A NEW ERA IN TELECOMMUNICATIONS : Q & A : Instant Help for Industry : But How Will the Reform Bill Affect Consumers?
Congress on Thursday passed a sweeping measure to rewrite the nation’s telecommunications laws. The bill will have a major and immediate impact on the communications industry, though the fallout for consumers will be more gradual.
Q: Why are legislators and industry officials so enthusiastic about the telecom reform bill?
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A: By removing regulations and allowing phone and cable companies into one another’s markets, the legislation is supposed to dramatically increase competition in phone and TV services. That in turn should result in lower rates and more choices for consumers and businesses, at least in the long run, and boost the productivity of the entire economy. Communications companies are poised to invest billions of dollars to enter new markets and create new services.
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Q: If it’s so great, why was there so much controversy over this bill?
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A: Although nearly everybody agreed the nation’s antiquated telecommunications regulations needed to be overhauled, each industry--especially local phone, long-distance phone, cable television and broadcasting--lobbied aggressively to protect its own markets while seeking easier access to other markets. In addition, many consumer groups fear deregulation will bring higher prices for cable TV and local phone services. Civil libertarians are furious about provisions that ban transmission of “indecent” material over the Internet.
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Q: Is this the final version of the bill?
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A: Yes. President Clinton is expected to sign it into law shortly. However, congressional leaders who were unhappy with certain provisions vowed to introduce follow-up legislation on several key issues, including whether television broadcasters should be required to pay for a broadcasting spectrum that’s been promised to them for the introduction of high-resolution digital television technology.
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Q: How will the bill affect me?
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A: Not greatly in the short run. However, cable TV subscribers in rural areas will probably see some immediate price increases. As competition develops in the next few years, consumers will eventually be able to choose a local phone company much as they now choose a long-distance company, and big communications conglomerates will probably begin marketing complete packages of local and long-distance phone service, cellular service and cable TV or satellite television service.
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Q: What about the provisions on Internet pornography and television sex and violence?
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A: The bill makes it illegal to transmit “indecent” material over computer networks unless steps are taken to keep it out of the hands of children. Civil libertarians are outraged over this provision, contending it is unconstitutional and will stifle discussion of subjects such as abortion and unreasonably restrict adult conversations. Legal experts say there is a good chance this provision will be blocked by the courts before it can take effect.
The so-called V-chip provision gives the TV industry one year to develop a ratings system that will electronically label programs with explicit sex and violence, and if they can’t agree in that time, the Federal Communications Commission will impose a system. Starting two years from now, new TVs will be required to include a special chip that will be able to read the rating labels and block out particular programs.
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Q: Whose cable rates will go up?
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A: Cable companies that serve fewer than 50,000 people in any given market--about 20% of the nation’s systems--will be free to raise prices immediately. Other cable companies can raise their prices after three years. Local phone companies will face fewer regulatory barriers to raising prices.
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Q: Won’t competition keep prices down?
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A: Yes, but it could take years for vibrant competition to emerge in many areas, especially poor and rural regions. Some critics argue that since cable and telephone companies will be allowed to own as much as 10% of each other, they could join forces to avoid competition even in major metropolitan areas.
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Q: When will the local Bell companies be allowed to start offering long-distance service?
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A: That’s the billion-dollar question. Under the bill, each Bell company is required to pass a list of tests showing it faces competition in its local markets before it can offer long-distance. The tests include a requirement that a Bell face at least one competitor that owns its own phone lines and other facilities, and the FCC will have to certify a Bell’s long-distance plans are in the public interest. Some Bells say they could be offering long-distance service in as little as nine months if all goes well.
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Q: How will local phone competitors get their networks built so quickly?
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A: They won’t. But most local competition at first will be from companies that buy network capacity wholesale from the Bells and resell it. The Bells are required to sell wholesale, although the pricing will be a major point of contention. In some states--though not in California--there’s already competition in providing local phone service for business customers.
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Q: Is this the end of all the bickering over phone competition?
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A: No. Although the broad ground rules are now set, a host of highly complex but important details still must be worked out by federal and state regulators.
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Q: What does all this mean for corporate America and Wall Street?
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A: A frenzy of deal making is likely to break out in the communications industry. Baby Bells will seek mergers with one another and alliances with long-distance and TV companies. Long-distance firms might well link up with cable companies as a way to get into local markets. Large broadcasters will buy more properties now that restrictions on media concentration have been eased. Communications equipment vendors are already seeing their stocks rise as investors anticipate a wave of new investment in networks.
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Q: Will all this speed deployment of new services, like interactive television and Internet access?
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A: Maybe. This is a key goal of the bill. But some new services require enormous investment for uncertain returns, and many companies--including Pacific Bell--have been pulling back. In the short run, the big players are likely to be more concerned with deal making than innovation.
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Q: What will be the impact on the entertainment industry?
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A: Competition should mean more outlets for movies and TV programs as phone companies begin offering video services. But it may also increase the power of entertainment firms that are tied to one of the major media conglomerates.
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Q: If big media firms get even bigger, will they gain too much control over the information and programming we have access to?
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A: That’s not clear. There will certainly be consolidation as broadcast networks are allowed to own TV stations that reach 35% of all viewers, up from 25% under current rules. But much will depend on how the FCC uses its power to waive current regulations that prevent common or multiple ownership of newspapers, TV stations and cable networks in the same market. Some contend that new media such as the Internet render the whole concentration issue moot, but others still fear a media world ruled by half a dozen global conglomerates.
* LOGJAM ENDS
Congress approves reform law. A1
* LONG FIGHT
The bill represents a major shift in public policy. A1