Why The Telecom Bill Is In Slo Mo

Edward K. Christian isn't the type of executive to leap blindly into a business deal. Since July, the CEO of Detroit-based Saga Communications Inc. has been shopping for more radio stations to add to the 25 he already owns. He was banking on congressional passage this year of an overhaul of the nation's communications laws--reforms that would lift limits on the number of stations one company can own. But suddenly, Christian has put his deals on hold. "I can't make business decisions based on maybes," he says.

It's the Pause that Retrenches. While final passage this year looked like a sure bet only last month, the biggest overhaul of telecommunications legislation in 60 years has hit speed bumps on Capitol Hill. Now, it's possible that reforms won't be enacted until next year, a casualty of the traditional end-of-session crunch in Congress.

What has gone wrong? Representative John D. Dingell (D-Mich.), a supporter, says that with lawmakers struggling to pass a balanced budget, tax cuts, and welfare overhaul, the telecommunications bill "is running into inexplicable delays."

COMPROMISE? Actually, the delays are not so inexplicable. Behind the scenes, a battle royal rages. In August, long-distance companies were dealt a big setback when the House passed a version of the bill that would let the Bells get into their business fairly easily. Since then, supporters of the long-distance companies have staged a rearguard action to soften the legislation. Even Speaker Newt Gingrich, normally a strong Bell backer, hasn't done much to fight off the long-distance forces.

There also is growing unease among Democratic lawmakers that deregulation--even the prospect of it--will help create overpowering communications giants. Case in point: Time Warner Inc.'s proposed $8 billion acquisition of Turner Broadcasting System Inc.

The House and Senate bills differ in a few key respects: The House version not only gives local phone companies a break, it also favors cable-television interests. The Senate version goes easier on long-distance companies. Creation of a joint conference panel to hammer out those differences in a compromise measure is way behind schedule. Gingrich spokesman Tony Blankley says that his boss still hopes to pass a bill this year.

Telecom reform continues to draw broad bipartisan support on Capitol Hill. But a delay gives more time for regrouping by the White House--which has threatened a veto over cable deregulation, media concentration, and the terms under which the Bells can get into long distance. Other bill opponents include several major consumer organizations. The longer passage takes, the more leverage critics will have to extract concessions. "Time is on our side," says Bradley Stillman, a telecom expert for the Consumer Federation of America.

HEADACHE. The long-distance coalition is taking advantage of the extra time to cast the House bill as a consumer nightmare. The measure would let the Baby Bells into the long-distance market before their local markets are open to competition, the group charges. "Don't let the local phone companies pick your pocket," one new opposition ad declares. Broadcasters are pressing to remove a provision that calls for installation of a "violence chip" in new TVs that would allow parents to block objectionable broadcasts. Vice-President Al Gore is using every chance he gets to argue that cable rates could skyrocket should they be deregulated.

With the process in slo-mo, GOP concessions may soon follow. The bills call for removal of cable-rate regulation in early 1997. But Democrats are betting they will be able to delay the effective date long enough for cable competition to develop. "We think we can get it pushed back," says Larry Irving, a telecom adviser for the White House. And there might be some new restrictions on media concentration, as well. Right now, the House and Senate measures call for removal of a federal rule that bars one company from owning the newspaper, cable, TV, and radio stations in any given community. But Congress is now expected to keep at least part of the anti-monopoly provision in conference.

Delays are a headache for CEOs such as Christian who want to get on with their dealmaking. In its broad outlines, telecom reform legislation is still intact. But the bill that finally emerges from Congress--when it emerges--will be far more of a compromise than the measures passed so far.

The Fight Isn't Over

Telecom reform looked like a sure thing this summer. But work has since slowed to a crawl. How industry stands on the legislation:


Local-phone company chiefs such as Bell Atlantic's Ray Smith want quick action. Reform would let them offer long-distance service once phone regulators certify that their local markets are open to competition. TCI's John Malone and other cable leaders like rapid cable deregulation.


AT&T's Bob Allen, MCI's Bert Roberts, and other long-distance executives are gleeful about the delay. They want a higher hurdle in place before the Bells can enter long-distance markets: certification by the Justice Dept., not just phone regulators, that their local

markets are competitive.

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