National Telecommunications and Information Administration

February 4, 1999


THE TELECOMMUNICATIONS ACT OF 1996

Table of Contents

OVERVIEW and SHORT SUMMARY OF THE TELECOMMUNICATIONS ACT OF 1996
UNIVERSAL SERVICE and "E-RATE"
LOCAL COMPETITION
ACCESS CHARGES
BELL COMPANY ENTRY INTO LONG DISTANCE SERVICE
BROADBAND FACILITIES AND SERVICES
TELEVISION BROADCAST OWNERSHIP
OTHER ISSUES RELATED TO THE TELECOMMUNICATIONS ACT OF 1996:

Digital Television Deployment
Cable Rate Regulation
Open Video Systems
Communications Decency Act (Internet Pornography
V-Chip
Wireless Facilities Siting
Satellite Television Antennas
bullet Click here to read or download the full text of the Act and related materials.


TELECOMMUNICATIONS ACT OF 1996

OVERVIEW

On February 8, 1996, President Clinton signed landmark telecommunications reform legislation into law. The overwhelming bipartisan support for this new law demonstrated America's commitment to ensuring that all citizens benefit from the information superhighway now and in the next century. The Act contained provisions to, among other things: i) open competition between local telephone companies, long distance providers, and cable companies; ii) help connect all classrooms, libraries, and hospitals to the information superhighway by the end of this decade; iii) give families control of the programming that comes into their homes through television; and iv) prevent undue concentration in television and radio ownership so that a diversity of voices and viewpoints can continue to flourish in this Nation.

The Federal Communications Commission (FCC) was given the task, in some places in conjunction with State governments, of developing regulations to implement the new Act.

The FCC has held numerous rulemakings over the past three years to implement the provisions of the Act. On behalf of the Administration, the Department of Commerce/NTIA has filed comments on many of the key issues, including interconnection, access charges, universal service, broadcast ownership, and advanced broadband services.
 

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SUMMARY OF TELECOMMUNICATIONS ACT OF 1996

Local Competition

Under the Act, each telecommunications carrier has a duty to interconnect with other telecommunications carriers. The Act sets forth specific requirements that local exchange carriers (LECs) must fulfill to meet this duty. Certain exceptions from these requirements are allowed for rural LECs and LECs with fewer than 2% of the Nation's subscriber lines.

Interconnection agreements negotiated between a LEC and other telecommunications carriers must be approved by a State within the Act's deadlines. If a State fails to act, the Federal Communications Commission (FCC) can assume the responsibilities of the State.

No State or local government may prohibit any entity from providing interstate or intrastate telecommunications services. Limited, nondiscriminatory exceptions to this rule are allowed for certain State and local government activities related to public rights-of-way, consumer protection, and other similar issues.

The FCC must establish regulations to allow public utility holding companies to offer telecommunications services.

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Universal Service

A Federal-State Joint Board will make recommendations to the FCC regarding changes to the definition and funding of universal service. Each telecommunications carrier that provides interstate and intrastate telecommunications services must contribute, on an equitable and nondiscriminatory basis, to universal service.

Upon request, all telecommunications carriers must provide universal service to K-12 schools, libraries, and rural and non-profit hospitals at preferential rates.

The Communications Act is amended so that the FCC's general universal service responsibility includes making communications available to all people of the United States "without discrimination on the basis of race, color, religion, national origin, or sex."

The Act requires telecommunications equipment and services to be accessible to and usable by individuals with disabilities, to the extent this is readily achievable.

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Provisions Concerning Bell Operating Companies (BOCs)

Upon enactment, a BOC may apply to the FCC for authorization to provide in-region long distance services if it has entered into an approved interconnection agreement and meets the "competitive checklist" and other requirements in the Act. The FCC may approve the authorization if the BOC meets these requirements and the authorization is in the public interest. A BOC must provide such service through a separate affiliate for 3 years after enactment. A BOC may also, upon enactment, provide out-of-region and incidental long distance services, as well as already authorized long distance services.

