Telecommunications Act of 1996, the first successful attempt to
rewrite the sixty-two year old Communications act of 1934, was passed
on 1 February 1996. The act refocuses federal communications policymaking
after years of confused, multi-agency and intergovernmental attempts
to regulate and make sense of a burgeoning telecommunications industry.
The bill relies on increased competition for development of new
services in broadcasting and cable, telecommunications, information
and video services while it reasserts Congress' leadership role
as the dominant communications policymaker.
Portions of the act became effective immediately after President
Clinton signed the bill into law on 8 February 1996. Other sections
of the act will be implemented as the Federal Communications Commission
(FCC) promulgates new rules and regulations to meet provisional
requirements of the act. Noting the historic nature of the bill,
President Clinton stated that the legislation would "stimulate investment,
promote competition, provide open access for all citizens to the
Information Superhighway." However, many public interest groups
are concerned that the act undermines public interest values of
access. The act includes several highly controversial provisions
that various interests groups claim restrict speech or violate constitutional
protections. One section of the bill prohibits the transmission
of indecent and obscene material when the material is likely to
be seen or read by a minor, and another provision requires broadcasters
to formulate a ratings scheme for programs. After nearly four years
of work, the bill's passage was eagerly awaited by government and
industry leaders alike. Public interest and various industry groups,
upset with provisions that would restrict First Amendment rights
of telecommunications users vowed to challenge the constitutionality
of those provisions in court. Within hours of the bill's passage,
a number of civil liberties groups led by the ACLU sought an injunction
against provisions of the act.
Telecommunications Act of 1996 is a complex reform of American communication
policymaking that attempts to provide similar ground rules and a
level playing field in virtually all sectors of the communications
industries. The act's provisions fall into five general areas:
- radio and
- cable television
o telephone services
and on-line computer services
act abolishes many of the cross-market barriers that prohibited
dominant players from one communications industry, such as telephone,
from providing services in other industry sectors such as cable.
New mergers and acquisitions, consolidations and integration of
services previously barred under FCC rules, antitrust provisions
of federal law, and the "Modified Final Judgment," the ruling governing
1984 "break-up" of the AT and T telephone monopoly, will be allowed
for the first time, illustrating the belief by Congress that competition
should replace other regulatory schemes as we enter a new century.
and Television Broadcasting
act incorporates numerous changes to the rules dealing with radio
and television ownership under the Communications Act of 1934. Notably
broadcasters have substantial regulatory relief from old and sometimes
outmoded federal restrictions on station ownership requirements.
Broadcast ownership limits on television stations have been lifted.
Group owners can now purchase television stations with a maximum
service area cap of 35% of the U. S. population, up from the previous
limit of 25% established in 1985. Limits on the number of the radio
stations that may be commonly owned have been completely lifted,
though the bill does provide limits on the number of licenses that
may be owned within specific markets or geographical areas. Also
amended are previous restrictions on foreign ownership of stations.
of license for both radio and television have been increased to
eight years and previous rules allowing competing applications for
license renewals have been dramatically altered in favor of incumbent
licensees. New provisions under the act prevent the filing of a
competing application at license renewal time unless the FCC first
finds that a station has not served the public interest or has committed
other serious violations of agency or federal rules. This provision
will make it increasingly difficult for citizen's groups to mount
a license challenge against a broadcast station. The act requires
licensees to file a summary of comments and suggestions received
from the public while prohibiting the Commission from requiring
licensees to file information not directly pertinent to the renewal
question. However, the bill gives the FCC no guidance as to how
it should interpret service in the "public interest" in light of
the new legislative mandates. Public interest groups who oppose
relaxing ownership provisions claim that the combined effect of
the new rules will be to accelerate current trends toward increased
control of most media outlets by a few communications conglomerates.
Telecommunications Act of 1996 makes significant changes in FCC
rules regarding station affiliations and cross-ownership restrictions.
