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I Way Tie Up On Capitol Hill


Information Processing: Telecommunications

I-WAY TIE-UP ON CAPITOL HILL

If there is one thing most Republicans and Democrats agree on, it's the need to reform the nation's 60-year-old telecommunications law. There's little argument that the rules limiting competition in the converging worlds of telecommunications, entertainment, and information--a $1 trillion industry--must be reformed if the U.S. is to lead the way onto the Information Superhighway. So telecom legislation should be a sure thing, right?

Well, maybe not--because of partisan infighting. Consider what happened last year: The House, after six months of negotiations, passed a bipartisan deregulation bill by a 423-to-5 vote. Then, a month before the November elections, Senator Ernest F. Hollings (D-S.C.) killed the measure--after Senator Bob Dole (R-Kan.) added a list of "nonnegotiable" demands favoring regional Bell operating companies (RBOCs).

The mood on Capitol Hill is even more intensely partisan now, which makes ironing out the divergent Democratic and Republican approaches dicey. "People want to vote for competition," says Scott Cleland, an analyst at Washington Research Group, a unitc of Mabon Securities Corp. "But we don't know if, in three to five months, the Democrats and Republicans will be on speaking terms."

GOP POWWOW. The bickering is derailing a lot more than the legislative process. Regulatory uncertainty is depressing telephone stock prices, holding up decisions on billions of dollars worth of I-way investment, and slowing the rollout of such consumer goodies as interactive TV and a choice of local carriers. Plus, industry studies estimate deregulation could create up to 4 million jobs. "Every day that this act is not updated is a missed opportunity for us," says Jamie DePeau, Washington spokesperson for Nynex Corp. "We're very anxious."

No wonder. Party intrigue is already overshadowing lawmaking. On Jan. 19 and 20, CEOs of many big phone companies met privately with House Republicans: No Democratic lawmakers were invited. And the Senate Commerce Committee scheduled only Republican witnesses--Dole among them--at a Jan. 9 telecom hearing. As for the Democrats, Representative John D. Dingell (D-Mich.) reintroduced last year's bill on Jan. 4 without first discussing it with Thomas J. Bliley Jr. (R-Va.), chairman of the House Commerce Committee, which oversees telecom legislation. "These kinds of things are bound to cause political differences," says H. Brian Thompson, CEO of LCI International Inc., a long-distance carrier.

Nonetheless, vows Larry Pressler (R-S.D.), chairman of the Senate Commerce Committee, Congress will pass a bill by July 4. To industry skeptics, that seems impossible. Even Gary W. McBee, upbeat chairman of the Alliance for Competitive Communications, the RBOC lobbying group, admits Pressler has "a pretty eptimistic timetable." Pressler dismisses those who say deregulation will again fall prey to infighting. "All I will say is this: The train is leaving the station. We welcome you on board."

ANATHEMA. The big stumbling block is timing on market entry. Last year's bill would have opened local calling to competition immediately, while keeping the Baby Bells out of long distance and cable TV until there was some measurable erosion of their local monopolies. Such an approach is anathema to the RBOCs, which argue that long-distance carriers could hold them up for years with legal challenges. They want a "date certain" on which they are free to enter unregulated industries, no matter how much local competition really exists.

Republicans, who are generally allied with the Bells, favor the date-certain concept. A Senate Republican statement of telecom principles calls for local competition immediately, with the Bells allowed into long distance on Jan. 1, 1998--no matter how big their local market share. If an RBOC can prove significant competition in its market before 1998, it will be able to apply to enter long distance just one year after the bill is passed.

Democrats, siding with long-distance carriers, fear this laissez-faire approach would allow the Bells to use their monopoly power to subsidize entry into the long-distance market while blocking local access. That wouldn't be hard to do, the theory goes, because the Bells own the "final mile"--connections to home or office--of more than 90% of America. That's why Vice-President Al Gore, although a deregulation booster, warns that "the game should not begin on some arbitrary date without rules at all--on the mistaken assumption that a calendar can replace a rule book."

COMMON GROUND. Expect clashes over cable deregulation, too. Some Republicans, including Senate Majority Leader Dole, want to repeal the 1992 Cable Act, with its tough rate regulation. But Democrats are likely to dig in their heels. The law, which the Federal Communications Commission estimates has saved consumers some $3 billion, is popular with voters.

The two parties have one patch of common ground: Both support federally mandated guarantees of universal service--requiring that cheap phone service be available to rural regions and the poorest consumers, subsidized by the entire industry.

So it's nail-biting time. Industry sources say the closed-door meetings with Republican lawmakers did not move the process ahead but did give all sides an opportunity to air views in a nonconfrontational setting. And J. Michael Brown, AT&T's vice-president for federal legislation, thinks the Republicans are not being exclusionary--they are merely trying to coordinate their views before reaching out to the Democrats. "I do think that in the end we will see a bipartisan effort again as we did in 1994," he says.

Such an effort might pay off for everyone. Just look what competition did for the folks at AT&T, says Thompson of LCI: "Since 1984, they've lost 40% of their market share, their rates came down 60%--and they didn't miss a single quarter of increasing revenues."By Catherine Arnst in New York


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