Bill to Overhaul Phone Industry Dies in Senate

A hotly debated measure to overhaul the nation’s telecommunications laws died in the Senate on Friday, dealing the Clinton Administration another domestic policy blow and possibly delaying introduction of new telephone and cable services.

The House earlier this year passed a telecommunications reform bill by an overwhelming margin, and until a few weeks ago many observers had expected the Senate to pass a bill this year.

The legislation, designed to introduce competition into telephone and cable television markets still controlled by monopolies, would have marked the first comprehensive reform of communications law in 60 years.

Local phone companies would have gained broad authority to offer cable TV programming, while cable TV companies would have been permitted to offer telephone service in all states--though consumers would not have seen such services develop for several years. The powerful regional Bell telephone companies, such as Pacific Telesis, would have been allowed to offer long-distance telephone service.

There is general agreement that reforms that would spur competition are desirable in an age of rapidly advancing technology: They would create incentives for industry to invest billions of dollars in new facilities and services and eventually give consumers more choices and lower prices.

But there has for years been intense controversy over which markets should be opened to competition first and under what conditions. Senate Commerce Committee Chairman Ernest F. Hollings (D-S.C.) spent much of the summer trying to broker a compromise among the many warring factions, but he said Friday that time had run out for this year.

“We will be unable to pass comprehensive telecommunications reform legislation in this Congress,” said Hollings, angrily blaming the bill’s failure on obstinate regional Bell companies and partisan opposition from Senate Minority Leader Bob Dole (R-Kan.).

The Bell companies, local telephone companies that were until 1984 part of AT&T;, are eager to provide long-distance phone service in competition with AT&T;, MCI and others. But they objected to provisions in the Senate bill that would have kept them from offering such services until competition developed in the local phone business, and they were also concerned about competition from cable.

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The Clinton Administration, which has made the development of an advanced information infrastructure a major part of its agenda, said it would continue to push for deregulation of the telecommunications industry through regulatory and other means.

“It’s a setback,” said Larry Irving, assistant secretary at the National Telecommunications and Information Administration. “The regulatory certainty that would have driven investment won’t be there. But the Information Highway is going to be built.”

“Sooner or later Congress will pass legislation that memorializes the clear, irrevocable commitment to competition in all communications markets,” added Federal Communications Commission Chairman Reed E. Hundt, speaking to an industry conference in Seattle via satellite from Tokyo.

Irving joined Hollings in blaming the Bell companies for their intransigence. “You don’t need any forensic evidence to know who killed this bill,” Irving said. “They played a bait-and-switch game, cutting a deal then coming back for something else. You can understand Hollings’ frustration.”

“I don’t want to sound corny but the biggest losers are probably the consumers,” said Stephen Yanis, telecommunications analyst for Kidder Peabody. “Any of the versions (of the bill) would have led to more services and lower prices.”

The telecommunications revolution won’t grind to a halt. Many states already permit the type of competition that the federal legislation would have mandated. Phone companies are already improving their networks so they can offer such services as two-way television. Many cable companies are preparing to offer local phone service. And the Bell companies hope to gain entry into the long-distance business through the courts if they can’t get there through Congress.

But change will likely come more slowly now. “There are 40 states that prohibit competitors in the local exchange,” said Gerald M. Lowrie, senior vice president of AT&T; and the companies chief lobbyist. “Without requirements for them to open up we’ll have to slug it out (state by state). It will be a sluggish process.”

A key difference between the House and Senate versions of telecommunications reform was a Senate provision that would have required Bells to offer “dial parity” before being allowed into the long-distance market. That means customers would be able to switch from their local phone company to a competitor without changing telephone numbers.

Hollings accused Bell companies of lack of faith for jointly agreeing to central features of the bill and then turning around and pushing for further changes. BellSouth and Ameritech, in particular, sent letters to their shareholders or employees criticizing the legislation. Hollings said the rush of proposed amendments could not be handled before the Oct. 7 adjournment.

Hollings also blamed Dole for being unwilling to allow the bill to move forward without substantial, “non-negotiable” revisions.

Ronald Stowe, vice president of Washington operations for Pacific Telesis, the parent company of Pacific Bell, denied the Bells had blocked the bill. Rather, he said, they had sought compromise, adding that the chief executives of seven Bell companies were meeting with Dole to persuade him to reach a compromise when they heard of Hollings’ decision.

The Bells’ objections were not to the long-distance provisions, Stowe said, but to provisions that would allow cable companies to begin offering phone service one year after the law passes without immediately allowing phone companies to enter the cable industry.

The irony of blaming the Bell companies for the bill’s failure, said Stowe, is that the Bells are the big losers. “The long-distance companies can get into local services if they get approval from the states,” he said. “We can’t get into long distance without legislation.”