Telecom bill spurs high-tech bedlam

The Telecommunications Reform Bill, signed by President Clinton Feb. 8, will affect the Northern Front Range much like the rest of the nation: It will lead to increased competition between telecommunications providers and more options for consumers.
The bill removes barriers between different service providers, allowing all telecommunications companies to expand into each other’s business. However, the bill, the first rewrite of telecom law since 1934, may hurt some local businesses, especially those involved in Internet services. And it is unknown whether it will actually lower prices for consumers.
U S West Inc., one of the seven Baby Bells, has had a monopoly on local phone service in Colorado and Wyoming since the breakup of AT&T Corp. in 1984. U S West posted revenues of $11 billion in 1994 and served 25 million customers. Now it will compete with MCI, AT&T, Tele-Communications Inc. and many other companies for local service.
The breakup of U S West’s monopoly had already begun through state legislation in Colorado before the federal law passed. Terry Anderson, district operations manager in Fort Collins, said the Colorado Public Utilities Commission is working on establishing rules regarding how new competitors will enter the Colorado market. The rules should be available for public comment by spring.
One concern being addressed by the PUC is universal service. U S West subsidizes service to rural areas with money from urban areas. With increased competition in urban areas, U S West may lose that ability. The PUC will establish funding mechanisms in order to guarantee continued service to less-populated areas.
Another issue questions how new local providers can connect to U S West lines and how much they should pay for that access.
Anderson said local services are already offered below cost and are subsidized by U S West’s business and long-distance services, making the issue of resale even more complex.
“Some long-distance companies want to connect (to U S West lines) for free, but U S West has put billions of dollars into establishing its network. It needs to recover that cost,” Anderson said.
U S West plans to offer long-distance service, but the Federal Communications Commission has six months to establish a competitive checklist that must be met before Bell companies can enter that market.
Currently, the seven Bell companies nationwide provide 75 percent of local phone service, a $98 billion market. The largest local telephone company, GTE Inc., has already made a contract with WorldCom Inc. to resell long-distance services.
MCI, whose annual revenue is more than $15 billion, is one company that plans to compete in the local phone market. It has already built fiber-optic rings in 25 major cities that will allow it to provide local service without using U S West wires.
“You will see us do some resale and build some of our own facilities,´ said Robert Stewart, MCI’s spokesperson.
MCI is in talks with AT&T about forming a partnership to build joint facilities, Stewart said. MCI recently spent $682.5 million for a license that allows it to launch a direct-broadcast television satellite, which will cost an additional $2 billion. MCI also offers Internet software and access and wireless services.
AT&T also has plans to eventually offer consumers local, long-distance, wireless, on-line and entertainment services.
AT&T’s chairman, Robert Allen, announced that the company is taking steps to provide local phone service in all 50 states this month and could be offering service by late summer. In a news conference, Allen said AT&T may be able to win a third of the local market within five to 10 years.
AT&T recently formed a partnership with DIRECTV, which will offer 150 channels by satellite to its customers. AT&T may also get into the cable market.
Phillips Bradford, executive director at the Colorado Advanced Technology Institute, a state agency for science and technology, said that at first glance it looked like AT&T and MCI could lose in the battle for competition. But in the long term, AT&T may win customers because it may be able to provide a technology called Personal Communications Services that would allow customers to run their computers, phones, and cable television without any wires, he said.
In March last year, AT&T merged with McCaw Cellular Communications, spending $1.685 billion for 21 wireless licenses that more than doubles its service area. AT&T is now the nation’s largest supplier of cellular services.
Cable TV companies may also benefit from the bill. The bill allows them to get into other markets and deregulates rates for small cable companies immediately. It also deregulates rates for larger companies by March 1999 or sooner if a company is competing with a telephone company for cable customers.
TCI, which recently purchased Columbine Cablevision in Fort Collins, may eventually get into local and long distance.
