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Business-as-Unusual : This time, Congress recognized that the direction and pace of technological change are unpredictable. So it wisely crafted a telecommunications bill with an eye toward a company's bottom line. Let the powerful special interests compete.

August 13, 1995|Charles R. Morris | Charles R. Morris is the co-author of "Computer Wars" (Times Books)

NEW YORK — Whenever government dispenses business franchises--like Boss Tweed's streetcar contracts or Los Angeles' 1920s sweetheart water deals--there is always the opportunity to distribute pelf. The crowd of ex-congressmen and former White House officials descending on Washington the past few weeks in pursuit of the showers of diamonds spraying out from the telecommunications bill illustrates the point. Their clients are not paying them bushels of money to protect the public interest.

America has never been friendly to regulation. The first colonies were private companies, operating under Crown charters. But the colonists viewed the charters as licenses for the king's rich friends to mint more money, so they poured into the unregulated settlements.

The irony of the telecommunications bill is that it is a deregulation bill. There are so many unregulated, or only semi-regulated, businesses springing up on every side of the traditional telecommunications industry--direct-satellite television, Internet e-mail, over-the-air data and voice transmission--that the government is being forced to back off its traditional regulatory stance. Any change--and moving away from telecommunications regulation is major change--creates winners and losers, and gives government the opportunity to destroy some vested interests and create others.

For a time, the biggest interest whose vesting was at issue was media tycoon Rupert Murdoch. The House leadership overrode its own committee's report to raise the limit on the share of the nation's households that could be reached by a single company's TV stations to 50% from the Senate's 35%. Since Murdoch's News Corp. is the only company likely to benefit from such a rule in the foreseeable future, it raised sharp questions about the nature of the book deal between Murdoch's HarperCollins and House Speaker Newt Gingrich. A floor amendment put the limit back to 35% when the House voted on the final bill last weekend.

Any major deregulatory move buys progress at the price of stability, and usually entails a bit of short-term chaos as well. The deregulation of long-distance telephone service a dozen years ago created at least three years of mass confusion. For the first time, customers had to buy their phones, choose their long-distance carrier, deal with two or sometimes even more billing entities. But most people seem to have sorted it out. At the same time, the cost of long-distance calling has fallen sharply, there have been huge investments in fiber-optics and other modern technology, and we can pick and choose among more kinds of telephone gadgets than ever before. The effects of deregulating the airlines have been similar. Several old-line carriers went under, but there are more people flying at lower rates than ever. The losers are business travelers, who were willing to pay for uncrowded comfort but now must squeeze between peripatetic grannies and squalling infants.

The telecommunications deregulation is unique, however, because there are so many competing interests at stake, and because the shape of the telecommunications future is so blurry that it is truly impossible to foresee more than a few years ahead just who the big winners and losers will be.

Part of the problem is that "multimedia" has become a mantra, like "plastics" in the '60s, or "gold" in 1849. The Disney-Capital Cities/ABC mega-merger burst on the scene just as the House bill was moving toward final passage. The Disney deal is intricately connected to telecommunications deregulation. Among other things, Disney is buying a pipeline to pump entertainment content into American homes. It feels it must do that in part because of fashionable notions about "integrating content and distribution" and also because deregulation will permit the TV networks to produce more of their own shows instead of buying them from Disney. The deal's logic may work, but Sony similarly thought it was integrating content and distribution--in the form of distribution hardware like VCRs--when it bought Columbia Pictures.

The milling about is furious because technology is changing the shape of the industry in ways that are quite unpredictable. The telephone companies are interested in the Disney-Capital Cities deal because they hope to be the ones who pump entertainment into American homes. Meantime, cable companies, which own a sizable one-way entertainment pump now, are adding capacity to get information back out from the household, which positions them to tread on telephone-company turf. One of the complicated trades in the telecommunications bill is that cable companies can invade local telephone territory, but that telephone companies can offer cable-like services, and that long-distance companies can compete for local service customers. In short, a free-for-all.

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