COMMUNICATIONS ACT 1934 TELECOMMUNICATIONS ACT 1996

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COMMUNICATIONS ACT 1934 - TELECOMMUNICATIONS ACT
1996

• Background and Evaluation

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Earlier Regulation

• Radio Act of 1927
• Created Federal Radio Commission
• with power to grant federal licenses allowing
• stations to broadcast over the airwaves
• required stations to serve the public
  interest, (defined on case-by-case basis)
  convenience and necessity
• Licenses given to for-profit broadcasters
• (National Association of Broadcasters
• lobbied successfully against allocation of
  airwaves
• to educational institutions)

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Growth of a Commercial Model

• Many early broadcasters were manufacturers of
  radios, who sponsored programming to increase
  sales of radios and used radio as a vehicle for
  generating more money from advertising

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FRC continued

• FRC classified stations assigned frequencies,
  made rules to prevent interference, established
  power and location of transmitters, established
  coverage areas

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Communications Act of 1934

• Federal Communications Commission replaces FRC
• Leaves public interest undefined
• Directs FCC to provide rapid, efficient
  communication service adequate facilities at
  reasonable charges distribution of service to
  all states and communities
• Allocates radio spectrum, assigning licenses
  (taking into account economic factors). NOTE
  license renewal increasingly a formality
• Supplemented in 1983 by new section encouraging
  provision of new technologies and favoring more
  competition in the marketplace.

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Regulation Examples (1)

• Anti-trust action (Federal Trade Commission,
  Justice Department, Federal Communications
  Commission e.g. break up of motion picture
  monopoly in the 1940s
• Fairness Doctrine (1949-1987) required
  commitment to different opposing positions on
  public issues of interest and importance
• Provision of childrens programming
• Fin-syn rules (1970-1993) prevented
  television networks owning own programs

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Regulation Examples (2) AM/FM

• AM/FM
• FCC delays allocating FM to protect AM
• Changes AM spectrum, making existing
• receivers obsolete
• Limits AM/FM duplication of programing
• Eliminates duplication rules
• Promotes AM by permitting cost savings

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Regulation Examples (3) Carroll

• Carroll Doctrine, 1958-88, required FCC to
  consider whether new competitor injure existing
  licensees ability to serve public
• Pleading a Carroll exemption would delay and
  force up cost of competition
• FCC never once denied a single license on this
  basis, but did protect UHF signals, as a class,
  from VHF.

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Regulation Examples (4) Early Cable

• Networks, federally licensed cable locally
  licensed networks more subject to public
  interest provisions.
• FCC initially limited cable importation of
  distant signals, for which cable stations had
  paid little or nothing, to protect local
  broadcasters (1962-1979)
• FCC in 1980 removes eliminates its rules against
  syndication exclusivity and network duplication,
  but then re-imposes them in 1988 in face of high
  cable growth, later to remove them again in the
  1990s

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Old Telecommunications Model (OTM)

• Key concepts include
• - common carrier
• - natural monopoly
• economies of scale
• single technology specifications
• cheaper to achieve universal service
• - public interest regulation

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OTM (2) Common Carrier

• - control over content separate from control over
  infrastructure or delivery
• - access should be non-discriminatory
• - rates should be just and reasonable
• - telephony network providers are not editorial
  gatekeepers.

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The New Telecommunications Model (NTM) (1)

• - rapidity of technical change
• - convergence
• - discrediting of natural monopoly
• - competition
• - commodification
• - new pricing systems
• - open network architectures
• - universality for basic services

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NTM (2) Technical Change

• Communications are faster,
• Exponential leaps in capacity
• Controversy as to investment proportionate to
  profit, Canadian telcos massively disinvested in
  the 1990s.

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NTM (3) Convergence

• (i) Integration of voice, video and data.
• (ii) Wish to exploit huge archives of recorded
  material.
• (ii) Despite considerable industry push
  adoption of broadband services has been
  relatively slow e.g. lack of interest in
  video-on-demand high prices problem of the
  last mile.

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NTM (4) Discrediting of Natural Monopoly

• Rural areas were often served by small
  independents, and these independents had
  successfully interlinked
• Natural monopoly was outcome of special
  interest, predatory policies. In early 1880s,
  Western Union moved out of telephony in favor of
  Bell in 1926 ATT dropped out of broadcasting and
  telegraphy in return for promises from companies
  like General Electric, Western Union etc. to stay
  clear of the telephone business. The 1956
  Consent Agreement kept ATT out of computing and
  computer services.

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NTM (5) Competition

• seeks more competition
• protect the competitive environment for smaller
  operators
• encourage international competition

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NTM (6) Commodification

• Decline of UNESCO's NWICO discourse
• Uses of personal data
• Commercialization of Internet
• Dumbing down

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NTM (7) New pricing system

• moving away from 'rate base rate of return
  regulation' towards price caps, involving a price
  index for bundles of services which are monitored.

