The Telecommunications Act of 1996

by Richard E. Wiley

On February 8, 1996, President Clinton signed into law the Telecommunications Act of 1996 ("the Act'). This bipartisan legislation represents the most comprehensive overhaul of the country's telecommunications laws in more than 60 years. The Act is expected to transform the communications landscape by eliminating regulatory barriers and encouraging competition in nearly every sector. It is also likely to have a profound effect on the Federal Communications Commission ("FCC"). The legislation's deregulatory measures, as well as the heavy administrative workload required to implement them, already have the agency significantly rethinking and revamping a number of its existing procedures.

The original Communications Act, passed in 1934, was enacted at a time when telephone, cable, and broadcast technologies were quite distinct and addressed different consumer needs. Accordingly, both the statute and its implementing regulatory scheme were designed to compartmentalize the various sectors of the telecommunications industry. But as technology evolved, the potential for competition became more apparent. In the last several decades, the FCC has tried to ease or eliminate anachronistic restrictions, but the confines of the agency's statutory authority have been a limiting factor in this regard.

The new Act begins to address the realities of today's converging marketplace by eliminating barriers that inhibit or preclude the entry of new competitors into various industry sectors. Most notably, the statute removes regulatory restrictions that have prevented the local Bell Operating Companies ("BOCs") from providing long distance telephone service and from engaging in certain other prohibited activities, such as manufacturing and electronic publishing. However, because of a concern that the BOCs' monopoly control of the local telephone market also would allow them to dominate long distance service, the legislation requires as a prerequisite to entry that the local market first be opened to competition. The Act attempts to ensure this policy through two means: preempting state or local restrictions that prohibit any entity from providing local telephone service, and conditioning long distance entry on a BOC's implementation of measures designed to ensure that other telecommunications service providers can obtain nondiscriminatory access and interconnection to its local network.

In addition, the Act eliminates the ban on telephone company provision of video service, authorizes a telephone company to provide service as a traditional cable operator or through an "open video system" (in which capacity must he available to other programmers on a common carrier-like basis). However, in order to ensure the competitive benefits of two wires to the home, the legislation generally prohibits a cable operator from acquiring a telephone company or vice-versa in the same market. In order to further spur competition in the video marketplace, the Act also provides for the elimination of most cable rate regulation (except for basic broadcast service) three years after enactment, or sooner upon competition.

Broadcasters are also beneficiaries of the deregulatory provisions of the new statute. It substantially liberalizes restrictions on the number of broadcast stations that one entity can own by eliminating the national radio limits and relaxing the national cap on TV ownership. It also eases restrictions on radio ownership within the same local market, but leaves local TV ownership restrictions in place pending further FCC review. Additionally, the Act permits TV network/cable cross-ownership and eliminates the statutory (but not the FCC's) ban on broadcast/cable cross-ownership in the same local market.

Despite its generally deregulatory tone, the legislation contains several provisions that would permit government regulation of content. For example, the Act requires most new TV sets to be equipped with a "V- chip" that can he programmed by parents to block violent or sexually explicit programming. The legislation requires the television industry to establish a system for rating such programming, although the FCC is permitted to step in if it is dissatisfied with the system. In addition, the Act would prohibit any person from sending patently offensive communications to a minor via a computer or from making such communications generally available on the Internet. Serious First Amendment concerns have been raised about both of these provisions.

The sweeping regulatory changes embodied by the new law will require extensive revisions to the FCC's rules and regulations. The Commission itself has estimated that implementation will require more than 80 different proceedings, covering at least 38 separate issues. Given its limited resources, there has been considerable speculation as to how the agency will accomplish these tasks in the expedited time frame required by the legislation, while still meeting its existing responsibilities.

The Act provides some guidance to the FCC in this regard. It specifically eliminates Commission oversight in certain areas by deleting various licensee requirements. The legislation also generally directs the agency to forbear from regulating telecommunications carriers or services where such regulation is no longer necessary to protect the public interest. Additionally, it authorizes the FCC to privatize certain functions, such as the certification and testing of radio and computer equipment and field inspections of radio facilities.

The FCC itself has already taken steps to reduce remaining oversight functions and to conserve limited resources. Within days of the legislation's enactment, the Commission initiated an inquiry as to how best to simplify agency processes and improve its delivery of services. FCC officials also have met with industry representatives to discuss strategies for expediting the rulemaking process and other requirements. A number of proposals to streamline the Commission's administrative procedures are being considered -- for example, submission of draft orders (similar to the practice of U.S. District Court); significantly shorter pleading periods; a policy against extensions of time; the filing of summarized arguments; the elimination of recitation of party positions in agency decisions; the expansion of the scope of interpretative rules (not subject to Administrative Procedure Act notice and comment requirements); and a much tougher stance on frivolous filings.

While such procedural modifications should lead to greater administrative efficiency, questions have been raised as to whether some of the more extreme shortcuts would be consistent with the APA. When does responding to the exigencies of Congressional deadlines transcend the APA's minimal accepted requirements? While the provisions of the Act will clearly stimulate a number of legal challenges, the FCC's procedural modifications in its wake may also raise their own concerns.

In all, the 1996 Act is clearly a watershed event. It will contribute greatly to shaping the future of telecommunications in this country, clearly one of the most dynamic sectors of our society and economy.