THE TELECOM REFORM BILL : A Double-Edged Sword : IMPACT ON CONSUMERS : Public Could Be Pushed Into Era of Uncertainty

The massive telecommunications bill tentatively agreed upon by congressional leaders and the White House on Wednesday would bring consumers more choices, an array of sophisticated new communications technologies and, in some cases, lower prices.

But it would also push residents willy-nilly into an era of uncertainty where service, price and quality could depend on how big a customer you are and where you happen to live.

And consumer activists worry that during the transition period when regulations have been phased out but true competition has not yet developed, many customers would face higher prices for telephone and cable televisions services.

Clearly, there is considerable potential for huge improvements in the range and quality of communications services available to consumers. The entry of the Baby Bells, long-distance phone companies and cable companies into one another’s markets would probably push down costs and increase the availability of services in many metropolitan areas, at least in the long run.

“I like the idea of AT&T; competing locally and Pacific Bell competing nationally,” said Eli Noam, a Columbia University telecom expert. “More competition will force everybody to be more efficient and innovative.”

Kitty Bernick, director for federal telecom legislation at Pacific Bell, said the company’s ability to enter new markets would bring huge productivity gains. “We can build a more efficient network if we can also offer long-distance. And we’ll be able to offer cellular at lower prices.”

Telephone companies also promise to offer cable service far superior to that offered by monopoly cable companies today. That could mean better picture quality, a better choice of programming and lower prices.

In the short term, though, many believe consumers would lose because of the new freedoms being given to large monopolies to raise rates.

“Consumers are going to come out worse,” said Bradley Stillman, telecom analyst at the Consumers Federation of America.

Price regulation of cable rates would end immediately in towns with populations of less than 50,000 and in 1999 in the rest of the country. With most cable companies still in monopoly control of their markets, deregulation could double or triple cable rates, as it did when rates were temporarily deregulated several years ago.

While the bill contains language designed to ensure that basic phone service is universally available at reasonable rates, consumer advocates said there are loopholes that could allow phone companies to chip away at those services.

And if you are among those who believe that a diversity of media voices is important to democracy, you may be disappointed. Big broadcasters would be able to own stations that reach 35% of the population--up from 25% today--and restrictions on radio station ownership would be sharply reduced.

“The bill would allow unprecedented concentration across all lanes of the information superhighway,” said Lee Selwyn, a telecommunications consultant to consumer groups.

Still, the elimination of artificial distinctions between phone, cable, computer data and broadcast systems could result in a more rapid proliferation of new technologies and the development of powerful networks.

Today, for example, Pacific Bell has little incentive to cut prices for such special services as high-capacity telephone lines that can offer Internet enthusiasts high-speed links to the Internet’s World Wide Web. Competition from long-distance providers and cable companies could change that.

Proponents of deregulation talk of an age when a multitude of voices will make media concentration a moot issue. Technically, anybody would be able to establish an online magazine, newspaper or even television news program.

The problem, said consumer advocates, is the long period between the time the bill is signed and the day competition ushers in this new utopian era of high-tech choices.

“We’re very concerned about the transition,” said Jeffrey Chester, analyst at the Center for Media Education, a public interest watchdog. “They are knocking down five decades of safeguards against media concentration and they aren’t creating new 21st century safeguards.”

A rush toward greater concentration of media companies could give a few large corporations powerful control over the news and media content viewed by the average consumer. And the merger frenzy likely to follow passage of the bill would be a major distraction for companies that might otherwise be focused on new products and services.

On the telecommunications side, consumer groups worry that phone companies, such as Pacific Bell, will squeeze regular ratepayers to subsidize entry into new businesses such as cable.

Despite the massive volume of detail in the new bill, important points would still have to be resolved by state utilities regulators and the Federal Communications Commission.

Although rate hikes and other key issues of concern to consumers would still come before the California Public Utilities Commission, the commission has already shown itself friendly to Pacific Bell on many issues--and the bill shifts much authority to the FCC.

Consumer advocates worry that a host of other issues will be determined by federal bureaucrats with little concern about local issues.

And state regulators have protested provisions in the bill that drastically reduce their authority.

But not everyone believes that local control is so critical.

That isn’t necessarily so, said Don Vial, a former California PUC commissioner who now works with community groups.

“The market system left to itself will build economic and social redlining into our telecommunications system,” Vial said. He suggested that incentives be put in place that encourage phone companies to develop advanced communications systems for such community needs as health care, education and job placement.

Added Vial: “The real question is how do you influence the investments of the big dominant carriers.”

More Telecom Coverage:

* Congressional negotiators tentatively OKd a broad telecom reform bill. A1

* Companies are itching to make deals to create multimedia empires. D2