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  Telecommunications Bill Passed

By Mike Mills
Washington Post Staff Writer
Friday, February 2, 1996; Page A01

Congress yesterday overwhelmingly passed the largest overhaul of telecommunications laws in 62 years, clearing the way for President Clinton to sign into law a measure that promises to change the way Americans receive telephone, television and computer services.

By removing long-standing monopoly protections, the bill would allow people to get long-distance service from their local phone company, for example, or local phone service from their long-distance or cable company. Or they might get it all, with TV and cellular service thrown in, from one company, on one bill.

But in some areas it imposes new regulations.

It would require that television makers put a "v-chip" in many sets that would allow parents to block out violent programs.

More controversially, it would establish criminal penalties for people who make material deemed "indecent" available to minors on-line.

Clinton hailed the bill's final passage, saying in a statement that "consumers will receive the benefits of lower prices, better quality and greater choices in their telephone and cable services, and they will continue to benefit from a diversity of voices and viewpoints in radio, television and the print media."

But many consumer groups oppose the measure. They say it will deregulate industries that continue to wield monopoly power before competition arrives. Cable rates are likely to rise, they say, as federal rate controls are lifted.

"This bill is bad for consumers," said Bradley Stillman of the Consumer Federation of America. "For every provision in the bill that encourages competition, there are other provisions that undermine it."

The thrust of the bill is to sweep away regulatory barriers that for decades have limited who competes in what business.

It would let the nations' seven Bell telephone companies enter the now-forbidden long-distance market.

At the same time the Bells would see their protected home markets invaded by new companies. Cable TV would face new competition as well.

The bill would loosen limits on the number of TV and radio stations a single company can own. It also would allow broadcasters to offer new money-making interactive services over their airwaves.

"It's the industry's equivalent of the Berlin Wall being broken down," said Robert Mayer, senior manager at the Deloitte and Touche Consulting Group. "We're going to see major industry groups with enormous resources begin to penetrate each others' markets."

Republican and Democratic sponsors also have touted the legislation as a job creation measure -- despite recent major layoff announcements by entrenched companies such as AT&T Corp. Trumpeting that theme were chief sponsors Sen. Larry Pressler (R-S.D.) and Rep. Thomas J. Bliley Jr. (R-Va.), both of whom repeatedly called the bill "the greatest jobs bill of the decade."

The legislation breezed through both chambers after Senate Majority Leader Robert J. Dole (R-Kan.) won assurance from Federal Communications Commission Chairman Reed E. Hundt yesterday that the agency would award no free licenses this year to broadcasters for new digital television service, allowing Congress to revisit the issue later. Dole had stalled the bill for weeks, complaining about what he called a "giveaway" of lucrative airwaves to the broadcasters.

The Senate passed the measure by a 91-5 vote, less than an hour after the House approved it 414 to 16. Clinton will sign the bill next week, Vice President Gore said in an interview. He called the bill "probably the biggest win for bipartisanship on a substantial piece of legislation we've seen in this Congress."

Under the legislation, the nation's local telephone carriers, dominated by the seven regional Bell companies, must allow all competitors to set up for business and connect to the Bells' traditionally monopolized telephone wires, switches and facilities. Once that happens, the $94 billion-a-year local residential telephone market will face its first real competition ever.

The nation's Big Three long-distance carriers, AT&T, MCI Communications Corp. and Sprint Corp., are about to get seven new, equally formidable competitors in the Bells. Once a Bell company faces at least one competitor in a state, it could seek permission to offer its customers long-distance service under its own brand name. The long-distance field has been off limits to the Bells since they were spun off from the old AT&T monopoly in 1984.

The FCC, with advice from the Justice Department, would then decide whether such a move is in the "public interest."

James Cullen, vice chairman of Bell Atlantic Corp., this region's local phone provider, said he hoped to win such approval so Washington area telephone customers could choose Bell Atlantic long-distance service as soon as a year from now. "We want to get started immediately," he said.

Gerald Taylor, president of District-based MCI, said his company would "aggressively" pursue selling local residential telephone service in this and other regions. Long-distance carriers plan to buy local service on a wholesale basis from companies such as Bell Atlantic and market it to consumers under their own brand names.

In addition, the legislation would reaffirm the Bells' court-ordered rights to offer cable television service. It also would allow them to manufacture equipment and, gradually, to enter the alarm services and electronic publishing businesses.

Cable television operators, who will face growing competition from telephone companies and satellite services, will be free within three years to set their own rates for most programs without federal government limits. Small operators would get immediate rate-setting freedom.

For those industries, the new buzzwords will be "one-stop shopping," analysts said.

"Consumers will get introduced to ways of combining services that they haven't seen before," said Sharon Armbrust, senior analyst with Paul Kagan Associates Inc. in Carmel, Calif. "People want one bill."

AT&T and MCI, for example, within a year will be able to "bundle" local residential phone service with their long-distance, cellular, paging and Internet services -- all on one monthly bill. Those companies and Sprint have plans to deliver video entertainment as well.

Now the lobbying focus shifts to the FCC and the states, where proceedings already are underway to settle the difficult issues of pricing for the new local telephone competitors and how to ensure that all residents have equal access to newly competitive telecommunications services.

For the telephone industry, analysts also expect a flurry of joint ventures and mergers -- between long-distance carriers and Bell companies, and perhaps even between Bell companies themselves. Bell Atlantic and Nynex Corp. have been exploring the idea of combining at least their long-distance operations.

The final passage and signing by Clinton would mark the end of a decade-long effort to deregulate the communications industry, which bill sponsors say accounts for one-sixth of the U.S. economy.

Over the years repeated efforts failed, as the Bells and the long-distance industry fought each other over the pace and conditions of deregulation in one of the most protracted and expensive lobbying battles ever waged before Congress.

Ultimately, industry analysts say, the rival companies were persuaded that the global market for telecommunications is expanding so rapidly that the threat of more competition has become a less pressing fear.

"Companies now realize they can afford to lose market share because their markets are getting bigger," said Mayer of Deloitte and Touche.

© Copyright 1998 The Washington Post Company

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