Partisan Politicking Threatens Telecom Reform : Congress: Reports of Baby Bell merger talks underscore bill’s importance. But a final bill before holidays seems unlikely.

An ambitious effort to rewrite the nation’s telecommunications laws has unexpectedly evolved into a partisan issue in recent days, making it increasingly unlikely that Congress will be able to produce a final bill before the Christmas holidays.

Republican and Democratic conferees trying to stitch together separate House and Senate telecom bills overcame an important sticking point last week when they tentatively agreed on rules for Baby Bell entry into the long-distance business. But they are now locked in a bitter battle over media concentration rules, and that has transformed what had long been a nonpartisan issue into an ideological struggle.

The consequences of enacting--or failing to enact--a new telecommunications law were underscored Monday by a Wall Street Journal report that Bell Atlantic and Nynex--the Baby Bells that serve the mid-Atlantic states and the Northeast, respectively--are engaged in merger talks. Such discussions have been rumored ever since the two companies merged their cellular telephone businesses earlier this year.

Such a merger will be possible only if the telecom bill passes. Indeed, if the legislation is enacted, a veritable frenzy of mergers and takeovers is expected to sweep the telephone, television and radio industries. Baby Bells might merge with one another, or with long-distance or cable companies in the wake of legislation that clears away many of the barriers that bar such companies from competing in one another’s markets.

The bill would also lift many long-standing limits on how many media outlets a single company can own. And many Democrats, including President Clinton, are fighting efforts by House Republicans to loosen those rules even further.

House Republicans want to do away with cable TV and broadcast cross-ownership rules and allow broadcasters to own more than one TV station in a single market and own a group of stations that reach more than 35% of American households. Their proposal goes beyond provisions in both bills that call for a more modest relaxation of the media concentration restrictions.

Sen. Ernest F. Hollings (D-S.C.), who is regarded as the Clinton administration’s voice on the conference committee, is leading Democratic resistance to the media concentration proposal. He did not attend a conference committee meeting Friday and skipped the weekend strategy sessions as well.

“The overall atmosphere is getting nastier and nastier,” said one administration official. “I don’t know whether it’s because of the budget [dispute] or something else,” he added, but the House Republican leadership now appears much less flexible.

House Republican leaders huddled late Monday to find a way around the opposition of Hollings and the White House. House Telecommunications Subcommittee Chairman Jack Fields (R-Texas) said House Republicans are expecting a counterproposal today from the Senate on the media concentration issue. Hollings’ aides were closed-mouthed Monday about how receptive the senator might be to a compromise.

“They’ve said they are concerned about undue media concentration, and we’ve tried to address that,” an agitated Fields said, adding that House Republicans have proposed a two-year moratorium on last week’s proposal to allow the Federal Communications Commission to authorize broadcasters to exceed the 35% audience cap on a case-by-case basis. Current rules limit broadcasters to stations serving 25% of the population, but the House and Senate have both agreed to lift that to at least 35%.

“In this world of cable and telephone companies and wireless cable” and satellite- delivered video services, “it’s difficult to make an argument the media is going to be more concentrated. I just think all of [the Democrats’] arguments now are just phony,” Fields said.

But many Democrats and public interest groups believe excessive media concentration would limit diversity in news and entertainment, raise prices for consumers and create an undeserved windfall for media moguls such as Rupert Murdoch and Ted Turner.

Clinton has threatened to veto any telecom reform legislation that goes too far in allowing further media concentration. That threat has given Republicans a strong incentive to reach an accommodation with Hollings and other Democrats on the conference committee--even though their assent is not strictly necessary to get a bill out of Congress.

Some industry sources said the Republicans, convinced they have the votes in the House, are committed to putting the telecom bill up for a conference committee vote this week no matter what.

“They seem to be thinking that maybe Hollings and the president are bluffing” in their opposition, said a Washington lobbyist for the broadcasting industry.

And some Wall Street analysts still believe legislators will succeed in a last-ditch effort to get a bill this year. Betty Massick-Columbo, an analyst for Bear, Stearns & Co. in New York, put the probability of a vote before year-end “at 60%; up from less than 50% 10 days ago.”

But others are much less optimistic and fear that if no action is taken before the holidays, interest groups that oppose the bill--including the long-distance telephone industry--will have time to chip away at the many delicate compromises that have already been reached, and thus undermine the legislation’s chances of succeeding next year.

In the last session of Congress, a House telecom bill passed overwhelmingly and was headed for enactment but ran aground when a companion Senate measure failed amid bickering between the Baby Bells and long-distance carriers. There was bipartisan enthusiasm for telecom reform again this year, until the White House and Republican party leaders began drawing a line.

“In the whole modern history of telecommunications reform, I’ve never seen it more politicalized than it is now,” 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.