roundtable: The telecommunications reform bill - another case of politics as

roundtable: The telecommunications reform bill - another case of politics as

The telecommunications reform bill - another case of politics as

W. Curtiss Priest (BMSLIB@mitvma.mit.edu)
Fri, 11 Aug 95 10:19:57 EDT 

Message-Id: <9508111425.AA15561@a.cni.org>
Date:         Fri, 11 Aug 95 10:19:57 EDT
From: "W. Curtiss Priest" <BMSLIB@mitvma.mit.edu>
Subject:      The telecommunications reform bill - another case of politics as
To: Telecommunications Policy Roundtable <ROUNDTABLE@CNI.ORG>


The telecommunications reform bill - another case of politics as usual.


August 3, 1995
CITS Observations on the attached article:
W. Curtiss Priest, Director

As the telecommunications bill came back to the House, many of us had
heard that Baby Bell lobbying had changed the provisions for
entry of the long line providers into their areas.

This informative article by Tom Valovic summarizes those changes,
how they came about, and their implications for competition should
this bill become law.

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The telecommunications reform bill - another case of politics as usual.
TOM VALOVIC

A flawed blueprint
for cyberspace

In the popular mind, the trendy appeal of cyberspace,
the Internet and the World Wide Web may seem to
have little to do with the plodding exigencies of the
telecommunications reform bills recently passed by
the House and the Senate. But public apathy concerning
what is essentially the nation's first major overhaul in tele-
communications policy in 60 years may come at a cost. The
bills, as they are now written, represent America's blue-
print for cyberspace for the 21st century. Unfortunately, it
may be a fundamentally flawed blueprint.

The Clinton administration has stated its intention. to
veto the legislation. Moreover, an important segment of the
telecommunications industry - the long-distance compan-
ies, including AT&T, MCI, and Sprint - is dissatisfied.
Along with many consumer groups, these companies
charge that the legislation will fail to bring true competi-
tion into an industry that badly needs it, and they are right.

In drafting the new bills, Congress had an opportunity
to demonstrate that it has both the wisdom and foresight to
create visionary legislation that would bring both deregula-
tion and competition into the telecommunications market-
place, and do so in a way that would bring positive benefits
to most Americans. These benefits would come not just in
the form of lower prices but would consist of a host of
affordable new services and capabilities.

Up to now, most of the competition that has been intro-
duced has affected only long-distance companies. However,
competition has been stalled for many years in the so-
called local services portion of the network. Local services
- essentially the provision of basic telephone service to in-
dividual residential households - has remained under the
monopoly control of the regional "Baby Bells."

The challenge for Congress was to introduce competi-
tion into local service areas by allowing cable and telephone
companies to compete and, in essence, get into each other's
business. The objective was to have both kinds of providers
compete for phone as well as cable services.

However, long-distance companies wanted a piece of
the action, especially because it looked like the regional
Bells would be allowed into their business. Since the Bells
held most of the cards in this high-stakes game, the long-
distance companies wanted Congress to build safeguards
into the bill requiring the Baby Bells to demonstrate that
local competition exists before they could get into long dis-
tance. Such a provision was hammered out and placed in
the House bill. But when everyone was looking the other

way, a handful of Republican leaders removed those safe-
guards from the bill.

As it stands, it looks like the visionary blueprint for
cyberspace has become just another case of politics as usu-
al. Many observers are calling it a major defeat for the
notion of true competition in what could be America's most
important industry. The House bill reinforces rather than
reduces the monopoly power of the "Baby Bells" by allow-
ing them to buy out what's supposed to be their principal
competition - cable companies - in many portions of the
telecommunications marketplace.

If this legislation became law, the losers would be not
just long distance companies, but the entire telecommuni-
cations industry as well as the American public. First, it
would deregulate cable prices; cable rates would undoubt-
edly increase in the short term. Second, lack of true compe-
tition would negatively affect both future pricing as well as
the diversity and quality of new service offerings, including
Internet services, which many telephone companies will
eventually provide. The new cyberspace regimes to be in-
troduced in the next century have the potential to either
widen the already growing economic disparities in the
United States or to alleviate them.

Finally, the provisions in both bills allow for significant
new levels of media concentration in an environment where
media diversity is already at risk. Although Rep. Ed Mar-
key was able to introduce an amendment to the House bill
limiting television station owners to 35 percent of the na-
tional audience (as opposed to the 50 percent cited in the
original legislation), the trend is clear: Ever-increasing
control by large companies over the flow of information at
a time when information is clearly correlated with econom-
ic well-being. As the Clinton administration and Markey
have both pointed out, these legislative trends run counter
to the kind of information diversity that Americans have
come to regard as an essential part of the democratic pro-

Tom Valovic, editor-in-chief of Telecommunications maga-
zine in Norwood, is the author of "Corporate Networks: the
Strategic Use of Telecommunications."

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