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MARIN COUNTY'S NEWS MONTHLY - FREE PRESS
(415)868-1600 - (415)868-0502(fax) - P.O. Box 31, Bolinas, CA, 94924

August, 2005

 

Consumers Trampled As Telecom Industry Runs Amok
By Sandy Leon Vest

"We heard from the industries...We have heard from the lobbyists that the industries have hired... We have heard from the consultants that the lobbyists have hired. ...We have heard from the law firms. ...What did you hear from the consumers? Oh, them? Well, what did you hear from the citizens?" Rep. John Conyers (D-MI)
Nearly a decade ago, Congress passed the Telecommunications Act of 1996 by huge bipartisan margins-91 to 5 in the Senate and 414 to 16 in the House. The bill was touted as "the most deregulatory telecommunications legislation in history." President Bill Clinton had become a believer. The Telecom industry was just getting warmed up. Today the threat posed by that industry to what remains of citizen representation looms larger than ever as a new slew of mergers-including the takeover of AT&T; by Texas' SBC Communications-threatens to sail through the regulatory process. (See The Quiet Little Mega-Merger of SBC & AT&T;, June CP).
Before 1996, major mergers in the communications sector were rare, restricted by a range of regulations limiting ownership. But as one commissioner at the Federal Communications Commission (FCC) noted, "The Telecommunications Act of 1996 unleashed decades of pent-up demand..." Today a host of new telecom takeovers are quietly going forward, including Sprint/Nextel, Verizon/ MCI and the Mother of all Mergers, AT&T;/SBC, approved by stockholders only last month. The recent renaissance of merger-mania prompted former FCC chief economist Simon Wilkie to comment that the trend could trigger a "dramatic loss of competitive choices, fueling major price increases and stifling innovative services for business customers." California-based consumer group, Toward Utility Rate Normalization (TURN) notes that the SBC/AT&T; merger will "create a virtual monopoly over much of California, making it impossible for smaller companies to compete," leaving dissatisfied customers with few options.
In California, the local mainstream media has been appallingly silent about SBC's scandalous attempt to ram through their takeover without public participation. That plan was only recently foiled by public interest groups who filed a formal Protest with the California Public Utilities Commission (CPUC) to force SBC to hold public hearings throughout the state in June and July. Over 500 Community Leaders and members of minority, low-income, and senior citizen groups demonstrated at the seven hearings in defiance of SBC's attempted coup. The groups were forced to request special public access from the CPUC due to "SBC's failure to provide adequate notice of the hearings."
The pending takeover blitz obviates the need for a crash course in the shameful history of the Telecommunications Act.
The Telecommunications Act was a law that would change the lives of all Americans. It was also a law that did not involve average citizens. Business and Economics journals did not write about the legislation in terms of its impact on the public. As media scholar Robert McChesney accurately observed, "The Telecommunications Act was covered as a business story, not a public policy story... the lack of public debate surprised even veteran Washington insiders," McChesney wrote, quoting one lobbyist: "I have never seen anything like the Telecommunications Act... the silence of public debate is deafening. A bill with such astonishing impact on all of us is not even being discussed."
The Telecom Act reflected the priorities of special interests-local phone companies, long-distance providers, and cable and broadcast corporations. While these special interests often disagreed among themselves, they all wanted Congress to allow them more "flexibility"-and less regulation. In return, they promised more diversity, more choices, lower prices, more jobs and a thriving economy.
But almost before the ink on the legislation was dry and despite assurances by elected officials that the law would benefit consumers, many of the same industries that initially agreed to its terms went to court to block them. They appealed to Congress and the FCC to relax already-diluted rules and regulations. By leaving regulatory discretion to the FCC, the Telecom Act gave it the power to issue rules that often sabotaged the intent of Congress. When control of the House passed from Democrats to Republicans, deregulators had a field day and while corporate interests all had a seat at the table when the bill was being negotiated, the public did not.
Back in 1984, the courts and the Department of Justice attempted to break up the huge AT&T; telephone monopoly, resulting in the creation of seven Regional Bell Operating Companies (RBOCs) known as the "baby Bells." The companies immediately pushed for deregulation-promising in turn to give competitors fairly priced access to their local exchange networks. The idea they said was to create more competition for local phone service.
