IP: Two years after big telecom bill: Promises unfulfilled (from

[Dave Farber <farber () cis upenn edu>]

Two years after big telecom bill: Promises unfulfilled


By Jeannine Aversa
Associated Press Writer


WASHINGTON (AP) -- These were the promises of the telecommunications
bill: lower cable TV rates, lower phone bills and a dazzling array of
work and entertainment choices only a touchtone away.


Two years later, the reality is higher prices and not much competition.


The average American doesn't have another local cable or phone company
to switch to. And the promised explosion of innovative new services is
more a whimper than a bang.


"This new law is truly revolutionary legislation that will bring the
future to our doorstep," President Clinton said when he signed the
measure Feb. 8, 1996.


He predicted "consumers will receive the benefits of lower prices,
better quality and greater choices in their telephone and cable
services."  Supporters in Congress, at the Federal Communications
Commission and in industry made the same claims.


"It will start an explosion of new devices being available to American
citizens. There will be an explosion of new investment in our country,"
said then-Sen. Larry Pressler, a co-author of the measure.


But those optimistic forecasts have yet to come true. In 1997, cable
TV rates rose 6.9 percent, local phone rates rose 1 percent and
in-state toll call rates went up 2.8 percent while interstate
long-distance rates declined 4.3 percent, according to the
government. Consumer prices for all goods and services went up 1.7
percent during the same period.


In 1996, the bureau reported across-the-board increases in cable and
phone prices.


It also costs more to make a call from most pay phones.


Rep. Thomas Bliley, R-Va., another co-author of the bill, predicted it
would break up "two of the biggest government monopolies left -- the
monopolies in local telephone service and in cable television. Beside
lower rates and better service, the result will be innovative new
products and services."


Instead, long-distance companies have had trouble building local phone
businesses, and local phone and cable companies have scaled back plans to
invade each others' businesses.


And key provisions in the 1996 law aimed at opening the $100 billion
local phone business to competitors were overturned in federal court
rulings last year.


Federal regulators are now scrambling to find ways to boost
competition for cable and local phone companies and to lower soaring
cable rates.


AT&T has stopped marketing local phone service and MCI has suffered
steep losses from local phone investments. Both companies in part
blame regulations they say make it too expensive to provide local
phone service.


Authors of the law assumed it would encourage cable companies to get
into the telephone business and phone companies to start offering
cable.


"Talk about broken promises, one of the premises of the `96 act was
that the telephone companies would get involved in the provision of
video," said Clinton's top telecommunications policy adviser, Larry
Irving.


Banking on more competition, Congress decided to end the FCC's
authority to regulate cable TV rates on March 31, 1999. With
competition not materializing as envisioned, some in Congress say


they'll push to extend the FCC's rate authority.


"Americans do not have real choice in the provision of cable TV
services," said FCC Chairman Bill Kennard. A new FCC report found that
there's head-to-head cable competition in only 81 communities. And
competition to cable from satellites, wireless cable and others is
growing more slowly than anticipated.


Consumer groups, which want the government to do more to hold down
cable and phone rates, call the law a failure.


"Virtually none of the promise of price reductions and competition has
materialized. On the contrary, these industries are becoming more
entrenched monopolies with rates spiraling upwards," said Gene
Kimmelman, co-director of Consumers Union's Washington office.