A BOC may engage in manufacturing if it is in compliance with the Act's interconnection, nondiscrimination, and cross-subsidy requirements. Such activity must be done through a separate affiliate for 3 years after enactment.

BOCs are permitted to engage in electronic publishing through a separate affiliate or joint venture, subject to the Act's non-discrimination and cross-subsidy requirements. These requirements sunset in 4 years after enactment.

BOCs are not permitted to engage in alarm monitoring before 5 years after enactment (except for certain already authorized activities).

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Broadcast Services

The Act encourages the FCC to limit initial eligibility for advanced television (ATV) licenses to existing broadcasters. Licensees that use ATV spectrum for services other than ATV for which a fee or other compensation is received must in turn pay a fee to the FCC based on the market value of the spectrum used for these "pay" services.

The Act extends radio and TV license terms to 8 years and loosens rules on license renewal, eliminating the need for comparative hearing in most cases.

The Act eliminates the FCC's national ownership cap for radio stations and modifies local radio ownership limits. The Act increases the national audience reach for TV station ownership to 35% from 25%. The FCC will conduct a rulemaking to determine whether local TV ownership limitations should be modified or eliminated.

The Act eliminates the FCC's network-cable cross ownership rule and the statutory broadcast station-cable cross ownership restriction, but retains the FCC's regulatory broadcast-cable and broadcast-newspaper ownership bans.

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Cable Services

Regulation of expanded basic cable rates sunsets on March 31, 1999. The Act deems effective competition to exist (and therefore rate regulation to cease) if a local telephone company offers "comparable" video programming in a community. The Act deregulates rates for cable programming services and some basic services offered by small cable systems immediately.
 


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Telephone Company Provision of Video Programming

The Act gives telephone companies the option of providing programming on a common carrier basis or as a conventional cable operator. If it chooses the former, the telephone company will face less regulation but will also have to comply with FCC regulations requiring "open video systems."

The Act generally bars, with certain exceptions including most rural areas, acquisitions by telephone companies of more than a 10% interest in cable operators (and vice versa) and joint ventures between telephone companies and cable systems serving the same areas.

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Regulatory Reform

The Act requires the FCC to forbear from regulating telecommunications carriers or services if it determines that regulation is not necessary to ensure reasonable rates, protect consumers, or otherwise promote the public interest.

The Act removes current restrictions on foreign officers and directors serving on the board of broadcast and other radio licensees or their holding companies. (The Act, however, retains the overall equity and voting control limits on such foreign ownership as set forth in 47 U.S.C. 310(b).)

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Obscenity and Violence

The Act makes illegal the transmission by computer of obscene or indecent communications to minors. Certain "good faith" defenses are provided for on-line services and users.

To address violence on television, the Act requires TV manufacturers, within 2 years of enactment, to include blocking technology (the "V-chip") in all TV sets. The Act encourages the broadcast and cable industries to create a voluntary rating system within one year. If they do not create a rating system, the FCC would establish an Advisory Committee to recommend a rating system. Use of ratings would be voluntary, but any rating must be sent electronically.

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Miscellaneous Provisions

The President must prescribe procedures by which Federal agencies may facilitate appropriate access to Federal property for the siting of wireless services. State and local governments must act within a reasonable time period on siting requests for wireless services.

A Telecommunications Development Fund under the auspices of the FCC is established for the purpose of promoting access to capital for small businesses and promoting delivery of telecommunications services to underserved rural and urban areas. The fund is financed through the interest on spectrum auction deposits.

The Act establishes in the District of Columbia the National Education Technology Funding Corporation, a nonprofit corporation which has authority to receive assistance from Federal agencies for the purpose of stimulating investment in education technology infrastructure through public-private ventures.
 