“We have an advantage because cable is wired for customers’ homes,´ said Larae Marsik, media-relations manager for TCI. “The networks are already in place but would have to be upgraded for local phone service.”
TCI is working on a wireless technology called digital TV, a technology that compresses video signals, increasing the available channels into the hundreds.
Scripps Howard Cable Co. in Loveland, which is being purchased by Comcast, also plans to expand.
“Ultimately, we will provide some type of telephone communication services,´ said Greg Griffin, general manager at Scripps Howard.
The cost of cable television could increase, Griffin said, but with the increase of competition, prices should stay competitive.
“We have to be extra sensitive about any price changes. If the prices are too high, that would open a door for competitors,” he said.
Interwest Communications Corp., which provides local business lines and other services in Colorado, said the bill provides companies with more options.
“Companies will have more to choose from to provide day-to-day service,´ said Steve Noland, sales manager.
Interwest has problems “every day” providing regular business lines to customers, because U S West doesn’t have enough lines, Noland said. It is also extremely hard to get what is called Integrated Services Digital Network. These lines transfer data at high speed, allowing a customer to speak over the telephone, see the person they are speaking to, and transfer large amounts of data over their computers, all at the same time.
“When that becomes a reality, it will have considerable impact, because it would be a phone system that links directly with your computer system,” Noland said.
Other local business owners are worried about too much consolidation, and some say prices might rise.
“There will be a competitive market, but prices tend to go up when you take regulations off,´ said one local business owner.
However, the price of long distance has declined since AT&T’s break up. More than 400 companies have competed in the long-distance market since that time, and long-distance costs have dropped 65 percent.
In addition to allowing companies to expand, the bill also allows TV stations to reach 35 percent of the national audience instead of 25 percent and allows radio operators to purchase more outlets.
The law also requires that all new television sets include a V-chip, a mechanism that will allow parents to block programs that contain violent or sexual content. The role of broadcasters in how these programs will be marked is not yet clearly defined.
Rod Bricker, owner of Western TV in Greeley, said he doesn’t believe the V-chip will work.
“I think it is a stupid idea,” he said. “It will not stop kids from accessing pornographic shows. If you let a kid loose with a computer, he’ll have it figured out in 15 minutes.”
Probably the most controversial part of the new law is the provision that bans transmission of “indecent ” materials over the Internet. The act defines indecent as “any comment, request, suggestion, proposal, image or other communication that, in context, depicts or describes, in terms patently offensive as measured by contemporary community standards, sexual or excretory activities or organs.”
Since the bill was signed, hundreds of computer screens on the World Wide Web, a popular Internet service, were turned black in protest. The American Civil Liberties Union has filed suit against the provision, saying it is unconstitutional and infringes on freedom of speech.
John Burke, vice president of Verinet Communications in Fort Collins, said the law is too vague and that even useful information, such as information on breast cancer or sexually transmitted diseases may be considered “indecent.”
“What one person finds as indecent may be totally different than what another finds as indecent,” he said. “I hate being a snoop and a censor.”
Burke said he thinks the provision will be thrown out. But if it isn’t, his business and anyone who uses the Internet would be affected. It would take a lot of money to hire operators for screening out “indecent” material, also leading to higher prices for Internet users, he said.
“We would have to divert resources or shut down altogether,” Burke said.
Jamison Gulden, president of the Northern Colorado Internet Cooperative Association, said he thinks it would be impossible to block out all indecent materials. People would start copying or “mirroring” information that is being banned on the Internet, making it difficult to track down all indecent material.
“It would be a full-time job to find where the information is coming from,” he said. The case will probably go to the Supreme Court. As of now, if a person is accused of sending indecent material over the Internet, he or she may have to pay up to $250,000 in fines or serve a jail term of up to five years.
The new law will obviously have a large effect on all communications businesses in Northern Colorado, southeastern Wyoming and elsewhere. Companies will continue to merge, form partnerships, and produce new technologies. Some companies will grow, while others may go out of business. The consumer will certainly have more choices, but the net result remains to be seen.