roundtable: telecom piece, part two

roundtable: telecom piece, part two

telecom piece, part two

Jwshenk@aol.com
Fri, 26 May 1995 16:29:07 -0400 

Date: Fri, 26 May 1995 16:29:07 -0400
From: Jwshenk@aol.com
Message-Id: <950526162906_14006020@aol.com>
To: roundtable@cni.org
Subject: telecom piece, part two


Hired Guns Ride to Town

In 1994, Vice President Gore excited the country's imagination with dreams of
a superhighway that would "educate, promote democracy, and save lives," and
the administration worked with Congress to produce a bill with common
carriage and open architecture as its leading principles. "We were trying to
create a climate," says David Moulton, chief of staff to Rep. Edward Markey,
former chairman of the House Telecommunications and Finance subcommittee, "in
which users could receive basic services for a reasonable price and where
small businessmen couldn't easily be choked off."

Rep. Markey's bill passed the House, but died in the Senate. Close observers
saw the footprints of industry. In particular, the Baby Bell providers of
local phone service opposed the bill, and Republican leader Robert Dole did
their bidding. "I don't know how they influenced Dole," says a top staffer on
the Senate Commerce committee. "All I know is that we were presented with a
list of non-negotiable demands, much of which was clearly written by the
industry. We knew who wrote it because it was the same language that the Bell
companies had given us before that we had rejected."

One clue to how they influenced Dole: Local phone companies gave $3.2 million
in PAC money in the 1993-1994 election cycle alone. There's a reason why The
Washington Post calls the Baby Bell lobbyists "The Kings of Capitol Hill."
Together the companies earn $88 billion annually. Their hired guns include
Roy Neel, a longtime aide to Gore and former White House deputy chief of
staff; William Diefenderfer, former top aide to Senator Bob Packwood; and
counsel from some of Washington's most high-powered lobbying firms. "The
[Baby Bells] cover the entire country, every congressional district," says
Brian Moir, Washington counsel for the International Communications
Association. "There's not a person up there on the Hill that doesn't have a
best friend who works for a Bell company."

The long distance and cable companies have virtually the same agenda as the
Baby Bells when it comes to common carriage and open architecture. And
they're no slouches either. Cable PACs contributed more than a million
dollars to candidates in the November elections. Computer, wireless
communication, satellite, as well as television and radio broadcast also have
a heavy presence in Washington. And Howard Baker, former Senate Republican
leader and chief of staff to Reagan, is chairman of a coalition of long
distance companies. "We've been pretty successful in getting what we wanted,"
says Marlin Fitzwater, the former spokesperson for Presidents Reagan and
Bush, who now lobbies for the long distance industry. "Senator Baker has been
very close with Dole and [Senate Commerce Committee Chairman Larry] Pressler
through the years."

The Republican ascendancy has provided a big boost to lobbyists' standing on
Capitol Hill. And they've wasted no time making their allegiance clear. On
November 3, just as the GOP takeover was assured, the giant cable company
Tele-Communications Inc. wrote a $200,000 check to the Republican National
Committee. And lobbyists press their case with regular phone calls and office
visits. "Ask our receptionist what she thinks of this bill," an aide on
telecommunications to a pivotal senator says wearily. "My name is cursed
around here because I get between 150 and 200 phone calls a day."

So what do all these lobbyists want? In a word, deregulation. With money and
influence, they are trying to buy freedom from public interest requirements
in the coming years. And from the looks of things, the purchase is almost
wrapped up. The high-toned words in Pressler's "Telecommunications
Competition and Deregulation Act of 1995" promise competition, open access,
and universal service. But this bill, like its counterpart in the House, does
very little to follow through. Despite their imminent expansion into
multimedia and phone services, cable companies are exempted entirely from
common carriage requirements. For phone companies providing advanced
interactive services, common carriage is optional, but there's little hope
they'll opt for it. The crucial distinction between open and closed
architecture is virtually ignored.

The assumption behind the Senate bill, and one pushed by industry, is that
competition makes common carriage unnecessary. So long as the industry is
"untrammeled by excessive regulation," promises Stuart C. Johnson, president
of Bell Atlantic Video Services Co., "markets will spring up, and a flood of
creativity will pour forth. And consumers, acting with control, convenience,
and choice will interact electronically in a manner that enhances both
enjoyment and individual growth." 

Theoretically, that's possible. But competitive networks take time to
develop, particularly when the higher capacity wire that needs to be laid is
so expensive. The only players in a position to compete in the near future
are local phone and cable companies. And the bill has another provision (for
which industry lobbied heavily) that allows phone companies to buy cable
companies, newspapers, and TV stations in the same service area, and vice
versa. The irony is sublime: A bill that is supposed to break apart
monopolies and open up competition instead opens up the field to far more
concentrated, less-regulated monopolies. Rather than compete, cable companies
and Baby Bells can, and probably will, join forces and block out smaller
competitors.

Since competition is uncertain, the absence of requirements for common
carriage and open architecture spells disaster. The Internet, openly
accessed, user-driven, and always changing, is the precise opposite of what
industry has in mind for the superhighway. These companies prefer the
closed-network model of cable television. "Cable companies," says Larry
Clinton, a lobbyist for local phone companies, "decide who is on their
network. They can choose Turner TNT, or not. And they get something of value
in return for allowing channels on the network." They also get away with high
prices: Before federal regulation in 1992, cable rates were rising at twice
the rate of inflation.

