Telecommunications Act of 1996
Encyclopedia
The Telecommunications Act of 1996 was the first major overhaul of United States
telecommunications law in nearly 62 years, amending the Communications Act of 1934
. This Act, signed by President Bill Clinton
, was a major stepping stone towards the future of telecommunications, since this was the first time that the Internet
was included in broadcasting and spectrum allotment. One of the most highly criticized - and discussed - titles is Title 3 ("Cable Services"), which allowed for media cross-ownership. "The goal of this new law is to let anyone enter any communications business -- to let any communications business compete in any market against any other." Also, the act allowed us to move forward by revising its old rules - based on The Telecommunications Act of 1934. Deregulation of the broadcasting
market was the primary goal. Also, the new Telecommunications Act allowed the FCC, and Congress, to "update" the old - and outdated - Telecommunications Act of 1934.
(FCC or “Commission”), which was to implement and administer the economic regulation of the interstate activities of the telephone monopolies and the licensing of spectrum used for broadcast and other purposes. However, the Act explicitly left most regulation of intrastate telephone services to the states.
In the 1970s and 1980s, a combination of technological change, court decisions, and changes in U.S. policy permitted competitive entry into some telecommunications and broadcast markets. In this context, the Telecommunications Act was designed to open up markets to competition by removing unnecessary regulatory barriers to entry. However, the deregulations have led to a concentration of media ownership
with fewer broadcasters competing in regional markets and the elimination of many local, independent and alternative media
outlets.
on January 3, 1996 and signed into law on February 8, 1996 by President Bill Clinton
. It was the first bill signed in cyberspace
and the first bill signed at the Library of Congress
.
, and a third for information services.
Preemption. One key provision allowed the FCC to preempt state or local legal requirements that acted as a barrier to entry in the provision of interstate or intrastate telecommunications service.
Interconnectedness. Since communications services exhibit network effects and positive externalities, new entrants would face barriers to entry
if they could not interconnect their networks with those of the incumbent carriers. Thus, another key provision of the 1996 Act set obligations for incumbent carriers and new entrants to interconnect their networks with one another, imposing additional requirements on the incumbents because they might desire to restrict competitive entry by denying such interconnection or by setting terms, conditions, and rates that could undermine the ability of the new entrants to compete.
Intercarrier compensation. Under these conditions, many calls will arise between parties on different networks. While it might be possible to have the calling party pay its carrier and the called party pay its carrier, for various reasons it has been traditional in the United States for the calling party’s carrier to pay the called party’s carrier for completing the call — this is called intercarrier compensation — and, in turn, recover those costs in the rates charged to its subscribers. The 1996 Act requires that intercarrier compensation rates among competing local exchange carriers (CLECs) be based on the “additional costs of terminating such calls.” However, the framework created by the 1996 Act set different intercarrier compensation rates for services that were not competing at that time but do compete today.
RBOCs may enter long distance. To foster competition in both the long distance and local markets, the 1996 Act created a process by which the Regional Bell Operating Companies (“RBOCs”) would be free to offer long distance service (which was not permitted under one of the terms of the 1982 Consent Decree settling the government’s antitrust case against the former Bell System monopoly) once they made a showing that their local markets had been opened up to competition. The list of Bell Operating Companies in the bill are:
Bell Telephone Company of Nevada, Illinois Bell Telephone Company, Indiana Bell Telephone Company, Incorporated, Michigan Bell
Telephone Company, New England Telephone and Telegraph Company, New Jersey Bell Telephone Company, New York Telephone Company, U S West Communications Company, South Central Bell Telephone Company, Southern Bell Telephone and Telegraph Company, Southwestern Bell Telephone Company, The Bell Telephone Company of Pennsylvania, The Chesapeake and Potomac Telephone Company, The Chesapeake and Potomac Telephone Company of Maryland, The Chesapeake and Potomac Telephone Company of Virginia, The Chesapeake and Potomac Telephone Company of West Virginia, The Diamond State Telephone Company, The Ohio Bell Telephone Company, The Pacific Telephone and Telegraph Company, or Wisconsin Telephone Company
Wholesale access to incumbents' networks. To allow new entrants enough time to fully build out their own networks, the Act requires the incumbent local exchange carriers to make available to entrants, at cost-based wholesale rates, those elements of their network to which entrants needed access in order not to be impaired in their ability to offer telecommunications services.
