Panel Agrees on Baby Bells’ Expansion Into Long-Distance : Telecom: Conferees overcome a key stumbling block on the road to reform legislation.

Closing in on final approval of a sweeping telecommunications reform bill, key House and Senate negotiators agreed late Thursday on rules that would allow regional Bell telephone companies to quickly enter the lucrative long-distance business.

The conditions governing Baby Bell participation in long-distance have long been the major stumbling block in efforts to reform the nation’s 61-year-old telecommunications laws. But the deal reached Thursday night still must gain the endorsement of key Democrats--and conferees have yet to resolve differences over issues such as media concentration and indecency on the Internet.

Supporters of telecom reform were hopeful that House and Senate conferees, who are trying to reconcile differences between the bills passed by the two chambers, could complete work on the landmark legislation by the end of next week. The bill aims to spur competition in the telecommunications industry by granting telephone and cable TV companies freedom to enter new markets.

But South Carolina Sen. Ernest F. Hollings, the ranking Democrat on the Senate Commerce Committee, whose views are close to those of the White House, has yet to sign off on the long-distance compromise, sources said. And President Clinton has indicated that he may veto the bill if the provisions on long-distance, media concentration and several other issues are not to his liking.

Hollings--and the White House--want House conferees to withdraw or significantly modify an amendment that House conferees offered Wednesday that would do away with the cable TV and broadcast cross-ownership rules, allow broadcasters to own more than one TV station in a single market and allow them to own a group of stations that reach more than 35% of U.S. households. Currently, both the Senate and House bills limit audience reach to 35%.

Observers say Hollings has withheld his support on the long-distance issue to strengthen his hand in the coming bargaining over media concentration.

Exhausted and dejected consumers groups and long-distance industry officials last night said they held out little hope that Thursday’s deal on Baby Bell entry into long-distance would be modified.

“This is very troublesome,” said Gene Kimmelman, co-director of the Washington office of Consumers Union. “I know the long-distance people are very unhappy. . . . This is being characterized as a [Baby Bell] victory.”

Consumer advocates fear that if the Bells get into long-distance before there is genuine competition in local phone service, they will gain an unfair advantage and neglect their local-service responsibilities.

Sources said the long-distance compromise adopts language from the House bill that would require regional Bell operating companies to face competition in their local phone markets from rivals that actually owned and operated their own phone networks, as opposed to simply reselling services purchased wholesale from the Bell.

The deal also incorporates elements of the Senate bill, including a requirement that the Federal Communications Commission certify that a move by a Bell company into long-distance is in the public interest. That requirement is stiffer than what the Bells had lobbied for but more lenient than what the long-distance firms wanted. And it falls far short of the Justice Department overview of Baby Bell long-distance activities that some had advocated.

Conferees also agreed to strike a provision in the House bill that would have made it more difficult for long-distance companies to compete in the toll call market.

The conference committee discussed meeting Saturday to resolve the remaining issues, paving the way for final congressional approval before Christmas. But committee aides were not optimistic they could get members to convene over the weekend.

Repeated efforts to pass telecom reform legislation have never before reached resolution on the contentious issue of the Baby Bells’ entry in the long-distance phone market, which they have been barred from since the breakup of AT&T; in 1984.

* INDECENCY ISSUE

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