Indeed, beyond deciding the network's content, the truly ambitious-and
telecommunications companies are nothing if not ambitious-also want to own
the content. That's why each of the Baby Bells has a deal with a major
Hollywood player to produce entertainment services. Bell Atlantic, Nynex, and
Pacific Telesis are aligned with Creative Artists Agency and its powerful
chairman, Michael Ovitz. US West owns an equity stake in Time Warner's
entertainment division. And the last three Baby Bells-Ameritech, BellSouth,
and SBC Communications-are hooked up with the Walt Disney Co. These
partnerships provide crystal clear evidence of their intent. They want to
build private networks and control the content that flows over it.

What's the trouble with the same entity controlling the pipeline and whatever
is pumped through it? It's a certain recipe for anti-competitive behavior.
Cable's all-news channel, CNN, is a perfect illustration of the perils. The
all-news network has a monopoly on that market, and because two principal
shareholders, Time Warner and TCI Cable, also control 40 percent of the
country's cable systems, they shut out any would-be competitors. When NBC
wanted to start a competitor to CNN, TCI Chairman John Malone simply said,
"No." Eventually, CNBC (home of "Rivera Live") got on the air, but only after
promising to stay out of the news business.

The miserable fate of community access programming on cable is further
evidence of the perils of mixing the ownership of conduit and content.
Congress in 1984 required that 15 percent of cable programming be devoted to
independent "leased access." They wanted to provide an outlet for educational
shows, serious documentaries, and community programming. But cable companies-
which prefer to keep their systems stocked with shows they own
themselves-have done everything they can to skirt the rules, from charging
high rates to burying independent shows on obscure channels. "The only guys
who can make a profit," says Matt York, publisher/editor of the Leased Access
Report, "are the ones who use that delivery capacity like a pimp. There's no
independent expression of an opinion, just a half-hour real estate show, or a
series of commercials."

If cable seems bad, a superhighway built in its image would be even worse.
And the Holy Grail of "interactivity" seems unlikely to be delivered. John
Perry Barlow, co-founder of the Electronic Frontier Foundation, a group that
lobbies for civil rights and public interest issues in cyberspace, says
companies like Bell Atlantic are planning a "grossly asymmetrical" system.
"It's a superhighway with 250 lanes in one direction, and one lane in
another" Barlow says. "They drop stuff on you and say, 'We're going to give
you just enough back bandwidth to operate the button on your clicker.'"

Indeed, the trial runs of "full-service networks"-Time Warner's in Orlando,
Bell Atlantic's in Reston, Virginia-are mostly one-way systems. To the extent
that subscribers have interaction and choice, it's to order movies and pizza.
The "many-to-many" communication we're promised-where any one site can
contact any other-is replaced by a system of "one-to-many." The company that
owns the wires controls the content and no one, not the user-certainly not
other businesses-can seek or provide an alternative. 

Boon or Bust

The promise of the superhighway is that it could be as much of a boon to
community and commerce as phones. If Congress keeps rolling over to please
industry, it would contribute about as much to public life as Disney World.
Schools, churches, hospitals, and small businesses would be shut out in the
closed system planned by the telecommunications giants. "It's important to
remember," says Moulton, Markey's chief of staff, "that that genius
developing the next killer piece of software in her garage-we don't even know
who she is yet. Sticking up for her means sticking up for an interest that's
not represented here at all. And yet, in terms of jobs created and net
benefit to society, that's the most important thing we could do."

This is not the first time that, poised at the beginning of a new
communications era, the public has been distracted by false promises. Radio
was destined to be a "classroom of the air." Television, in its early days,
was championed for its potential to educate and illuminate. Cable, in
particular, was championed as a boon for health care-doctors could talk to
patients over cable wires-and community interaction. In the "blue skies"
period, cable was going to give voice to the voiceless, empower consumers,
and inject new life into the economy. 

At the dawn of each new era in technology, businesses have sought to excite
the public at the possibilities in order to secure a favorable regulatory
regimen. Then, having gotten what they wanted, the promises of education,
health care, and community benefits are quickly lost. "The superhighway
rhetoric has come straight from cable's handbook from the seventies," says
Jeff Chester, executive director of the Center for Media Education. "And
without good policy, we'll end up with the same electronic nightmare."

Because the issue is so complicated, the public is on the sidelines. The
loudest voices are those of the lobbyists. "It doesn't get the emotional
involvement that health care does," says Fitzwater of telecommunications
policy. "People don't see a direct impact on their lives. That makes it a lot
more of an inside game." Roy Neel puts it more bluntly: "Members of Congress
don't think there are any good guys or bad guys in this," he told The New
York Times. "This is not about right or wrong-it's ultimately about money."

There is right and wrong, though-it's just that no one's framed it in those
terms. But it's not too late to start. Neither the House nor Senate bill has
come to the floor, and the battle is not yet over. Al Gore, who has been
largely silent on the House and Senate bills, has the potential to be a real
leader on this issue. If he emerges from hiding to vigorously champion open
networks-in terms the public understands-there's hope that the bills could be
improved. And whatever package emerges from Congress, President Clinton still
has his veto. If the bill doesn't have provisions for common carriage and
open architecture, he should use it.

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