House Rewrites Phone, Cable Rules : Communications: Bill to ease ‘Baby Bell’ restrictions and let telephone firms deliver TV shows passes almost unanimously. Measure’s fate in the Senate is uncertain.

Ending years of delay and deadlock, the House on Tuesday adopted landmark legislation that rewrites the rules governing the communications industry, paving the way for an era of reduced regulation and increased competition among telephone companies and cable television operators.

Lawmakers from across the ideological spectrum joined in support of two companion bills that represent the most fundamental change in federal rules for communications firms since the depths of the Great Depression.

But the legislation faces an uncertain future in the Senate, where long-distance telephone companies are expected to mount a spirited attack. The House bills sweep away the rules that bar the big local telephone firms--known as regional Bell operating companies--from providing long-distance services and manufacturing equipment.

At stake is the future of a $300-billion industry that is in the midst of a technological upheaval, one that has made it possible for phone companies, cable operators, satellite manufacturers and even two-way radio operators to offer similar services.

“By removing barriers that protect industries from each other, the bill will force companies to be more aggressive about defending their markets and moving into others’ markets,” says Eli Noam, director of Columbia University’s Institute for Tele-Information.

Regional phone companies have promised to spend billions of dollars on new fiber-optic cables and other equipment if they are allowed to compete openly with long-distance providers and offer cable television services. The Clinton Administration has made the development of an advanced telecommunications infrastructure--which will potentially make a host of new information services available to every home--a major political priority.

“This is going to build the information superhighway,” said Rep. Michael G. Oxley (R-Ohio), and Rep. W. J. (Billy) Tauzin (D-La.) said: “The consumer is the big winner today.”

Although the legislation sailed through the House with near-unanimous support, the expected battle in the Senate could prevent final passage of any legislation this year. Sen. Ernest F. Hollings (D-S.C.), chairman of the Senate Commerce Committee, predicted quick approval of his own, different bill in the Senate after the 4th of July recess, setting the stage for Senate-House negotiations on a compromise version before Congress quits for the year in October.

In the House, Democrats and Republicans united in praising a breakthrough agreement between two powerful barons, Rep. Jack Brooks (D-Tex.), chairman of the Judiciary Committee, and Rep. John D. Dingell (D-Mich.), chairman of the Energy and Commerce Committee.

They resolved their lengthy jurisdictional dispute and agreed on a bill that would rewrite the judicial consent decree that broke up the Bell telephone system 10 years ago, giving birth to the seven “Baby Bells” but barring them from long-distance service or manufacture of phone equipment.

This measure, approved 423 to 5, would allow the Baby Bells greater freedom to provide long-distance service and to produce equipment, subject to Justice Department supervision.

Although few Bell companies are expected to become major manufacturers, all are eager to tap the $70-billion long-distance market. Bell company-backed studies say competition in that market could save consumers $30 billion over a 10-year period as a result of lower phone rates--but long-distance carriers say the Bell companies will have an unfair advantage by virtue of their control over local circuits.

A second bill, approved 423 to 4, would force local telephone companies to make their phone lines available to rival firms, thus setting the stage for competition in the local phone business. The bill will also allow phone companies to provide television programming by wire, competing with cable operators.

Phone companies say they need to have a stab at the $21-billion cable television business if they are to justify spending huge sums to extend high-capacity lines to every home.

Underscoring the lack of opposition, the two bills were put on the fast-track “suspension calender,” which required a two-thirds vote of the House for passage and barred any amendments.

“This is the most comprehensive telecommunications legislation brought to the House floor in 60 years,” said Rep. Edward J. Markey (D-Mass.). He alluded to the Federal Communications Act of 1934, which established a regulatory system that existed for 50 years before a federal court ruling broke up the virtual monopoly enjoyed by the old American Telephone & Telegraph Co. and its subsidiary operating companies.

House Majority Whip David E. Bonior (D-Mich.) and his Republican counterpart, Rep. Newt Gingrich of Georgia, showed rare agreement in praising the legislation as a job-creating bill that demonstrated the value of bipartisanship.

The regional Bell firms hailed the House action. Pacific Telesis Vice President Ronald F. Stowe said the legislation represents “a dramatic step toward ensuring that all Americans will benefit from the new age of advanced communications,” by bringing significantly lower prices.

Pacific Telesis has announced plans to spend about $5.3 billion to link 5.5 million California homes with broad-band networks by the year 2000 but has warned that failure of the Legislature to act could result in scaled-back plans.

Under the Brooks-Dingell bill, the Baby Bell companies would be allowed to engage in manufacturing activities and long-distance services within a year after the law is enacted, subject to approval by the FCC and the Justice Department.

Similarly, the Bell companies would be allowed to provide long-distance services within a state, subject to state approval, with the Justice Department retaining the ability to challenge these services if it finds they are anti-competitive. The California Public Utilities Commission has stated its intention to allow such competition.

The regional Bells could offer interstate long-distance only if the FCC and the Justice Department certified that they would not hinder competition.

Long-distance operators point out that it could be many years before real competition exists in the $90-billion local phone exchange business and insist that the Bells should be regulated to allow such competition to develop.

“As long as the Bell companies still have a monopoly in local telecommunications, they will have the power to abuse customers and competitors alike,” MCI said. Officials at MCI and AT&T; are looking for the Senate bill to set a far stricter standard on allowing the Bells to enter the long-distance market.

The House bill also would establish rules for Bell companies to provide electronic publishing services, such as the sale over telephone lines of news, financial reports and public records, with the rules scheduled to expire in 2000.

Under the proposal, the Baby Bells could provide electronic publishing only if they did so through a separate affiliate or a joint venture, without any joint sales, advertising or marketing activities with the affiliated organizations.

The other bill, sponsored by Markey and Rep. Jack Fields (R-Tex.), would require that local phone companies allow competitors--such as cable companies--access to their telephone lines. It also would override state and local laws or regulations that ban or restrict local telephone competition.

Telephone companies would be allowed to operate cable television systems--but not permitted to buy existing cable companies in their service areas. Similarly, cable firms would be allowed to enter the telephone business.

Eaton reported from Washington and Helm from Seattle.

Trying to Open the Market

The House passed two measures that radically change the way telecommunications services are regulated. The bills alter the Communications Act of 1934 and eliminate restrictions on the regional Bell operating companies that were imposed by the consent decree governing the 1984 breakup of AT&T.;

BROOKS-DINGELL BILL

* Permits regional Bell operating companies to provide long-distance telephone services. Services needed to provide audio and video programming and wireless services would be permitted immediately. Intrastate long-distance services would be permitted if the state approves and the Justice Department does not object. Interstate services would require FCC and Justice Department approval.

* Permits Bell companies to manufacture telecommunications equipment, provided the Justice Department does not intervene.

* Permits Bell companies to provide electronic information services over their own networks but only through separate subsidiaries.

* Bars Bell companies from using telephone account information to market other services.

MARKEY-FIELDS BILL

* Opens local telephone service to competition by requiring local phone companies to offer network connections to competitors, including cable television companies. Also overrides many state and local laws that forbid local phone competition.

* Permits telephone companies to provide cable television services through separate subsidiaries but bars phone companies from buying existing cable systems within their service areas.

* Establishes a federal/state board to develop ways to assure low-cost phone service for the poor.

* Requires FCC to review current restrictions on the number of radio and television stations any one person may own.