The resulting legislation allowed local phone companies to offer long-distance outside of their service areas but stipulated that long-distance within these areas could be offered only after the companies had opened their local markets to competition. But instead of increasing competition, the Bells merged with one another, reducing the seven RBOCs to four. The Telecom Act promised over a period of ten years to save consumers $550 billion, including $333 billion in lower long-distance rates, $32 billion in lower local phone rates, and $78 billion in lower cable bills. Instead, the public got more media concentration, less diversity, and higher prices. Since the Telecom Act's passage, cable rates have surged by some 50 percent and local phone rates have risen 20 percent.
Those supporting the legislation predicted the Telecom Act would add 1.5 million jobs and boost the economy by $2 trillion. But by 2003 elected officials reluctantly began admitting to a $2 trillion dollar loss in the telecommunications sector and a loss of 500,000 jobs between 2001 and 2003. Those losses had much to do with corporate malfeasance at MCI WorldCom and the meltdown of other big corporate players caught in the act of swindling investors.
The dire repercussions were exacerbated by the frenzy of speculative investment and conflicts of interest spurred by the Telecom Act. The devastation was further fueled by the flurry of new companies - many of whom had raised hundreds of billions of dollars to enter the local telephone business-being effectively shut out by the baby Bells refusal to open their local markets.
In 2001 the Consumer Federation of America and Consumers Union concluded that the 1996 Telecommunications Act had done "virtually nothing to bring consumers competition for local phone service." While cell phones have been hailed as boons to consumers, Consumer Federation points out that for local phone service, "wireless phones are more costly on a per-minute basis, less dependable and are not completely connected to local emergency 911 tracking systems." Further exacerbating the situation, the Telecom Act relied in many instances on the FCC to ensure the legislation's goals of competition and innovation but since the Act's passage, the FCC has consistently issued rulings that have sided with special interests-and against the public.
The impact of the Telecom Act on once-thriving community radio stations has been devastating. As a growing number of local stations attempt to offset their costs by resorting to corporate underwriting, terms like "community-owned," "listener-sponsored" and "public" radio have all but lost their meaning. In many cases these terms are mere buzzwords to fool listeners into continuing their financial support-not accurate representation of station policy. This trend of corporate modeling has resulted in the near extinction of true community radio and the erosion of local programming, staff morale and political integrity. Corporate allegiance to the bottom line has forced local TV and radio stations, often owned and/or underwritten by non-local corporations, to produce less local public affairs programming and to hire less local staff. Increasingly, only the volunteers are local with much of the paid staff being drafted from out of town stations.
In 2002 the Future of Music Coalition documented the sweeping changes that deregulation of radio had produced, noting that a mere ten companies dominate two-thirds of the radio audience with two companies, Clear Channel Communications and Viacom (owner of Infinity Broadcasting), controlling 42 percent of listeners and 45 percent of radio industry revenues. Radio monoliths such as Clear Channel have driven out minority radio station owners and made it difficult for non-corporate artists to get airtime on commercial radio. The Coalition further notes that "all radio markets are dominated by four radio companies controlling at least 70 percent of the radio audience-with concentration even greater in smaller markets."
The Project for Excellence in Journalism noted in 2004 that between 1994 and 2001, the number of full-time radio newsroom staff shrank by 44 percent, and part-time news staff by over 71 percent. Study after study has documented that profit-driven media conglomerates are investing less in news and information and that local news in particular is failing to provide listeners and viewers with the information they need to participate in their democracy. The Telecom Act extended the terms of broadcasters' TV licenses and made it more difficult for those licenses to be revoked. Broadcasters were held far less accountable to viewers and even more beholden to shareholders interested in maximizing their profits.