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UNIVERSAL SERVICE and "E-RATE"

Section 254 of the Act expands the concept of universal service and requires the Federal Communications Commission (FCC) to establish a panel of Federal and State regulators (the Federal-State Joint Board) to develop recommendations on defining and funding universal service. In addition, Section 254 provides for a discounted rate for eligible schools and libraries (through the "education rate" or "e-rate") and for rural health care providers that are connecting to the National Information Infrastructure (NII).

BACKGROUND: The goal of universal service — i.e. the availability of basic communications services to the public at just, reasonable, and affordable rates — has been a cornerstone of U.S. communications policy for over sixty years. Traditionally, this concept has pertained to telephone service. The 1996 Act expanded this goal by requiring that the FCC define universal service, taking into account advances in telecommunications and information technologies.

About 94% of all U.S. households now have telephone service. The FCC promotes increased telephone subscribership in two main ways: (1) the Universal Service Fund (USF), also called the "High Cost Fund," to help telecommunications carriers mitigate high costs existing mainly in rural and insular areas; and (2) the "Lifeline" and "Link-up America" initiatives, aimed at helping low-income subscribers pay for the costs of telephone service. All interstate telecommunications carriers, as well as payphone aggregators, must contribute to universal service. Internet and on-line service providers and cable companies do not have to contribute to universal support mechanisms unless they provide telecommunications services.

The Administration worked with Congress to pass the 1996 Act and to expand traditional universal service to include support for schools, libraries, and rural health care providers connecting to the NII. The Administration has been actively involved with implementation of the new support systems, particularly the "e-rate." NTIA is also helping to develop a high-cost fund for rural areas, and a survey of low-income support at the state level. NTIA has also promoted "universal access" to the Internet through its TIIAP grants program and periodic assessment of household penetration (Internet and telephones) in its on-going Falling Through the Net studies.

STATUS: Pursuant to the Act, the Federal-State Joint Board issued recommendations in late 1996, which the FCC adopted in large part in its May 1997 decision. Among the issues that were decided were: (1) what package of telecommunications services must be made available and affordable for all Americans; (2) what segments of U.S. society need support to ensure that service is affordable; and (3) how regulators should implement the Act's mandate that basic and advanced services be made available to schools, libraries, and rural health clinics at discount rates. The new universal service includes support for high-cost areas, low income households, and for the first time, key institutions in education and health care that otherwise might not be able to participate in the Information Age.

Rural, Insular, and Other High Cost. The FCC has not yet determined the methodology for calculating support for rural and urban high cost areas. It anticipates that the mechanism for non-rural carriers will be implemented by July 1999. The mechanism for rural carriers will not be operational before 2001. USF funding totaled $1.7 billion in 1998.

Schools and Libraries (E-Rate): Under the "e-rate" program, a telecommunications carriers must provide, upon request by an eligible school or library, any commercially available telecommunications services, internal connections among classrooms, or access to the Internet — all at a discounted rate. Discounts range from a minimum of 20% to 90% for the most economically or geographically disadvantaged schools and libraries. Total expenditures for support for schools and libraries are capped at $2.25 billion.

The DOC and other parts of the Administration have supported the "e-rate" program against attacks from Regional Bell Operating Companies, interexchange carriers, the GAO and Members of Congress. Last year, Congress considered, but did not pass, legislation to significantly modify the FCC program. The FCC subsequently cut the funding level from $2.25 billion per year to $1.9 billion through June 30, 1999. This year, in the 106th Congress, there are a number of new proposals to reduce or eliminate the e-rate. The Tauzin-Burns bill, for example, would subsidize the e-rate program through federal excise tax funds rather than the universal service program. There are also proposals for an "E-Rate Termination Act."

The Schools and Libraries Division has issued six rounds of commitment letters to schools and libraries so far: the first wave was released on November 23, 1998, and the most recent wave was released on January 28, 1999. Altogether, approximately $ 620 million of the $1.9 billion has been committed for schools and libraries to date.

