February 2, 1996

News Analysis: What the Telecom Bill Already Did

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  • Congress Passes Bill That Reshapes Telephone, TV Industries

    WASHINGTON -- Even the politicians who wrote the communications law stumble as they try to explain just what it will actually do, reverting to cliches about the "information superhighway" and the 21st century.

    But the most concrete measure of its impact is to look at what the bill has already done, long before it was passed by Congress:

    -- It has prompted AT&T Corp. to voluntarily split into three separate companies, plan to cut 40,000 jobs and write off billions of dollars in failed business -- all in anticipation of competing against the regional Bell companies in both local and long-distance telephone service.

    -- Persuaded two of the nation's four commercial television networks to merge with other media companies, with CBS being acquired by Westinghouse Corp., and Capital Cities/ABC about to complete its sale to Walt Disney Co.

    -- Incited anxious merger talks between two of the seven giant Bell companies -- Nynex and Bell Atlantic -- to create a single company that would control local telephone and cellular systems from Virginia to Maine.

    -- Fostered a bewildering range of new media alliances and joint ventures -- among long-distance carriers, cable television companies, software companies like Microsoft and satellite television operators.

    In theory, at least, consumers will benefit from the variety of new choices that communications competition is supposed to bring.

    In reality, no one, not even the shrewdest and most powerful media moguls, knows exactly what to expect next. But all of these moves were, in large part, pre-emptive strikes in anticipation of free-market warfare that will result from the communications bill.

    At its simplest, the bill's core purpose is to unleash a "digital free-for-all," in the words of Rep. Edward Markey, D-Mass., who has been one of the lawmakers pushing for a communications overhaul since the late 1980s.

    It would knock down decades of regulatory barriers that have prevented local telephone companies, long-distance carriers and cable television companies from attacking each others' markets -- and even allow electric utilities to seek ways to use their networks of wires and right-of-ways to carry communications traffic.

    The bill will not, as many Republicans have maintained, simply "de-regulate" the communications industry. So complex is this legislation that it will actually spawn a mountain of new regulations and lucrative fees for lawyers.

    Nor is it clear, despite the repeated promises of lawmakers Thursday, that the bill will generate tens of thousands of new jobs. It may well have that effect eventually, but its most immediate impact has been to prompt telephone companies -- both the Bells and AT&T -- to slash their well-paid work forces.

    And for all the forecasts of bare-knuckles competition, it also seems clear that the bill has ushered in a new era of industry consolidation, with huge media mergers and "full-service" conglomerates unlike any that have come before.

    Will ordinary people be the only ones not to benefit?

    Not necessarily. Recent history has shown that most predictions about the course of communications and media turn out to be wrong. The giant Bell companies have stumbled repeatedly in attempts to offer interactive video services over telephone networks, and have now retreated to cautious attempts at mimicking plain-vanilla cable television programming, transmitted over wireless networks.

    Similarly, conventional wisdom on Wall Street is that the Bells will now snatch billions of dollars in business away from long-distance carriers. But some analysts argue that any revenue gains the Bells find in long distance may be more than offset by the money that their new rivals will siphon off in the local market.

    "The Bells will be facing competition from all sides, and I'm just not convinced they are up to it," said Michael Mahoney, portfolio manager for the GT Global Telecommunications Fund, a mutual fund in San Francisco. "I wouldn't buy stock in those companies."

    One who takes the long-term view is Vice President Al Gore, who when he was a Senate Democrat from Tennessee was one of the leading Congressional champions of tough cable television price regulations.

    He now argues that the long-term public benefits of untangling the regulatory thicket will vastly outweigh the disruption caused by new competition.

    "If you look at new jobs, in the industries that make up this sector of the economy, the cumulative additions far outnumber the layoffs," he said Thursday night. "The large layoffs represent a tragedy for those involved, but there is no question that in this sector as a whole many more new jobs are being added than lost."

    Although the bill has been a favorite item of business' agenda, it has drawn the support of many liberals as well, including Markey, who said the coming turbulence is worth the price.

    "Some companies will be winners and some companies will be losers, but there will be many more winners than losers," he said on the House floor Thursday. "The country will be the big winner."

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