Stations may choose affiliation with more than one network. Though
broadcasting networks are barred from merging or buying out other
networks, they may start new program services. For the first time,
broadcasters will be allowed to own cable television systems, but
television licensees are still prohibited from owning newspapers
in the same market. The act affirms the continuation of local marketing
agreements (LMAs) and waives the previous restrictions on common
control of radio and television stations in the top fifty markets,
the one-to-a-market rule.
broadcasters won new freedoms in licensing and ownership, the act
mandates that the industry develop a ratings system to identify
violent, sexual and indecent or otherwise objectionable programming.
The Communications Decency Act of 1996, embedded in the Telecommunications
Act, requires the FCC to devise a rating system if the industry
fails to develop such a system within one year of passage of the
act. However, early indicators appear to signal a desire on the
part of the industry to develop its own ratings system rather than
allow government to define program standards. Although development
of a ratings system is required under the act, application of the
system is voluntary. In conjunction with the establishment of a
ratings system, the Telecommunications Act requires television set
manufacturers to install a blocking device, called the V-chip, in
television receivers larger than 13 inches in screen size by 1998.
Recognizing the potential for constitutional challenges of these
provisions, the act allows for accelerated judicial review by a
special three-judge federal district court panel. Other provisions
of the Communication Decency Act require programmers to limit minors'
exposure to objectionable material by scrambling channels depicting
explicit sexual behavior and blocking access channels that might
contain offensive material.
the biggest concession to the broadcast industry centers around
provisions for allowing, but not mandating, the FCC to allocate
extra spectrum for the creation of advanced television (ATV) and
ancillary services. Eligibility for advanced television licenses
is limited to existing television licensees, insuring current broadcasters
a future in providing digital and enhanced television services.
However, Senate Majority Leader Robert Dole,(R, Kansas), expressed
reservations about giving broadcasters extra spectrum without requiring
payment for the new spectrum. Thus, the bill includes a provision
that allows Congress to revisit this issue before the FCC awards
any digital licenses. Broadcasters vehemently oppose the notion
of paying for spectrum, but the act includes provisions that would
allow the Commission to impose spectrum fees for any ancillary (non-broadcast)
services that broadcasters may provide with these new allocations.
Generally, though the act provides for new possibilities for broadcasters
and calls for the FCC to eliminate unnecessary oversight rules,
a substantial portion of regulation implemented since the passage
of the 1934 Act remains. Thus, while FCC Chairman Reed Hundt issued
a statement that claimed that the ubiquitous world of telecommunications
had changed forever, analysts and industry experts, remind us that
the act amends, but does not replace, the Communications Act of
changes in rate structures and oversight contained within the Telecommunications
Act of 1996 are meant to provide new opportunities and flexibility
as well as new competition for cable service providers. Under the
provisions of the act, uniform rate structure requirements will
no longer apply to cable operators where there is effective competition
from other service providers including the telephone company, multichannel
video, direct broadcast satellites and wireless cable systems. However,
for the new effective competition standards to apply, comparable
video programming services would have to be available to the franchise
community. For smaller cable companies, programming tier rates and
basic tier rates would be deregulated in franchise areas where there
are fewer than 50,000 subscribers. Additionally, states and local
franchise authorities are barred from setting technical standards,
or placing specific requirements on customer premise equipment and
transmission equipment. Sale or transfer of licenses are expedited
under the act. Franchise authorities are required to act upon requests
for approval to sell or transfer cable systems within 120 days.
Failure to comply with the 120 window will provide an "automatic"
approval of the sale unless interested parties agree to an extension.
carriers and other operators that utilize radio communications to
provide video programming will not be regulated under cable rules
if the services are provided under a common carriage scheme. Common
carriers who choose programming for their video services will be
regulated as cable operators unless the services are provided under
the "open video systems" provision of the Telecommunications Act.