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NTM (8) Limitation of Universal Service

• Universal service principles preserved only for
  basic services

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Main Chapters of the 1996 Act

• Title One telecommunications
• Title Two broadcast services
• Title Three cable
• Title Four regulation
• Title Five obscenity and violence

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Telecommunications

• Competition in basic phone service, local and
  long distance.
• Incumbent services to allow interconnection for
  competing services.
• Universal service maintained for basic service
• Internet access, caller ID, etc. may later become
  'basic'.
• Bells into long-distance phone service
  immediately, except in own territory. Outside own
  regions, Bells can offer local and long distance
  and can even offer them together.
• Bells must first let competitors into the market.
  Once they face competitors in their own regions,
  they can finally get back into manufacturing.

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Broadcast Services 1

• For digital, broadcasters allowed to add
  spectrum, so long as it is used for digital
  broadcast.
• Broadcasters get additional spectrum for free.
  But to use it they have to spend millions to
  outfit for digital transmission. Analog spectrum
  must eventually be returned.

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Broadcast Services 2

• For radio, all national ownership restrictions
  removed.
• Local ownership restrictions are relaxed
  according to the size of the market so that one
  owner cannot own more than half the radio
  spectrum.

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Broadcast Services 3

• In TV single owner may buy stations that reach up
  to 35 of the national audience.
• In 50 largest markets, now legal to own more than
  one TV station or a radio and a TV station, to
  own a TV station and a cable TV system in the
  same place and to own more than one network
  (except the biggest existing networks).
• Law virtually guarantees license renewal,
  providing almost complete protection of
  broadcasters from public scrutiny and from
  enforcement of public trustee obligations.
• No one can challenge an incumbent's license
  unless the FCC has already found the licensee
  unfit. The FCC can no longer find licensees
  unfit because of failure of public trusteeship.

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BROADCAST SERVICES 4

• But on violence, broadcasters are required to
  append to license renewals any written comments
  from listeners or viewers about violent
  programming
• The FCC is charged to review its ownership rules
  every two years to see if any more of them can be
  relaxed or abolished.

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Cable 1

• Incentives for establishing cross-platform
  competition among services (e.g. cable into
  telephony, phone companies into video service)
• Cable still treated as an editor, a gatekeeper of
  programming, with a variety of public interest
  obligations ranging from required local carriage
  of local broadcast signals to franchise
  obligations imposed by local authorities.
• It permits network businesses to enter the cable
  environment.
• No further protection for access cable channels.

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CABLE 2

• All rate regulation for non-basic tier services
  is abolished from March 31, 1999. Cable
  companies that own programming must offer their
  programs to competitors at fair prices.
• Phone companies are allowed to offer video
  programming.
• Any telecoms service that cable companies offer
  is exempt from state and local regulation of the
  cable company (under review)
• Law bans mergers, joint ventures, and
  greater-than-10-percent investments between cable
  and phone companies serving same market. But
  many exceptions allowed difficult for new
  entrants.

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Regulatory Reform

• Law explicitly equates competition with public
  interest.
• Policy is of forbearance, opting not to conduct
  or enforce regulation that interferes with the
  public interest (which equals competitive
  environment).
• This applies only to telecommunications, not to
  mass media.
• Rules governing interconnection, and rules
  governing Bell entry to long distance - are
  exempt from forbearance.

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Obscenity and Violence

• Bans obscene or harassing phone calls.
• Reemphasizes existing law requiring cable
  operators to block all programming that the
  subscriber did not opt for, upon request.
• Requires any multi-channel video program
  distributor also to block or scramble sexually
  explicit programming.
• FCC to create a rating system, if the industry
  does not.
• Requires TV sets to include a chip that can
  receive signals labeling shows with ratings.

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Some Outcomes 1

• Opening up of local Bell markets has been slow
  and resisted
• Local telephone markets quickly consolidated from
  7 to only 4 Baby Bells (BellSouth, Qwest, SBC and
  Verizon)
• Despite new competition in local telephony, Baby
  Bells own the local telephone lines and 85 of
  the market. California has only two major
  providers of local land lines, namely SBC
  (17.3mlines) and Verizon (4.6m)
• Development of cross-platform competition between
  cable and telephony has been slow (even with ATT
  takeover of MediaOne and now the emergence of ATT
  Comcast)

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Some Outcomes (2)

• ATT presence in local markets growing ATT
  still earns 7.3bn from consumer units (a 6 drop
  in 2003)
• Increased competition from cellular and Internet
  telephony providers, though ATT and the Baby
  Bells are also tapping these markets
• Hesitancy with respect to video-on-demand
• Cable rates have increased significantly faster
  than consumer price index
• Satellite delivered multi-channel video controls
  less than 10 of the market (1999) has grown
  since, but is controlled by only 2 companies of
  which one is News Corp, the other is Echostar.

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Some Outcomes 3

• The act triggered a wave of mergers, mainly to
  protect against competition
• Greater concentration in radio Westinghouse and
  Chancellor Media control about half the
  advertising market in radio in five major US
  cities
• In cable, the top 25 cable MSOs comprised 88 of
  the industry by 1997, and the top 10 accounted
  for 75.
• Greater commercialism many radio stations offer
  no local news at all. In 3 markets not a single
  station offered any public affairs programming,
  and overall, public affairs programming accounted
  for far less than 1 of the total.
• Decline in minority ownership by about 15