Health Care Providers: Approximately 9,600 - 12,000 health care providers in rural areas in the U.S. are eligible to receive telecommunications service support. Although $100 million in funding was anticipated for 1998, applications have only requested about 10% of that amount. A partial refund of monies contributors to the fund is being considered.

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LOCAL COMPETITION

Section 251 of the Act seeks to foster competition in the local telephone market by requiring incumbent local exchange carriers (ILECs) to make their facilities available to competing local exchange carriers (CLECs). Section 252 creates a process by which those basic obligations can be turned into working interconnection agreements between ILECs and CLECs. Section 253 of the Act buttresses the market-opening requirements of section 251 by eliminating most State and local barriers to competitive provision of local telecommunications services.

BACKGROUND: The 1996 Act advances the Administration's objectives to create an advanced telecommunications system, available to all Americans at affordable prices, through the principles of competition, open access, and universal service. Entry by competing carriers can be costly if it requires duplicating facilities to offer telephone service.

The Act facilitates entry by permitting use of a LEC's existing network through interconnection, unbundling, or resale. Specifically, section 251 directs ILECs to (i) interconnect with CLECs on reasonable terms; (ii) make unbundled network elements (UNEs) available to CLECs on just, reasonable, and nondiscriminatory terms; or (iii) make any service the ILEC offers at retail available to CLECs at a reasonable discount.

STATUS: The FCC adopted regulations on August 8, 1996 to implement the requirements of Section 251. Most controversially, the FCC established national principles and procedures for determining the prices of interconnection and UNEs, as well as the resale discount. ILECs and State regulatory commissions appealed the FCC's order and in July 1997, the United States Court of Appeals for the Eighth Circuit invalidated key parts of that order, including the new pricing rules. Recently, however, the Supreme Court reversed the Eighth Circuit and largely affirmed the FCC's order, including the agency's claimed authority to govern the pricing of interconnection, UNEs, and resold services.

It is hoped that the Supreme Court's ruling, by removing the uncertainty over the scope of the section 251 requirements, will accelerate the growth of local competition. The Act has already produced significant local competition, particularly in the business market. CLECs are growing in number and capturing an ever greater percentage of existing customer lines. After much anticipation, cable operators and even electric utilities are also beginning to offer local service in selected areas.

The White House CEA's Report demonstrates the benefits of competition: we are seeing lower rates and a greater investment in the nation's infrastructure and economy. According to the CEA report, CLECs have invested more than $20 billion and are now employing more than 50,000 workers. The FCC also reported that new competitors tripled the amount of fiber they had in place between 1995 and 1997. These developments will contribute to the growth of electronic commerce and enable more Americans to gain access to the NII.

Since the passage of the Act, there has also been a significant increase in merger activity that may impact local competition. Soon after the Act's passage, four of the seven Bell regional holding companies announced promised mergers: Bell Atlantic acquired NYNEX, and SBC acquired Pacific Telesis. The passage of time has brought more mergers among the Bells and local carriers: Bell Atlantic/GTE and SBC/Ameritech are among those pending. Many argue that these mergers will have a detrimental impact on local competition. The Department of Justice and the FCC have not yet issued a decision on many of the pending merger applications.

In another proposed merger that may affect local competition, the AT&T - TCI proposed merger is gaining momentum, having received approval from the Department of Justice on December 30, 1998. The FCC, however, has not yet approved the merger. AT&T also recently announced a deal to offer local telephone service over Time Warner's cable system in 33 states.

The significance of AT&T's actions is that it is bypassing the "local loop" to provide local phone service through alternative means.

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ACCESS CHARGES


"Access charges" refer to the fees that long distance companies (interexchange carriers, or IXCs) pay local exchange carriers (LECs) for the IXCs' use of the LECs' networks to originate and terminate long distance calls. Although the 1996 Act does not mandate access charge reform, the level and structure of access charges has implications for local competition and universal service. Former FCC Chairman Hundt therefore included access charge reform among its "trilogy" of proceeding to implement the 1996 Act (along with its local competition and universal service proceedings).