Universal service support made explicit. Prior to enactment of the Act, universal service
had been funded through implicit subsidies, levied as above-cost business rates, urban rates, and above-cost rates for the “access charges” that long distance carriers paid as intercarrier compensation to local telephone companies for originating and terminating their subscribers’ long distance calls. Recognizing that new entrants would target those services that had above-cost rates, and thus erode universal service support, Congress included in the 1996 Act a provision requiring universal service support to be explicit, rather than hidden in above-cost rates. This requirement has only been partially implemented, however, and therefore significant implicit universal services subsidies still remain in above-cost rates for certain services.
It did not envision the intermodal competition that has subsequently developed, such as wireless service competing with both local and long distance wireline service, VoIP competing with wireline and wireless telephony, IP video competing with cable television. Providers from separate regulatory regimes have been brought into competition with one another as a result of subsequent deployment of digital broadband technologies in telephone and cable networks. Voice and video services can now be provided using Internet protocol and thus might be classified as unregulated information services, but these services compete directly with regulated traditional voice and video services. Moreover, these digital technologies do not recognize national borders, much less state boundaries.
Given the focus on intramodal competition and the lack of intermodal competition, there was little concern about statutory or regulatory language that set different regulatory burdens for different technology modes. As a result, the current statutory and regulatory framework may be inconsistent with, or unresponsive to, current market conditions in several ways:
Generally speaking, the number of broadband networks is limited by cost constraint—huge, sunk, up-front, fixed costs—which do not apply to applications providers. In this new environment, there will be three broad categories of competition:
These three areas of competition will all be affected by a common factor: will there be entry by a third broadband network to compete with the broadband networks of the local telephone company and the local cable operator?
There are four general approaches to the regulation of broadband network providers vis-a-vis independent applications providers (At present, the FCC follows the last two approaches):
There is consensus that the current universal service and intercarrier compensation mechanisms need to be modified to accommodate the new market conditions. For example, the current universal service funding mechanism is assessed only on telecommunications services, and carriers can receive universal service funding only in support of telecommunications services. Thus, if services that had been classified as telecommunications services are re-classified as information services, as recently occurred for high-speed digital subscriber line (“DSL”) services, then the universal service assessment base will decline and carriers that depend on universal service funding may see a decline in support. It therefore may be timely to consider whether the scope of universal service should be expanded to include universal access to a broadband network at affordable rates, not just to basic telephone service.
Title I, "Telecommunications Service" : Helps to outline the general duties of the telecommunication carriers as well as the obligations of all Local Exchange Carrier
s (LECs) and the additional obligations of Incumbent Local Exchange Carrier
s (ILECs).
Title II, "Broadcast Services" : Outlines the granting and licensing of broadcast spectrum by the government, including a provision to issue licenses to current television stations to commence digital television
broadcasting, the use of the revenues generated by such licensing, the terms of broadcast licenses, the process of renewing broadcast license
s, direct broadcast satellite services, automated ship distress and safety systems, and restrictions on over-the-air reception devices
Title III, "Cable Services" : Outlines the Cable Act reform, cable services provided by telephone companies, the preemption of franchising authority regulation of telecommunication services, video programming accessibility, and competitive availability of navigation devices.
Title IV, "Regulatory Reform" : Outlines regulatory forbearance, a biennial review of regulations, regulatory relief, and the elimination of unnecessary Commission regulations and functions.
Title V, "Obscenity and Violence" : outlines regulations regarding obscene programming on cable television
, the scrambling of cable channels for nonsubscribers, the scrambling of sexually explicit adult video service programming, the cable operators' refusal to carry certain programs, coercion and enticement of minors, and online family empowerment, including a requirement for the manufacture of televisions that block programs using V-chip
technology. Title V also gives a clarification of the current laws regarding communication of obscene materials through the use of a computer.
Title VI, "Effect on Other Laws" : Outlines the applicability of consent decree
s and other laws and the preemption of local taxation with respect to direct-to-home sales.
Title VII, "Miscellaneous Provisions" : Outlines provisions relating to the prevention of unfair billing practices for information or services provided over toll-free telephone calls, privacy of consumer information, pole attachments, facilities siting, radio frequency emission standards, mobile services direct access to long distance carriers, advanced telecommunications incentives, the telecommunications development fund, the National Education Technology Funding Corporation, a report on the use of advance telecommunications services for medical purposes, and outlines the authorization of appropriations.
The Act makes a significant distinction between providers of telecommunications services and information services. The term 'telecommunications service' means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.' On the other hand, the term 'information service' means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service. The distinction comes into play when a carrier provides information services. A carrier providing information services is not a 'telecommunications carrier' under the act. For example, a carrier is not a 'telecommunications carrier' when it is selling broadband Internet access. This distinction becomes particularly important because the act enforces specific regulations against 'telecommunications carriers' but not against carriers providing information services. With the convergence of telephone, cable, and internet providers, this distinction has created much controversy.
