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February 2, 1996

Congress Passes Bill That Reshapes Telephone, TV Industries


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    By EDMUND L. ANDREWS

    WASHINGTON -- After four years of struggle and gridlock, Congress rewrote the nation's communications laws Thursday, passing a bill that would transform television, telephones and the emerging frontiers of computer networks.

    Voting within two hours of each other, both the House and Senate approved a final version of a bill that is broadly intended to promote a free-for-all rivalry between local telephone companies, long-distance carriers, cable television operators and even electric utilities.

    The House approved the bill first, by a vote of 414-16; the Senate's vote was 91-5. The bill now moves directly to President Clinton, who strongly supports it and has said he will sign it.

    "Today, we have broken up two of the biggest government monopolies left: the monopolies in local telephone service and in cable television," said the bill's primary author in the House, Rep. Thomas Bliley Jr., R-Va., the chairman of the Commerce Committee.

    "For the first time ever, Americans will be given choices. Besides lower rates and better service, the result will be innovative new products and services that will create thousands of new American jobs."

    Whether or not the bill lives up to the superlatives heaped on it Thursday by its supporters, few dispute the sweeping impact of the new legislation, which leaves no corner of the industry unchanged.

    It would replace the historic antitrust consent decree that broke up the Bell telephone system in 1984, freeing the seven regional Baby Bell companies to offer long-distance services while forcing them to open the local telephone business to new rivals.

    The bill lets cable television and telephone companies attack each others' markets, as each industry races to offer a full menu of telephone, video and high-speed data communications. The bill also relaxes ownership restrictions in broadcasting, allowing companies to greatly increase the number of radio and television stations a single company can own.

    And it contains provisions that make it a crime to transmit indecent sexual material over computer networks, and require television manufacturers to begin including the so-called V chip to allow parents to block undesirable programming.

    Thursday's vote came after Sen. Bob Dole of Kansas, the majority leader, dropped his objections to a provision that he attacked as a multibillion-dollar giveaway for television broadcasters.

    That provision essentially reserves a segment of the nation's airwaves, estimated to be worth as much as $70 billion, for television broadcasters to start new digital television services.

    Dole effectively blocked the bill several weeks ago, arguing that the provision amounted to corporate welfare for media companies at a time when Congress was cutting funds for social welfare programs.

    But Thursday he let the bill proceed unchanged -- though not without being blasted by numerous Democrats for capitulating -- after he obtained assurances from Republicans and from the Federal Communications Commission that no licenses would be given until after Congress revisits the issue in a separate bill.

    Overall, however, Thursday's votes drew a chorus of praise from almost every segment of the communications industry. But consumer groups complained that the measure would lead to higher prices for telephone and cable customers, and civil liberties groups were furious about provisions aimed at blocking sexual material on computer networks.

    In industry, the biggest winners Thursday were the seven regional Bell companies that have been prohibited from entering the $70 billion long-distance market since they were created 12 years ago.

    It remains unclear how quickly this will take place, but executives at AT&T predicted Thursday that head-to-head rivalry from the Bells could arrive within two years.

    Under the new law, the Bell companies must open their local networks to competition by satisfying a detailed checklist of requirements that aspiring rivals have said are essential for entering the local phone business.

    "This bill is a blueprint for the 21st century," said Rep. Edward Markey, D-Mass. "It breaks down all the old models of one cable company and one telephone company. It is not perfect, but it is the best overall blueprint that any country in the world has ever come up with."

    Vice President Al Gore, who has spearheaded the Clinton administration's efforts on communication issues, effusively praised Thursday's votes.

    "It's a bipartisan victory, a textbook example of how the White House and Congress can work together," he said Thursday night. "Creativity that has been bottled up for decades will be let out in a very constructive way."

    Despite the turmoil, virtually every segment of the communications industry has been pleading with Congressional leaders for weeks to simply pass the bill and be done with it.

    Gerald Levin, chairman and chief executive of Time Warner Inc., phoned Republican lawmakers to beg for an end to the bickering.

    Time Warner, the nation's second-largest cable television operator, will benefit from both cable price deregulation and from rules to ease its entry into the telephone business.

    Cable companies were so eager for the bill, in fact, that they agreed to delay full price deregulation for three more years -- a retreat from the bills passed last summer.

    Consumer advocates continued to criticize the bill, particularly provisions that would immediately end most cable television price regulations in small markets and permit cable television and telephone companies to merge in markets with fewer than 50,000 people.

    "Cable rates are going to go up in small towns immediately and could rise significantly in three years across the country," said Gene Kimmelman, co-director of the Consumers Union's Washington office.

    Civil liberties groups quickly vowed a court battle over provisions that would block the transmission of smut over computer networks.

    "The Internet has been give second-class speech rights, and we are going to take them to court over it," said Jerry Berman, director of the Center for Democracy and Technology, a nonprofit group in Washington focused on Internet issues.

    Numerous Democratic lawmakers took potshots over the provision that would reserve part of the airwaves for digital television.

    "It is a huge charitable corporate gift," thundered Rep. John Conyers Jr., D-Mich.

    But Dole, citing assurances from the FCC that it would take no action until Congress revisits the issue in a separate bill, said broadcasters would not get the valuable television frequencies without a fight in the months ahead.

    "I am determined to turn the FCC's commitment to us into a victory for the American taxpayer," he said in a written statement Thursday. "For those who think this is an idle threat, guess again."


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