BACKGROUND: The need for access charges arose with a Depression-era Supreme Court decision declaring that because long distance calls "use" local networks to some degree, long distance rates must bear some of the costs of those networks. For many years, access payments were handled as intercorporate payments between the local and long distance components of the unified Bell System. For the most part, those fees took the form of per minute charges applicable to each long distance call.

With the AT&T divestiture in 1984, the FCC needed to develop a new mechanism for assessing and collecting access charges. The FCC required LECs to create and to file access tariffs to be paid by IXCs. Because a large proportion of the local network costs that access charges recover do not vary with long distance usage, the FCC decided to begin recovering some of those costs via flat charges (the so-called subscriber line charge, or SLC), instead of usage-based, per minute charges. Since 1984, the SLC has increased (from about $.50 per month to $3.50 per month), permitting substantial reductions in per minute rates. The reduction in per minute rates, in turn, has translated into substantial reductions in long distance rates.

Apart from deciding that access charges should be assessed through a combination of flat charges and per minute charges, the FCC has not done much about the actual levels of those charges. Even when the FCC adopted price cap regulation for most LECs [which fixes an initial rate for regulated services, then allows those rates to fluctuate over time in accordance with changes in inflation and industry productivity], the FCC set initial access rates at the levels dictated by the LECs' historical costs.

STATUS: In response to complaints that access rates are too high, and realizing that the LECs' historical costs probably do not reflect the true costs of providing access services, the FCC in May 1997 revisited its access charge rules. It further reduced per minute access charges by choosing to recover a larger share of access costs on a flat rate basis. As importantly, the FCC considered ways to reduce access rates. It effected a one-time reduction in those charges by increasing the productivity factor in the LECs' price cap formula, which caused a specific percentage decrease in LEC access rates. The FCC eschewed the further step of reducing access rates further to reflect some measure of "true" economic costs. It chose instead to rely on the competitive forces to be unleashed by the 1996 Act to force the LECs to reduce their access rates over time, or risk a loss of revenues.

Since the FCC's 1997 decision, IXCs have complained that, though competition has increased, it has not grown sufficiently to impose any market constraint on LEC access rates. As a result, IXCs are urging the FCC to order additional reductions in access rates, either by increasing the price cap productivity even further, or by aligning access rates with long run incremental costs, rather than historical costs. They have also suggested that reduced access charges would enable them to absorb the added costs of universal service (including the schools and libraries program) without having to increase long distance rates.
 
 

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BELL COMPANY ENTRY INTO LONG DISTANCE SERVICE

Section 271 of the Telecommunications Act of 1996 establishes the rules and procedures whereby certain local exchange carriers — the Bell Operating Companies (BOCs) — may seek entry into the "Inter-LATA" (long distance) market.

BACKGROUND: The 1984 AT&T Consent Decree divided the Bell System into two major service components — AT&T's long distance business and the seven BOC local telephone operations. The Decree allowed the BOCs to market a wide range of telecommunications services within designated "local access and transport areas" (LATAs), but precluded them from offering services that cross LATA boundaries.

The 1996 Act modified the Decree's "interLATA restriction" by permitting each BOC to provide interLATA services outside of its monopoly service region (e.g., Ameritech may market long distance services between New York and Washington) and to offer certain "incidental" interLATA services (e.g., cable television service, wireless services) within its region. However, the Act bars a BOC from offering any other interLATA service within any of its operating region unless it applies for and receives authorization from the FCC.

