Telecommunications Breakdown

If you use a phone, watch TV, read the newspaper, or listen to the radio, you are going to be affected by a remarkably little- scrutinized piece of legislation now weaving its way through Congress. On June 15, the Senate overwhelmingly approved sweeping legislation that would recast the way the entire U.S. telecommunications industry does business. The mind-numbingly dense proposal will be the first significant revision of national telecommunications law since 1934, when Congress passed the first Communications Act requiring broadcasters to serve the "public interest, convenience, and necessity" as a prerequisite to being given trusteeship of the airwaves. In place of the many tiers of regulation that have evolved since, the legislation would open up the telecommunications industry to an essentially unfettered free market. The House of Representatives is expected to vote on its version of the bill before it recesses on August 4. And despite widespread acknowledgement that the Telecommunications Act of 1995 is a corporate wish list come true -- at the public's expense -- the President has yet to indicate whether he will use his veto power. As Rep. Jack Fields (R-Texas), the swaggering chairman of the House subcommittee on telecommunications put it, "The president is not going to veto the largest jobs bill passed during his administration." Whether or not this prediction of economic stimulus will hold true remains to be seen; in fact, critics argue that the concentration of ownership sure to result from deregulation will ultimately lead to a loss of jobs. But what is known is that communications is the fastest growing industry in the U.S., with its major sectors being broadcasting, cable, telephone, Hollywood and the recording industry, publishing, computers, consumer electronics, wireless, and satellite. Right now, telecommunications is a $700 billion a year business -- a bottom line destined to soar with passage of this legislation. "While the rhetoric claims the bill will promote competition by removing barriers to entry for various media companies, it really ensures concentration of control and monopolization," says Jeffrey Chester, director of the Washington, DC-based Center for Media Education (CME). "When one company controls the newspaper, several TV and radio stations, the cable company and even phone service -- will any politician dare oppose its interests? Will reporters feel free to explore positions which contradict their powerful bosses? Will citizens with alternative points of view be able to communicate with other citizens? " Up for grabs By all accounts, the legislation would bring about an unprecedented transformation of a major U. S. industry, bigger even than the widely covered and debated health care reform legislation of last year (which was never even introduced). Yet while everyone seemed to know who Harry and Louise were (not to mention Hillary and Ira), few are fluent in the intrigue and minutiae behind the telecommunications debate. Even Senate Majority Leader Bob Dole (R- Kansas), whose presidential ambitions have led him to vocalize on a range of more readily accessible issues, has heeded big business's call, describing the bill as the "most important piece of legislation Congress will consider this year." In brief, the bill would: * Eliminate the legal barriers to competition across markets. The intention of the legislation, is to "get everybody to get into everyone else's business" explained Senator Larry Pressler (R-South Dakota), the bill's sponsor. That means, for example, that phone companies could offer cable, long-distance providers could offer local phone service, cable could offer phone, or one could offer all three. The idea is to encourage telephone, cable, broadcast, and other telecommunications giants to compete; in reality, these corporate giants are more likely to combine forces; * Supersede the Modified Final Judgment which broke up the old AT&T, created the Baby Bells, and prevented them from entering the competitive long distance, equipment manufacturing and information services markets; * Eliminate most cable-rate regulation. The version passed by House committee would immediately eliminate all price regulation for cable television companies with fewer than 600,000 subscribers; the rest of the industry would be freed from most price regulation within about 15 months. Consumers Union has estimated that if cable rates are deregulated the average cable bill will go up $5, to $19 a month; * Relax or eliminate the limits on the number of radio and television stations one entity can own. In the House version of the bill, broadcasters can own television stations reaching up to 50 percent of the national audience (up from 25 percent); the Senate version sets the limit at 35 percent; * Eliminate the restrictions on ownership of multiple media outlets in a single community, making way for the omni-media giants of the future -- and a revival of the term "company town." The result, commented Rep. Ed Markey (D-Mass.), an outspoken opponent of deregulation, could "make Citizen Kane look like an underachiever;" * Prohibit states from using traditional rate-of-return regulation to set local telephone rates. Currently, many states limit the profits of telephone monopolies through price caps and restrictions on their rates of return. The Act would relax regulation even if no competition develops. For the captive telephone ratepayer, this likely means over-inflated local telephone bills; * Permit cable and telephone monopolies to buy each other out and/or collaborate. The trend in media ownership is already toward concentration and conglomeration. But when control of the content and control of the means of delivery reside in the same hands, the combination is clearly anti-competitive. In a widely cited example, two companies -- Time-Warner and TCI -- already control 40 percent of U. S. cable systems, and they have effectively thwarted any competition to CNN, in which they hold major ownership positions; and * Establish a new federal/state joint board to redefine the concept of Universal Service, which was conceived to ensure basic telephone service for everyone, especially residents in rural areas. What's missing from the equation? "If you look at this legislation, there is something for absolutely everybody -- except the consumer," said Bradley Stillman, legislative counsel for the Consumer Federation of America. Its backers say the Act promotes access, universal service, and competition in the nation's rapidly evolving media environment by opening the entire telecommunications field to market forces. But these claims overlook the monopoly market realities which will lead to higher prices and fewer choices. Telecommunications lobbyists portray a wealth of sophisticated packages combining voice, video and online information services, with benefits -- especially lower prices -- flowing to all. It wasn't that long ago when similar promises, likely made by some of the very same lobbyists, echoed throughout the Capitol. The 1984 deregulation of cable TV was supposed lead to a broader diversity of programming and lower prices for everyone. But all consumers got were cable rates that increased at three times the pace of inflation, leading to overcharges of $6 billion by 1994, and notoriously poor service. Congress finally stepped in and re- regulated the industry in 1992. The Consumer Federation of America and the