Groups to challenge telecom law in court

By Fred W. Weingarten
CRA Staff

After languishing in conference committee for several months, the Telecommunications Act of 1996 passed Congress and was signed into law by President Clinton a few days later. The president and vice president extolled the importance of the bill, both as a mechanism for unlocking investments in a new advanced information infrastructure and as a major jobs creator.

To the dismay of many in the Internet user and service provider communities, content controls imposing severe criminal penalties were included in the bill. The amendment's wording and form did not change substantively from the version that distressed many proponents of free speech. Clinton and Gore were silent on this issue in their initial statements. The president did applaud the so-called "V-chip" provision mandating that television sets be produced with technology that allows people to screen out violent programs.

Civil liberties and other public interest groups, publishers and writers began filing petitions to federal courts asking for an injunction against enforcement of those provisions and an immediate court review of their constitutionality.

It was apparent the bill contained a lot that the president wanted in the form of regulatory reform, and, thus, he would sign it. Some civil liberties groups hoped he would at least express concern about the restrictions and that a court would overturn the content controls. The groups now say they expect the Justice Department to defend the restriction vigorously and aggressively in court.

Given the complexity and the controversy that have swirled around the bill since it was submitted in January 1995, the margins of victory were very high and bipartisan: 414-16 in the House and 91-5 in the Senate. This consensus was probably due to a combination of factors, not least of which must have been the strong desire on the part of both the White House and Congress to demonstrate a major legislative accomplishment before primary elections began.

The Senate and House passed markedly different versions of the bill in the spring and summer of 1995, respectively. Since then the legislation has been the subject of endless conference meetings, as congressional staff members and their bosses negotiated over sometimes fundamental differences in language and approach. Lobbying was intense. The bill rearranges the markets and roles of an information and communications industry sector whose markets approach $1 trillion.

In December movement was halted when Senate Majority Leader and presidential candidate Robert Dole (R-KS) opposed the free allocation of spectrum for broadcasters to provide high-definition television service. House leaders stated they were happy with the bill as it stood and had no intention of changing it. Congress watchers began to think the bill might unravel.

The issue was straightforward. In recent years, the government has increasingly allocated spectrum for commercial use through auction. Economists like it because, in their view, it leads to efficient use of the spectrum. Politicians like it because it raises funds in an era of budget cutting.

Dole's objection was on fiscal grounds. He pointed to estimates that the economic value of the spectrum, if auctioned, was tens of billions of dollars. Why, in these days of budget cutting, is Congress giving away such a valuable public resource? he asked.

House negotiators were firmly opposed to auctioning the spectrum to broadcasters. Commerce Committee Chair Thomas Bliley Jr. (R-VA) said the provision was not a "giveaway," because the government was "loaning" the spectrum for transition purposes.

Unexpectedly, Dole retreated from direct opposition to the bill, although he still expressed doubts during floor debate. Whether this had anything to do with the state of his presidential campaign is an open question.

It is hard to characterize the 200-plus-page bill, especially because it was not published and distributed before the vote. Basically, it is an attempt to modernize and strip down a 75-year accumulation of regulations and procedures for deciding who can provide what service, under what terms and for what price. Much of the bill's language is a detailed exposition of which companies will be freed up to do what and when.

For instance, the bill ends federal regulation of cable television in three years and allows regional telephone companies that meet certain criteria to offer long-distance services. It goes on in a similar vein through dozens of more specialized and general telecommunications services.

The end result inevitably represents political compromise much more than rational economic and market analysis, and economists differ on how the compromises will work out. Most agreed it was time to try something--inaction threatened to leave the communications industry increasingly bogged down in a morass of outdated restrictions and regulatory procedures. The hoped-for outcome is greater competition and, as a result, lower prices and faster innovation.

Many consumer and other public interest groups have been more skeptical. They worry that decreased regulation will lead to further concentration and market domination by a few very large firms. The recent wave of mergers and buyouts in the communications and information industry may lend some weight to the concern. Similarly, the argument that this is a "jobs" bill rang a little hollow, coming as it did on the heels of another major wave of layoffs in the telecommunications sector.

The bill contains a few provisions that had been promoted by public interest groups. Most notable is an amendment establishing a system of "preferential rates" for connectivity to educational institutions, libraries and other groups.

The bill contains provisions for universal service, although it ducks the key issue of what the term means for an advanced infrastructure.

In general, the act constitutes a major revision of the country's telecommunications laws. To be sure, Congress has not heard the last of telecommunications policy.