A NEW ERA IN TELECOMMUNICATIONS : A New Set of Rules

After years of tortuous legislative battles and high-powered industry lobbying, Congress on Thursday gave final approval to a historic measure to overhaul the nation’s telecommunications laws. The bill, which President Clinton is expected to sign, is designed to spur competition among local and long-distance telephone companies, cable operators and otherproviders of communications services. In principle, such competition will lead to new services and lower prices, though many public interest groups fear it will bring higher prices in the short run. Here are the main provisions of the legislation:

Phone Competition

At the heart of the bill are provisions that will allow the regional Bell operating companies to offer long-distance telephone service for the first time since they werecreated by the 1984 breakup of AT&T.; At the same time, all local telephone markets will be thrown open to competition. The so-called Baby Bells will be allowed to offer long-distance service within their regions only after they face competition in their local markets. The bill includes a series of tests for determining when adequate local competition exists, and the Federal Communications Commission has the power to determine whether Baby Bell entry into long-distance is in the public interest, but most Bells are expected to gain entry fairly rapidly. Long-distance companies such as AT&T; and MCI are expected to move aggressively into the local phone business as the Bells move into long-distance. All companies are expected to begin offering packages of local, long-distance, wireless and television services.

Cable and Video

Phone companies would be able to offer video services in their own markets but would not be permitted to buy cable companies in the same market. Cable companies are expected to seize new opportunities in providing local phone service. Cable rate regulations will remain in place forthree more years, although some rural cable operators will be able to increase prices immediately.

Media Concentration

Long-standing limits on the number of media properties a single company can own will be loosened. Broadcasters will be allowed to own TV stations that reach 35% of all viewers, up from 25% under current rules. Limits on ownership of radio stations will be eased modestly, with further loosening likely to come from the FCC. Rules barring simultaneous ownership of broadcast TV and cable TV properties will be eliminated.

Sex and Violence

New rules will ban the transmission of “indecent” material over computer networks unless controls are in place to keep it out of the hands of children, with violators subject to felony charges and up to five years in prison. The television industry will be required to develop a ratings system and a special chip that will be included in new TV sets to allow consumers to block out violent or sexually explicit programming.

Consumer Impact

For residential telephone consumers, deregulation will produce more choices for local and long-distance service over the next several years. Local phone prices will probably rise modestly in the short term as long-distance prices fall. Big companies will begin offering packages including a full range of phone and TV services. In television, consumers will eventually enjoy more alternatives to the local cable company, although they might also face higher cable prices. In the long run, the bill is supposed to spurdevelopment of a host of new services such as interactive television and video-on-demand. Critics of the bill say increased media concentration could eventually reduce diversity in radio and television.