FCC Allows Phone Firms to Carry TV Programming

Federal regulators Thursday took sweeping steps that could vastly expand telephone and television services and create new competition for the nation’s communications and media giants.

The Federal Communications Commission ruled that regional phone companies may transmit movies and other television services by phone lines nationwide. The commission also voted to allow phone companies to purchase up to a 5% stake in cable TV or video programming companies.

The FCC’s decision pits the nation’s phone companies as potentially formidable competitors against the cable TV industry, TV networks and neighborhood video rental stores.

The commission also took the first steps toward creating a nationwide radio network for the next generation of portable telephones, two-way paging devices and tiny notebook computers.

Known generically as “personal communication” devices, these systems represent a competitive threat both to the existing phone network as well as the nation’s wireless cellular system.

FCC Chairman Alfred Sikes said the commission’s actions “constitute truly critical components . . . of what futurists have called a ‘glittering communications mosaic.’ ”

However, the commission’s actions were immediately criticized by some as unfair to existing media operators and as potential costly boondoggles for American consumers.

“When you cut through all the technical ballyhoo, this is a kind of half-step toward encouraging phone companies to build a lot of hugely expensive TV plants, with telephone customers financing the investment,” charged James P. Mooney, president and chief executive of the National Cable Television Assn.

Cable TV operators now hold effective monopolies in their service territories and, since 1986, fees for basic cable services have jumped an average of more than 50% nationwide.

Under the “video dial tone” service, customers could pick what programs they wanted to watch on TV by simply dialing their telephone.

While those programs would include movies and other entertainment, it may someday also include educational programs to be viewed at home or schools, medical image transfer and business services.

Mooney’s charges underscored the intense political fight that has been waged in Washington and in state capitals over efforts to expand new communications technologies and create new competition among the businesses offering them.

The nation’s phone companies, which have sought entry into the cable TV business for years, largely cheered the FCC’s actions Thursday, calling them an important first step toward their goals.

The FCC’s action allows phone companies to transmit video programming created by other companies. While the phone companies remain constrained by the Cable Act of 1984, which prevents them from creating or transmitting their own programming, the FCC voted to allow them to purchase up to a 5% ownership stake in video programming businesses.

In his dissenting vote on the ownership issue, Commissioner James H. Quello said the phone companies’ entry into the video broadcast business “could eventually lead to universal pay TV” and represented a threat to the free government-licensed broadcast service available over network TV.

The nation’s phone companies, which hope to profit from owning both the video programs as well as the communications networks used to transmit those programs, were not entirely satisfied by the commission’s action.

Phone company executives, who have long argued that without both sources of revenue they could not afford the cost of installing a telecommunications network capable of carrying a video dial tone, said the 5% limit did not provide the incentive they need to upgrade their facilities.

In other action, the commission invited public comment on its plan to allocate space in the radio spectrum for new pocket telephones and wireless, hand-held computers.