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The planned Communications Act Re-write of the New(t) Congress
From: David Farber <farber () central cis upenn edu>
Date: Mon, 16 Jan 1995 06:44:54 -0500

I have paraphrased a message from a source who claims that
this has been substantiated by at least two other sources.

PLEASE note that I can neither personally confirm or deny
this information at this time, so...

Some may call this another of the "hysterical ravings"
heard out of DC. Who knows but there have been such in the
past that came true. I suggest watching events and see if
you see any sign of this happening. If you do, come back
and carefully re-read this message


I paraphase:

For what it's worth, my impeccable source in DC just called
to tell me how the Communications Act Re-write will appear
when a carefully orchestrated scenario runs its course.

By Feb 15th, the RBOCs expect their bill (yet to be
introduced) to pass both the House & Senate, with
accelerated Hearings. All the deals have all been made over
the holidays with the critical opposition that stopped last
year's bill: the IXCs, cable, etc. It will be a very
complex bill, packaged with the right deregulation words
(get the government off our backs), universal service, and
futuristic "3d Wave" stuff from Toffler and Gilder. The
media blitz is being planned for maximum effect. Clinton
won't oppose it because if he does it will appear that he
is reneging on Information Highway promises. There is no
stopping the steamroller now, and there won't be any time
for major forces (other potential players in the NII -- the
Microsofts, Hughes, etc. -- to do a decent analysis without
looking like they are naysayers).

The details -- as usual -- are what counts.

The bill will turn residential, small town, suburban, and
rural _local access_ into a permanent natural monopoly with
a single gateway for services TO the home. The BOCs don't
think there are any services FROM the home business worth
considering, other than voice and low-speed return data for
games. The RBOCs, have given up on medium to large
customers. They realize that they already lost that market
to AT&T and the niche players, MCI & Sprint. But by
controlling access to the home, they figure they can
control everything else, and have a chance at getting a few
large users by packaging the residences for them. This way
they might actually gain market share in the IXC business.
AT&T knows they can't fight this Congress without looking
like the spoiler, so they will take their chances on radio
access, manufacturing, and the more lucrative businesses.

It looks like the RBOCs will pull this off, because the
separate interests are now stronger than the mutual
conflicts among the biggest boys in town. Cable knows they
are finished if they have to compete with the LEC's cash
flow and new, and better, coax networks are constructed; so
they might as well settle for what they can get now.

The bill will have the right incentives for the major MSOs
to lease-back their coax for the LECs to run. Malone
already said so. One "Uniwire" into the home discourages
future competition, especially with complicated lease-back
arrangements. Any competitor will think twice about trying
to breach that monopoly. They are simply following the
successful strategy that AT&T used to play W.U. off of 3d
parties, like RCA, for decades; W.U. used to get sweetheart
deals for circuits with the FCC blessing. No one else even
bothered to think about competing until MCI discovered
microwaves. These lease-back arrangements will look clean
to the uninitiated. Uniwire will be reinforced by control
of the settop box interfaces. A barrage of economists will
be engaged to argue that natural monopoly, under some new
name, is best for everyone because it broadens opportunity.
If you think crystals are screwy, wait till you hear the
new mantras.

The BOCs don't know what to do about radio, but don't
believe the technology for broadband radio is here anyway,
and have come up with a legalistic strategy that empowers
the FCC to slow down any competitive forces using
alternative carriage. This will take three steps:

1) Federal pre-emption of States' rights in ALL
communications fields -- wire, radio, switching, rates,
whatever. But State's rights are a Republica mantra. To
prevent this looking like more centralized government
(which it is):

2) An "ombuds panel" will be set up under the FCC, but with
extraordinary powers to bypass the Administrative
Procedures Act and expedite the CFRs without 11 months of
notice, etc., to settle all disputes between the States and
the Federal government on communications matters. This will
be presented as State oversight to protect universal,
vaguely defined, services and the like.

Everyone who thinks they matter are hustling to get on this
panel, for then they will be more powerful than the
Commissioners themselves. It will look balanced, with even
one FCC Commissioner or two on two panel, somebody
representing consumers, labor, etc., but since the GOP
expects to win the next Presidential election, within 2-3
years it will be totally stacked. Of course, if the
Democrats should ever win anything again, and the BOCs get
into financial trouble, which is very likely given that the
residential business has always been a dog, all the
mechanisms for nationalisation of local carriage will be in
place. So why should a good Democrat oppose this? Power
swings back and forth in Washington.

and to make sure none of this unravels too early:

3) the Justice Dept. will be cut out of all antitrust
matters related to communications.

All this will be called cutting down centralized government!!

The message is that too much money has been spend on this
deal for anyone to back out now.

What can kill it is the State pre-emption clause. The
Governors of the five, so-called "seed" states in telecom
(FL, NY, CA, IL and CO) are going to want something big in
return for blessing pre-emption. They are in terrible
financial shape. So expect weird pork barrel monies flowing
for totally unrelated things: releasing FEMA funds for
disaster relief in Florida, California, and who knows what
else. This is a very large country with a very large
economy -- it is easier to move money around than the
average citizen thinks. A small portion of a large number
is still a large number.

So much for capping Federal spending.

The other wild card is the broadcasters, who last year
stuck in a provision to use the so-called HDTV UHF channels
for anything but. However, the networks would love to drop
foreign ownership provisions and they might relent on data
over former video channels -- which they really don't
understand anyway -- for a chance to make better deals with
foreign entities.

The Republicans are counting on cable & telcos to behave
themselves and not raise rates until after the next
Presidential election.

There is nothing to stop the steamroller now but if they
can't get the bill signed into law by Feb 15th, the deals
are all off, I am told.

end of paraphase

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