The Act both deregulated and created new regulations. Congress forced local telephone companies to share their lines with competitors at regulated rates if "the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer." (Section 251(3)(2)(B)) This led to the creation of a new group of telephone companies, "Competitive Local Exchange Carrier
s" (CLECs), that compete with "ILECs" or incumbent local exchange carrier
s.
Most media ownership regulations were eased, and the cap on radio station ownership was eliminated.
Title V of the 1996 Act is the Communications Decency Act
, aimed at regulating Internet
indecency and obscenity, but was ruled unconstitutional by the U.S. Supreme Court for violating the First Amendment
. Portions of Title V remain, including the Good Samaritan Act, which protects ISPs from liability for third party content on their services, and legal definitions of the Internet.
The U.S. Congress is currently considering legislation that would overhaul the Telecommunications Act of 1996.
The Act codified the concept of universal service
and led to creation of the Universal Service Fund
and E-rate
.
(MFS) were acquired by AT&T
and MCI
/WorldCom.
Looking back five years after the bill, the Consumers Union reported that wire to wire competition, the reason that sold the bill, had not succeeded as legislators had hoped. CLECs had captured just under seven percent of total lines in the country, and only three percent of homes and small businesses. Wire to wire competition only accounted for one percent of total lines nationwide.
The Consumers Union also raises one other major point. The Telecommunications Act of 1996 did not foster competition among ILECs as the bill had hoped. Instead, of ILECs encroaching on each other, the opposite occurred - mergers. Before the 1996 Act was passed, the largest four ILECs owned less than half of all the lines in the country while five years later the largest four local telephone companies own about 85% of all the lines in the country.
Robert Crandall
has argued that the forced-access provisions of the 1996 Act have had little economic value, and the primary, sustainable competitive forces in phone and related, non-'radio', telecommunications are the wireline telephone companies, the cable companies, and the wireless companies.
The Act was claimed to foster competition. Instead, it continued the historic industry consolidation reducing the number of major media companies from around 50 in 1983 to 10 in 1996 and 6 in 2005. An FCC study found that the Act had led to a drastic decline in the number of radio station owners, even as the actual number of commercial stations in the United States had increased.
Consumer activist Ralph Nader
argued the act was an example of corporate welfare
spawned by political corruption, because it gave away to incumbent broadcasters valuable licenses for broadcasting digital signals on the public airwaves. There was a requirement in the act that the FCC not auction off the public spectrum which the FCC itself valued at $11–$70 billion.
information via telecommunications.” (Title I, Section 3(20) of the 1934 Act)
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
telecommunications law in nearly 62 years, amending the Communications Act of 1934
Communications Act of 1934
The Communications Act of 1934 is a United States federal law, enacted as Public Law Number 416, Act of June 19, 1934, ch. 652, 48 Stat. 1064, by the 73rd Congress, signed by President Franklin D. Roosevelt, codified as Chapter 5 of Title 47 of the United States Code, et seq. The Act replaced the...
. This Act, signed by President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
, was a major stepping stone towards the future of telecommunications, since this was the first time that the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
was included in broadcasting and spectrum allotment. One of the most highly criticized - and discussed - titles is Title 3 ("Cable Services"), which allowed for media cross-ownership. "The goal of this new law is to let anyone enter any communications business -- to let any communications business compete in any market against any other." Also, the act allowed us to move forward by revising its old rules - based on The Telecommunications Act of 1934. Deregulation of the broadcasting
Broadcasting
Broadcasting is the distribution of audio and video content to a dispersed audience via any audio visual medium. Receiving parties may include the general public or a relatively large subset of thereof...
market was the primary goal. Also, the new Telecommunications Act allowed the FCC, and Congress, to "update" the old - and outdated - Telecommunications Act of 1934.
Prior regime
Previously, the Communications Act of 1934 (“1934 Act”) was the statutory framework for U.S. communications policy, covering telecommunications and broadcasting. That act created the Federal Communications CommissionFederal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
(FCC or “Commission”), which was to implement and administer the economic regulation of the interstate activities of the telephone monopolies and the licensing of spectrum used for broadcast and other purposes. However, the Act explicitly left most regulation of intrastate telephone services to the states.
In the 1970s and 1980s, a combination of technological change, court decisions, and changes in U.S. policy permitted competitive entry into some telecommunications and broadcast markets. In this context, the Telecommunications Act was designed to open up markets to competition by removing unnecessary regulatory barriers to entry. However, the deregulations have led to a concentration of media ownership
Concentration of media ownership
Concentration of media ownership refers to a process whereby progressively fewer individuals or organizations control increasing shares of the mass media...
with fewer broadcasters competing in regional markets and the elimination of many local, independent and alternative media
Alternative media
Alternative media are media which provide alternative information to the mainstream media in a given context, whether the mainstream media are commercial, publicly supported, or government-owned...
outlets.