Section 271 specifies that the FCC may not grant a BOC's application to provide in-region, interLATA services unless the BOC demonstrates that (1) either one or more competitors provides local telephone service to some residential and business in the State in which the BOC seeks to provide service or no competitor has sought to enter the market, (2) the BOC makes available to competitors a range of services, facilities, and capabilities enumerated in a so-called "competitive checklist," and (3) that grant of the BOC's application will be in the public interest. In making that determination, the FCC must consult with the regulatory commission for the State implicated in the application and must solicit and accord "substantial weight" to the views of the Department of Justice.

STATUS: To date, the Commission has reviewed and rejected applications by three BOCs to provide interLATA services in four different States, including a request by Ameritech to operate in Michigan. A recurring problem has been the BOCs' failure to comply fully with the competitive checklist. The focus of concern has been ensuring reasonable access to the BOCs' "back office" ordering, billing, installation, repair, and maintenance systems that competitors need in order to put together alternative local telephone services.

The Administration views the prospect of interLATA entry as an important "carrot" to induce the BOCs to open their local exchange markets and networks to competition. Accordingly, the Department of Justice has been reluctant to approve any BOC interLATA application until DOJ is convinced that the BOC has complied fully with the competitive checklist.

The FCC's failure to grant any interLATA relief has caused considerable consternation in Congress. Some have alleged that local competition has not burgeoned because long distance companies have deliberately avoided local entry to forestall BOC entry into the interLATA market. Some members of Congress (including Rep. Dingell) have raised the prospect of reopening the 1996 Act, in part to modify section 271.
 


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BROADBAND FACILITIES AND SERVICES

Section 706 of the Act directs the FCC to initiate by August 7, 1998 an inquiry to determine whether "advanced services" are being deployed to all Americans in a timely fashion. That inquiry must be completed by February 1999. Section 706 also directs the FCC to conduct similar inquiry on a regular basis thereafter.

BACKGROUND: The incredible growth of the Internet and other advanced communications services has come despite the limited carrying capacity of most consumers' connections to the network. The connection most people have at home is a old-fashioned "twisted-pair" copper wire. It is increasingly important that consumers have more "bandwidth" through more high capacity systems, such as a "digital subscriber line" (DSL) and "cable modem" services.

Anticipating the FCC's August inquiry, several incumbent local exchange telephone companies (ILECs) in early 1998 petitioned the FCC under section 706 to reduce substantially the regulations pertaining to their provision of certain DSL services. In particular, the ILECs sought relief from the interconnection, unbundling, and resale obligations contained in section 251 of the 1996 Act. As noted, those provisions were designed to create opportunities for new entrants to offer competitive local telecommunications services (including DSL services). The ILECs claimed, however, that those requirements reduced their incentive to deploy advanced services, contrary to the dictates of section 706.

The FCC initiated its section 706 inquiry in August 1998. At the same time, it denied the ILECs' section 706 petitions. The FCC concluded that the market opening requirements of section 251 applied to advanced services such as DSL, and that the FCC lacked authority to dispense with those requirements, even in the interest of spurring deployment of advanced services. The FCC concluded, however, that ILECs ought to have some ability to offer advanced services on a less regulated basis. It therefore proposed to allow ILECs to offer advanced services free from most Federal regulation if they provide such services through a separate affiliate. It instituted a rulemaking to determine what degree of separation that should be required.

STATUS: The FCC recently concluded its section 706 inquiry, finding that advanced services are being deployed on a timely basis. Accordingly, it chose not to recommend significant regulatory changes designed to accelerate such deployment. In particular, the FCC opted not to consider requiring cable television systems to make their cable modem services available to competing providers.

The FCC had hoped to conclude the parallel rulemaking at the same time as the inquiry. NTIA understands, however, that the Commissioners are debating a proposal to give the BOCs flexibility to offer advanced services on an interLATA basis (perhaps on a statewide basis). Some BOCs have argued that, without such relief, they will be disinclined to provide advanced services through a subsidiary or will be unable to extend advanced services to rural areas.