Federal Communications Commission estimate that these caps have already saved subscribers $2.5-$3 billion. It's possible to look even further back for an instructive lesson about today's debate. When Congress was considering the original Communications Act in 1934, lobbyists also built their case around the premise that the public interest could best be served by private companies in pursuit of profits. But according to Robert W. McChesney, author of Telecommunications, Mass Media, and Democracy: The Battle for the Control of U.S. Broadcasting, 1928- 1935 "[B]y relegating noncommmercial broadcasters to the margins of the U.S. airwaves, the legislation of 1934 seriously distorted America's media and tragically affected the quality of our political culture." As for the what's-good-for-the-media-corporations-is-good- for-the-people logic revived by today's lobbyists, McChesney adds, "The tightening oligarchy of telecommunications companies that arose in the wake of the 1934 law shows how misguided that assumption was." The result this time around, critics say, will be an initial opening of markets, followed by the emergence of unregulated information monopolies in "one-wire" communities, where consumers are caught in a tightening noose of higher prices and fewer choices. Perhaps most troubling of all, considering the stated goal is competition, is the combined effect rate deregulation and unrestricted cross-ownership between local cable and telephone companies could have in many communities. Currently, most telephone companies have significant positive cash flows from their telephone ratepayers, both business and residential. With no limits on their rates, and new markets to exploit, the phone companies could leverage their existing monopoly positions to create a second local monopoly by buying into any cable system in their service areas. They would then be in a strong position to control the content of the TV services they deliver over any of the lines they own. And the next logical step will be to own that content as well -- one reason why the Baby Bells have begun making Hollywood deals to produce entertainment programming. "The bills are laden with give-aways to the media industry, especially local cable and phone companies -- with almost nothing in return for the public," stresses CME's Chester. "And they undermine the principle that monopolies, especially those that are government sanctioned, must accept reasonable regulation in the public interest in exchange for their franchises. It is what is missing from the bill that is so alarming: nothing about protecting citizens' privacy, encouraging non-discriminatory access, making sure that nonprofit educational and information programming has a role." The Gold Rush of 1995 While the general public has remained out of the loop as the Telecommunications Act has moved forward, there is one group that is strikingly well-versed in its endless clauses and amendments. By most accounts, lawyers and lobbyists for the affected industries have descended on Capitol Hill in a relentless cascade since debate began. According to the Center for Responsive Politics, a nonprofit, nonpartisan research group that tracks campaign contributions, the communications industry ranks sixth among all PAC givers. PACs run by the communications and electronics sector -- one of the dozen ways the Center categorizes industries -- gave a total of $9.4 million to the 1994 congressional elections. Assuming that this whopping figure is only about half the story, as individual contributions generally equal or surpass the PAC amount from a given industry, it's not hard to understand why so many Senators were inclined to evoke images of the Gold Rush during the floor debate on the bill. In 1992, for example, individual contributions accounted for 54 percent of total communications industry contributions of $21.2 million. "Campaign contributions are a clear part of these groups' lobbying strategy," said Nancy Watzman, the Center's project director. "This bill is so complex, no one really understands it except these lobbyists. They are giving very strategically. Money buys access that ordinary people don't get." Putting their tassled loafers where their money is, this army of lobbyists has managed to surprise even longtime veterans. "It's a frenzy," said Tom Korologos, a former White House official under Presidents Nixon and Ford, now working as a lobbyist for Ameritech Corporation, in a recent New York Times article. Describing the scene in the Senate anteroom during the debate on the Telecommunications Act, he said, "There are more cellular phones per capita in this room than anywhere else in the world." As for the House bill, the lobbying, and the deregulatory fervor continue unabated. Speaker Newt Gingrich (R-Georgia) has announced plans to "scrub" the bill and make it even more deregulatory before it hits the House floor. And with the notable exception of a few members, led by the valiant Rep. Markey, who has been almost a lone voice decrying the bill's monopolizing effect, almost all the Democrats are walking lockstep with the GOP. The elusive promise The electronic media don't simply reflect our society and culture: they shape it in profound ways. For example, recent studies of pre-school children in the Kansas City area have confirmed the common-sense notion that kids who are exposed to educational programming on TV do better in school than those who only watch cartoons and talk shows. Right now, Sesame Street provides one of the only beacons in a sea of childrens' programming littered with shows based on breakfast cereals and action figures -- a fact unlikely to change with passage of the telecommunications bill. The positive potential of TV has never been realized, and will never be achieved point out educators, if the only function of broadcasting and cable-casting is to maximize profits for giant corporations. In exchange for their license to operate in communities, it seems only reasonable that media corporations should be held accountable to the public interest, including some commitment to educational programming, community access, and an overall open exchange of ideas. That's what the Telecommunications Act lacks, and why media advocates are hoping against hope for a veto from the President. Technological changes make the present an easy time to re-think regulation of telecommunications. The dividing lines between delivery systems are rapidly blurring; technology exists which permits television, for example, to be delivered digitally by telephone lines, and telephone services by satellite, cable or even the Internet. But the same developments that make re-thinking necessary also tend to cloud public understanding of the issues. Few journalists have ventured to take on the issue in all its complexity. And beyond that, the issue has been surrendered to industry to spin. The Alliance for Competitive Communications, a lobbying group of Baby Bell phone companies is running full page newspapers ads in one such effort, while AT&T has produced a 30- minute infomercial -- hardly the consciousness raising citizens need. "The public interest will not be served by this headlong rush into the electronic future," says CME's Chester, who urges the citizens to weigh in with their legislators, and just say no to more deregulation. "The stakes are much too high to let these developments pass unchallenged."

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