Panel Considers Changing Phone Reform Measure : Legislation: There is tentative agreement on alterations that would make the telecom bill more consumer-friendly.

A congressional panel is considering significant changes in a pending telecommunications reform measure to appease President Clinton and other Democratic leaders who want a bill that is friendlier to consumers.

Participants in delicate negotiations between the White House and staff members of a 42-member House-Senate conference committee have tentatively agreed to permit less concentration of media ownership than the House-passed version of the measure would allow. And they have proposed to narrow the seven regional Bell telephone companies’ ability to offer long-distance service.

Consumer groups and long-distance companies are cheered by the prospect for changes in legislation that currently bears the imprint of powerful cable and local phone company lobbyists. But they caution that the final language of the sweeping reform measure, which would free the telephone, cable and long-distance industries to compete in one another’s markets, remains uncertain.

“There have been some positive discussions, but the ink’s not dry yet,” said Brian Moir, a Washington lawyer and lobbyist who represents a coalition of business groups seeking to delay the Baby Bells’ entry into the long-distance market until there is local phone competition.

The discussions, which have centered on permissible levels of phone company ownership of cable systems as well as on the kinds of tests phone companies must pass before being allowed to enter the lucrative long-distance market, come a month after Clinton released a letter attacking key provisions of the measure and saying it must be significantly changed to win his support.

Clinton objects to a number of elements of the bill on the grounds that they would allow too much concentration of ownership in the media industry and in effect enable the regional Bells and the cable industry to stifle competition at consumers’ expense.

According to industry lobbyists and sources close to the committee, the conference committee staff working on a final version of the bill has settled on Senate language that would bar local telephone companies from acquiring more than 10% ownership or any “management interest” in a cable company in the same market. That same restriction would apply to cable companies’ investments in local phone carriers.

The more flexible House version of the bill would allow telephone companies and their affiliates to acquire up to 50% of a cable system in their service area. It would also allow them to buy all of some rural systems.

The staff, meeting nearly every day since late October, has also indicated that it wants to define more specifically the kind of competition local phone companies must face from a rival before being allowed into the lucrative long-distance market.

A House proposal last week would require the Baby Bells to face one or more local rivals with telephone facilities serving both residential and business consumers before they could plunge into long-distance service.

Sources say staff members have not yet resolved whether a Baby Bell that met that test would be free to compete in long-distance only in the individual market where it faced facilities-based competition or in its entire service area.

But one source close to the committee said several staffers had indicated a preference for the narrower definition. Such a change would be a major victory for the Clinton Administration.

The White House has been seeking much broader changes than those tentatively agreed to thus far. The committee staff remains bitterly divided on most other remaining issues, including cable pricing, regulation of cyberporn and changes in media cross-ownership rules.

And there is no indication that there has been any move to address Clinton’s biggest objection to the legislation: that it does not yet include a test specifically designed to ensure that the Baby Bells entering into long-distance markets will not impede competition.

Nevertheless, the moves thus far toward appeasing the President have alarmed some local phone company officials, who have spent millions of dollars in a generally successful lobbying effort to make the legislation favorable to their interests. One vowed that the changes will never see the light of day.

Sources say the turnabout for the White House has been engineered in large part by Sen. Ernest F. Hollings (D-S.C.), the ranking minority member of the Senate Commerce Committee.