Because the Administration is intensely interested in the rapid deployment of advanced services to all Americans, NTIA has been actively involved in the FCC's advanced services proceedings. We urged the FCC to deny the ILECs' section 706 petitions, but have supported granting the ILECs regulatory relief if they provide advanced services through a separate affiliate. NTIA also suggested a number of regulatory changes designed to increase opportunities for new entrants to offer advanced services in competition with ILECs. We have stated that the best way to achieve the objectives of section 706 would be for the FCC to promote vigorous competition in all telecommunications markets. The agency recommended that the FCC not grant any relief to incumbent telephone companies for their broadband services until those companies make available facilities and services needed by competitors to offer comparable services.

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TELEVISION BROADCAST OWNERSHIP

Section 202 of the Act relaxes rules governing the number of television stations and audience covered by any one licensee.

BACKGROUND: The Act contains several provisions within Section 202 regarding television broadcast ownership. It eliminates national numerical ownership cap and increases the national audience reach limit to 35%. Moreover, it requires the FCC to initiate a rulemaking to determine whether local television ownership limitations should be modified or eliminated, and required the FCC to extend its waiver policy for the "one-to-a-market" rule to any of the top 50 markets.

Congress may consider this year additional changes. The major broadcast networks want the television ownership cap raised from 35% of the national audience to at least 45%. Some want elimination of the cap altogether. This raises the concern, raised by single station and small group owners, that the networks will ultimately harm localism because the network owners will be far from the communities in which they operate stations.

The Administration expressed such concern about media ownership prior to passage of the 1996 Act that it threatened to veto the Act over this issue. It has more recently expressed concern that further relaxation of the ownership rules at this time will diminish viewpoint diversity in the marketplace of ideas by making it more difficult for new entrants to become broadcasters. The problem is particularly acute for minority television broadcasters. NTIA's 1998 ownership study found that minority ownership of television stations declined from 38 to 32 over the last year. Although the number of communications platforms has grown, the dominant players in the broadcast media are also among the largest operators in the alternative venues found in the multimedia marketplace. In addition, the advent of digital television broadcasting offers broadcasters added programming capacity and revenue opportunities. The networks and others, however, point to the networks' dwindling audience share and say that the entire system of free over-the-air television is in jeopardy if the cap is not lifted.

STATUS: These issues may be taken up by the Congress in 1999. The Administration will most likely continue its strong opposition. In addition, the FCC is reviewing other mass media policies, including its "duopoly rule" which prohibits a single entity from holding licenses to more than one station in a market, and its rules allowing local marketing arrangements (LMAs), whereby a single entity may program two television stations in the same market without running afoul of the "duopoly rule."

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OTHER ISSUES RELATED TO THE TELECOMMUNICATIONS ACT OF 1996

Digital Television Deployment: The Act has provisions regarding the licensing of advanced next generation television service ("ATV"; also referred to, depending on context as, "digital television (DTV)" or "high-definition television (HDTV)"). Service began last Fall in some cities. Although the Act does not mandate the FCC to limit eligibility for ATV licenses to existing television broadcasters, it strongly encouraged the FCC to do so. This language essentially precludes the use of an open auction to select ATV licensees other than existing broadcasters. (Congressional action in 1997 requires that broadcasters surrender their existing "analog" licenses by 2002, unless a large portion of the viewing public does not have digital television by then.)

Another provision of the Act gives the ATV licensees the flexibility to use their spectrum for services other than ATV broadcasting — such as non-broadcast services. A licensee that for any such service receives a fee or other compensation must, in turn, pay a fee to the FCC based on the market value of the spectrum used for these "pay" services.

Unrelated to the 1996 Act, the White House appointed a private sector Advisory Committee on the Obligations of Digital Television Broadcasters to make recommendations in this area. This committee presented its written report to the Vice President in December, 1996.

Cable Rate Regulation: The Act deregulates rates for cable programming services and some basic services offered by small cable systems. This deregulation took place immediately upon passage of the Act. Rate regulation of "expanded" or "upper tier" was continued until a sunset date of March 31, 1999. With this date now imminent, cable rate regulation may soon reappear as a policy issue.

