Congress Set to Reform How We Swap Ideas

First telecom changes in 60 years will modernize system

ON a Washington morning in 1844, Samuel Morse crouched over a telegraph and tapped out the world's first electronic message. Uncoded in Baltimore moments later, it read: ''What hath God wrought!''

Morse's statement was, above all, an expression of wonder. But it also posed an enduring question. Today, as telephone, broadcast, cable, and computer companies converge to form a mammoth ''information superhighway,'' the answer continues to elude us.

But here at the birthplace of the telecommunications revolution, Congress is putting the final touches on the first comprehensive ''telecom'' reform in 60 years.

Republicans say the legislation will create a modern arena for telecom providers: spurring competition and innovation and driving down consumer costs. Critics say it will cause mergers, raise prices, and concentrate power.

Either way, the bill will have huge implications for the fast-growing communications industry that now represents one-sixth of the US economy. It will determine how Americans get news, select entertainment, and exchange ideas in the next century.

''These are not lollipops. These are things that go into the home and into the mind,'' says Jerry Landay, a journalism professor at the University of Illinois.

The bill, now in conference, aims to strip away many of the rules that govern broadcasters, cable-television companies, and local and long-distance telephone providers.

Local phone companies would be forced to open their markets to competitors, while the six regional ''baby bells'' would be allowed to offer long-distance service. Cable-television companies could enter the local telephone business, and cable price controls would be scrapped.

In addition, the bill would allow companies to own more types of media outlets, auction off more spectrum for broadcasters, encourage foreign investment, and mandate safeguards to shield minors from indecent material.

By all accounts, it's the first comprehensive package of reform since the landmark Communications Act of 1934, and a much bigger deal than the court-mandated breakup of AT&T in 1982.

Now or never

Bernie Tylor, a spokesman for MCI, says reform is necessary now because states are beginning to rewrite their own telecom laws, and communications companies are itching to merge into the ''information highway.''

If handled properly, he says, reform could be positive for everybody by providing ''a greater variety of ways to receive telecommunications services.'' He points to the experience of the long-distance telephone industry after the Bell breakup. In that arena, he argues, prices have dropped considerably as companies compete to provide better service.

But doubts remain. Gene Kimmelman, co-director of the Consumer's Union in Washington, says today's reform movement has less to do with consumers than profits.

By interpreting the 1994 election as a sign ''that the public was clamoring for more deregulation,'' Mr. Kimmelman say Republicans in Congress have worked to give telecom providers what they really want: the chance to join forces.

That, he says, is the reason that telecom companies have dropped their usual enmities. ''This reform bill has goodies for everybody,'' he says, adding that nearly every sector of the industry ''sees an opportunity to get something.''

If the bill passes, Kimmelman predicts, companies will merge to form huge monopolistic conglomerates. Telephone rates will rise by $14 billion each year, and cable rates will climb $3 billion to $6 billion. For this reason and others, President Clinton has threatened a veto. By his side are long-distance providers, who have not fared as well as local phone companies in an intense lobbying campaign. Rural advocates also oppose the bill.

Moguls' market

But the most onerous problem with telecom reform, according to Professor Landay, is its potential effect on ''the marketplace of ideas.'' Current laws prohibit any one broadcast company from reaching more than 25 percent of the population. In its current form, the telecom bill would raise this threshold to 35 percent and allow companies to own more radio and television stations, cable companies, and newspapers in the same market.

As a result, Landay says, a tiny cabal of media moguls will be allowed to control more information: a situation that could limit public discourse and debate and make cash the arbiter of who speaks to the public.

Without such safeguards, he argues, companies that own media outlets will be less inclined to air ''public service'' programming or discuss any issues that might impact their profit margins.

Indeed, in recent weeks, CBS declined to run an interview with a tobacco executive for fear of a lawsuit, and CNN declined to air television spots that contradicted its position on the telecom issue. Both companies recently merged with larger entities.

''It's one thing when Congress makes mistakes in health care,'' Kimmelman says. ''There's an outcry in the media and they go back and fix it. But where does the outcry come from when these mergers hit? Who will tell the story about how the public is being harmed?''

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