In 1997 broadcasters eviscerated an FCC rule that would have required them to give back their analog spectrum at the end of 2006. They inserted language into legislation stating that they could keep the analog spectrum until 85 percent of viewers in their markets were receiving digital signals. To date broadcasters continue to resist the giveback of the analog spectrum. The same broadcasters who extolled the country's need for high-quality, free TV instead produced reality TV shows requiring few (paid) writers or actors, reduced news staffs and stubbornly resisted requirements that they serve the public interest.
Once the Act was passed broadcasters began downplaying the importance of public access to high quality programming and HDTV. Instead they hyped their ability to use the digital spectrum to broadcast "multiple programming streams" in the same space they could broadcast one analog channel. Talk of high quality pictures and sound for the American public was replaced by discussions of data transmission and paid programming. A majority of Americans today are still not benefiting from HDTV and the US lags behind the rest of the developed world in the deployment of broadband access to the Internet.
Common Cause reports that since 1997, Verizon Communications, SBC Communications Inc., AOL Time Warner, General Electric Co./NBC, News Corp./Fox, Viacom Inc./CBS, Comcast Corp., Walt Disney Co./ABC, and the National Association of Broadcasters, the National Cable & Telecommunications Association, and the United States Telecom Association together gave nearly $45 million in federal political donations. Of that total, $17.8 million went to Democrats and $26.9 million went to Republicans. Those same corporations and three trade associations also spent more than $358 million on lobbying since 1998.
As Congress reviews telecommunications policy, the industry has had nearly a decade to reinforce their relationships with lawmakers and the Administration. Congress now has an opportunity to ensure that citizens have a seat at the table. Priorities for the next Telecom Act must include affordable access to phone, Internet and cable-and policies that encourage true competition and diversity of ownership. Congress should further ensure that no single company or group of companies has the power to control the public's access to mass media. Bell South's F Duane Ackerman recently told a reporter that the new Telecommunications Act could be written in a matter of months, not years. It could also be a "very short bill," resulting in almost complete deregulation of the telecommunications industry. "The basic issue before Congress is simple," Ackerman said. "Can competition do a better job than traditional utility regulation?"
The passage of the Telecommunications Act of 1996 and its consequences offer vivid lessons of what happens when public policy is made largely without informing or consulting the public and when corporations, spending millions on political contributions and lobbying are allowed to skew policy debate and make promises they do not intend to keep. The story of the Telecom Act further demonstrates what can happen when a federal agency-the FCC- is permitted to issue rules that flout what Congress intended.
Today special interests are once again mounting a campaign to get their priorities into law. At least twenty-six states and nine countries have already approved or are in the process of approving SBC's planned buy-out of AT&T.; Australia, Austria, Estonia, Germany, Israel, Norway, Pakistan, Russia and South Africa have already signed on, placing the telecommunications giant on track to complete its merger by late 2005 or early 2006.
In accordance with Section 854(b)and(c), the PUC must approve mergers involving large telephone companies to ensure that economic benefits are distributed to shareholders and ratepayers, that the merger will not negatively impact competition and that the merger is in the public interest. SBC and AT&T; insist that their merger application should not be subject to any of these requirements, making citizen input all the more essential-and the window of opportunity for such input is rapidly closing. There are many ways to plug in and get heard. Best websites include www.turn.org, www.commoncause.org and you may also voice your concerns to the CPUC at www.cpuc.ca.gov.
As "consumers" are confronted by a media universe dominated by a handful of mega-corporations, we will need to move quickly to transform ourselves into involved and responsive citizens. A successful transformation requires that, as citizens, we ensure the legislative process is transparent and accountable to the public. What is at risk today is not simply how much consumers pay for access to the Internet or cable TV, but the very essence of American democracy-civic discourse and dissent, how ideas get communicated (or stifled) and whether citizens will have access to the information they need to represent themselves. Entering the national conversation via the Telecommunications Act may be the best and last chance to give substance to the word "democracy."

Sandy Leon Vest is a renewable energy activist and journalist. She has produced news and public affairs programming for public and community radio, including KPFA in Berkeley, KWMR and the National Radio Project in Oakland.

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