Open video systems operators can apply to the Commission for certification
under section 653 of the act which will provide the operator with
reduced regulatory burdens. Local Exchange Carriers (LECs) can provide
video services under the open video provisions. Further, LECs are
not required to make space on their open video systems available
on a non-discriminatory basis. Joint ventures and partnerships between
local exchange carriers and cable operators are generally barred
unless the services qualify under provisions for rural exemptions,
or LECs are purchasing a smaller cable system in a market with more
than one cable provider, or the systems are not in the top 25 markets.
an attempt to spur competition between cable operators and local
exchange carriers, Congress provided incentives for cable operators
to compete with local telecommunications companies. Under the act,
cable systems operators are not required to obtain additional franchise
approval for offering telecommunications services.
Telecommunications Act of 1996 contains sweeping provisions that
will restructure the telephone industry in the United States. As
noted, LECs can offer video programming services themselves or carry
other video programming services under the "open video systems"
provisions of the act. In addition to allowing telephone companies
to offer video services, important structural barriers erected under
the Modified Final Judgment (MFJ) have been swept away. The act
allows the seven regional Bell operating companies to offer long-distance
telephone service for the first time since the 1984 breakup of AT
and T. At the same time, long distance companies and cable operators
are allowed to provide local exchange service in direct competition
with the regional Bell operating companies, but the act prohibits
cross subsidies from non-competitive services to competitive services.
Representative Thomas Bliley, (R-Virginia), stated, "we have broken
up two of the biggest government monopolies left: the monopolies
in local telephone service and in cable television." While investors
and legislators hailed a new era of competition in the telephone
industry, it now becomes the task of the FCC to work out details
of the act with state public utilities commissions (PUCs) to ensure
a smooth transition of services. The act preempts all previous state
rules that restrict or limit competition in telephone services for
both local and long distance services.
act requires regional telephone companies (regional Bell operating
companies) to undertake a series of reforms designed to open competition
in their service areas. Companies must implement these reforms in
order to "qualify" for providing long distance service outside their
regional areas. LECs are also required to interconnect new telecommunications
service providers and to "unbundle" their networks to provide for
exchange access, information access, and interconnection to their
systems. In order to provide customers continuity of service, LECs
must provide number "portability" by allowing customers to keep
their telephone numbers when switching from one service provider
to another. The FCC has the task of assessing whether RBOCs and
LECs have met the necessary requirements in order to offer long
distance services while state public utilities commissions (PUCs)
are charged with implementing local telephone competition.
254 of the act defines the nature of "universal service" as "an
evolving level of telecommunications services" that take into account
telecommunications service advancements. The FCC and a working group
of PUC officials are charged with designing policies to promote
universal service, especially among rural, high cost and low-income
telecommunications users. Also included in the act is a provision
that directs the FCC to create discounted telecommunications services
for schools and libraries.
telephone companies are now free to manufacture telephone equipment
once the FCC qualifies and approves their applications for long
distance services. The act prohibits Bellcore, the research arm
of the RBOCs from manufacturing as long as it is owned by one or
more regional operating companies.
and On-line Computer Services
Telecommunication Act of 1996 includes Title V, called the Communications
Decency Act of 1996 (CDA). The inclusion of the CDA culminates more
than a year of debate by members of Congress over the degree to
which government could regulate the transmission of objectionable
material over computer networks. It creates criminal penalties for
anyone who knowingly transmits material that could be construed
as indecent to minors. The act criminalizes the intentional transmission
of "any comment, request, suggestion, image, or other communications
which is obscene, lewd, lascivious, filthy, or indecent...." Enforcement
of the CDA includes the filing of criminal charges against any person
who uses the computer network for such a transmission. Additionally,
the CDA establishes an "anti-flame" provision by prohibiting any
computer network transmission for the purpose of annoying or harassing
the recipients of messages. If enforced, penalties under the CDA
could range as high as $250,000 for each violation.
act exempts commercial on-line services that engage in "blocking"
from prosecution if they have demonstrated "good faith, reasonable,
effective and appropriate" actions to restrict or prevent access
by minors. In addition, the CDA contains provisions for a "Good
Samaritan Defense" against civil liability for on-line service providers
who voluntarily restrict access or availability of material that
the provider considers "obscene, lewd, lascivious, excessively violent
or otherwise objectionable." The act does not authorize the FCC
to enforce the statutory requirements as written.
free speech advocates and First Amendment scholars claim that the
language in the Communications Decency Act of 1996 is overly broad.