Open Video Systems: The Act gives telephone companies the option of providing video programming on a common carrier basis or as a conventional cable television operator. If it chooses the former, the telephone company will face less regulation but will also have to comply with FCC regulations regarding what the Act refers to as "open video systems." The Act generally bars acquisitions by telephone companies of more than a 10 percent interest in cable operators (and vice versa) and joint ventures between telephone companies and cable systems serving the same areas. There are certain exceptions, such as for most rural areas.

There has been little development in this area since passage of the Act in 1996. Despite early optimism, open video systems have not materialized. Companies such as Time Warner and Pacific Telesis (now part of SBC) have discontinued their market trials of open video systems. More recently companies such as RCN, which has ventures with electric utilities in Boston and Washington under the name "Star Power" have used these provisions to press cities for entry into video markets.

Communications Decency Act (Internet Pornography): Some provisions of the Act concerning pornography on the Internet are known as the Communications Decency Act. These provisions made it a crime to transmit or make available obscene or indecent material over the Internet under certain circumstances. They provided certain "good faith" defenses for on-line services and users. Some of these provisions were successfully challenged in the courts as a violation of the right to freedom of speech under the First Amendment to the United States Constitution. The Supreme Court struck down that portion of the Act that criminalized material "harmful to minors," which is a test of indecency, although it let stand the provisions against obscene materials.

In 1997, Congress passed a narrower law, the Child Online Protection Act (COPA), which limits access by children to adult material offered on commercial Web sites. The law essentially requires purveyors of material deemed harmful to minors, to take affirmative steps to prevent minors from accessing their websites, or be subject to fines or imprisonment. Such affirmative steps include requiring the use of credit cards, or accepting digital certificates that verify age. On February 1, 1999, a federal judge in Philadelphia issued a preliminary injunction, which prevents the government from enforcing COPA. The judge based his decision on First Amendment protections, and stated that the government did not show that COPA represented the least restricted means of protecting minors from objectionable material online. The Department of Justice is reviewing the judge's decision to determine if the law will be defended at trial or on appeal.

V-Chip: To address violence on television and to give viewers greater control over the television programming they receive, the Act required television manufacturers, within two years of enactment, to include blocking technology (the "V-chip") in all television sets. The Act encouraged the broadcast and cable industries to create a voluntary rating system within one year, which it did. Now all major broadcast networks except one, NBC, display ratings for their programming. The ratings system is similar to that developed and used for many years by the motion picture industry. When V-chip technology is incorporated into television receivers, the use of ratings would remain voluntary, but any rating must be sent electronically.

Wireless Facilities Siting: Section 704 of the Act contains provisions regarding the siting of antennas and towers for wireless services. Although it maintains local authority over such siting, it prohibits states and local governments from unreasonably discriminating among personal wireless service providers and from prohibiting the provision of such service, and requires them to act on such requests within a reasonable period time. Despite these provisions, antenna siting has remained a point of contention between local governments and wireless providers.

The Act also contained provisions requiring the President or his designee (now the GSA) to establish procedures by which Federal agencies would make available on a fair, reasonable, and non-discriminatory basis, property and buildings under the Federal Government's control for the placement of private commercial mobile service facilities. Although the GSA, as the President's designee, established such procedures, agencies have not always been as quick to act as the industry would like. Congress may consider legislation this year to further streamline siting on Federal property.

Satellite Television Antennas: The Act required the FCC to issue regulations to prohibit local governments, community associations, landlords, and so forth, from restricting a viewer's ability to receive video programming services through devices designed for over-the-air reception of television broadcast signals, multichannel multipoint distribution service, or direct broadcast satellite services. Although the FCC has issued its rules, the prohibition does not extend, however, to commonly-owned property such as condominium balconies.

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