty young then, but I do remember that after the breakup the market saw a rush of new phone devices.