Computer experts express concern over whether government should
regulate the flow of information on the Internet and other computer-based
networks. On the day the President signed the bill into law, the
ACLU and other plaintiffs filed suit against Attorney General Janet
Reno seeking to enjoin the enforcement of the provisions of Title
V on the grounds that it was unconstitutional. Judge Ronald L. Buckwater,
a federal judge in Philadelphia, ruled that the language in the
law regarding indecent material was unconstitutionally vague but
upheld parts of the law regulating obscene and patently offensive
information. The Justice Department has stated that it would not
prosecute anyone under the law until the challenges mounted against
the act were resolved in court. This suit and a companion suit filed
by the American Library Association may ultimately go to the Supreme
Court for resolution.
Telecommunications Act of 1996 has garnered substantial praise as
a pro-competitive bill designed to allow anyone to enter any communications
business and to let any communications business to compete in any
market against other competitors. Supporters of the bill predict
job creation and lower telecommunications costs as two benefits
likely to accrue as a result of its passage. Other experts say the
Telecommunications Act will allow smaller telephone companies to
successfully compete with larger companies for telephone, paging
and cellular services. Manufacturers of cable modems and network
connectivity devices should benefit from rapid advances as a result
of increased competition.
of the act claim its extensive deregulatory provisions coupled with
relaxed restrictions on concentration of media ownership dilute
the public responsibility guarantees built into the Communications
Act of 1934 and tilt the preference in favor of private market forces.
Critics claim that in many areas of the country which are not likely
to see real competition, the cost of telecommunications and video
services are likely to rise dramatically. Other critics oppose giving
broadcasters extra spectrum at a time when the government could
reap hundreds of millions of dollars for those frequencies through
this time it is too early to predict the outcomes of the Telecommunications
Act of 1996. Analysts and financial experts views are mixed but
they predict market shake-outs and consolidations are likely to
radically transform the telecommunications industry in the next
few years as a result of the implementation of the act.
E.L. "Congress Votes to Reshape Communications Industry Ending a
4-Year Struggle." New York Times, 2 February 1996.
_______________. "President Signs Telecommunications Bill." Cyber
Times Extra, New York Times, 9 February 1996.
_______________. "What the Bill Already Did." New York Times,
2 February 1996.
B. "The Networks See Potential for Growth." New York Times,
2 February 1996.
W. "Remarks By The President in Signing Ceremony for the Telecommunications
Act Conference Report." Washington, D.C.: Library of Congress (press
release), 8 February 1996.
__________. "Statement By The President." Washington, D.C.: Office
of the Press Secretary, The White House (press release), 1 February
S. "The Greatest Telecommunications Show in Years: The 1996 Legislation
Leaves Fund Managers Wondering: Which Company's Act is a Winner?"
The Washington Post, 24 March 1996.
K. "Net Access Providers Worried As FCC Rethinks On-Line Regulation."
Cyber Times Extra, New York Times, 29 February 1996.
M. "For Telephone Companies, Excitement Over New Markets." New
York Times, 2 February 1996.
P. H. "Internet Courtroom Battle Gets Cyberspace." Cyber Times
Extra, New York Times, 20 March 1996.
R., and P. Brown. "Liability of Internet Access Provider Under Decency
Act." New York Law Journal, 12 March 1996.
States Congress, House of Representatives. 104--H.R. 1555, The
Telecommunications Act of 1995. 104th Congress, 1st Session.
Washington, D.C.: Introduced 3 May 1995.
States Congress, Senate. S.652--The Telecommunications Act of
1996. 104th Congress, 2nd Session. Washington, D.C.: 3 January
States Congress. Joint Explanatory Statement of the Committee
of Conference on S.652--The Telecommunications Act of 1996.
104th Congress, 2nd Session. Washington, D.C.: 3 January 1996.
Cable Networks; License;
States: Cable Television; U.S. Policy:
Communication Act of 1934