Stated objective
Its stated objective was to open up markets to competition by removing regulatory barriers to entry: The conference report refers to the bill “to provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced information technologies and services to all Americans by opening all telecommunications markets to competition....” Congress attempted to create a regulatory framework for the transition from primarily monopoly provision to competitive provision of telecommunications services.Enactment
The Act was approved by the 104th Congress104th United States Congress
The One Hundred Fourth United States Congress was a meeting of the legislative branch of the United States federal government, composed of the United States Senate and the United States House of Representatives. It met in Washington, DC from January 3, 1995 to January 3, 1997, during the third and...
on January 3, 1996 and signed into law on February 8, 1996 by President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
. It was the first bill signed in cyberspace
Cyberspace
Cyberspace is the electronic medium of computer networks, in which online communication takes place.The term "cyberspace" was first used by the cyberpunk science fiction author William Gibson, though the concept was described somewhat earlier, for example in the Vernor Vinge short story "True...
and the first bill signed at the Library of Congress
Library of Congress
The Library of Congress is the research library of the United States Congress, de facto national library of the United States, and the oldest federal cultural institution in the United States. Located in three buildings in Washington, D.C., it is the largest library in the world by shelf space and...
.
Framework
The 1996 Act sought to foster competition among companies that use similar underlying network technologies (e.g., circuit-switched telephone networks) to provide a single type of service (e.g., voice). For example, it creates separate regulatory regimes for carriers providing voice telephone service and providers of cable televisionCable television
Cable television is a system of providing television programs to consumers via radio frequency signals transmitted to televisions through coaxial cables or digital light pulses through fixed optical fibers located on the subscriber's property, much like the over-the-air method used in traditional...
, and a third for information services.
Preemption. One key provision allowed the FCC to preempt state or local legal requirements that acted as a barrier to entry in the provision of interstate or intrastate telecommunications service.
Interconnectedness. Since communications services exhibit network effects and positive externalities, new entrants would face barriers to entry
Barriers to entry
In theories of competition in economics, barriers to entry are obstacles that make it difficult to enter a given market. The term can refer to hindrances a firm faces in trying to enter a market or industry - such as government regulation, or a large, established firm taking advantage of economies...
if they could not interconnect their networks with those of the incumbent carriers. Thus, another key provision of the 1996 Act set obligations for incumbent carriers and new entrants to interconnect their networks with one another, imposing additional requirements on the incumbents because they might desire to restrict competitive entry by denying such interconnection or by setting terms, conditions, and rates that could undermine the ability of the new entrants to compete.
Intercarrier compensation. Under these conditions, many calls will arise between parties on different networks. While it might be possible to have the calling party pay its carrier and the called party pay its carrier, for various reasons it has been traditional in the United States for the calling party’s carrier to pay the called party’s carrier for completing the call — this is called intercarrier compensation — and, in turn, recover those costs in the rates charged to its subscribers. The 1996 Act requires that intercarrier compensation rates among competing local exchange carriers (CLECs) be based on the “additional costs of terminating such calls.” However, the framework created by the 1996 Act set different intercarrier compensation rates for services that were not competing at that time but do compete today.
RBOCs may enter long distance. To foster competition in both the long distance and local markets, the 1996 Act created a process by which the Regional Bell Operating Companies (“RBOCs”) would be free to offer long distance service (which was not permitted under one of the terms of the 1982 Consent Decree settling the government’s antitrust case against the former Bell System monopoly) once they made a showing that their local markets had been opened up to competition. The list of Bell Operating Companies in the bill are:
Bell Telephone Company of Nevada, Illinois Bell Telephone Company, Indiana Bell Telephone Company, Incorporated, Michigan Bell
Telephone Company, New England Telephone and Telegraph Company, New Jersey Bell Telephone Company, New York Telephone Company, U S West Communications Company, South Central Bell Telephone Company, Southern Bell Telephone and Telegraph Company, Southwestern Bell Telephone Company, The Bell Telephone Company of Pennsylvania, The Chesapeake and Potomac Telephone Company, The Chesapeake and Potomac Telephone Company of Maryland, The Chesapeake and Potomac Telephone Company of Virginia, The Chesapeake and Potomac Telephone Company of West Virginia, The Diamond State Telephone Company, The Ohio Bell Telephone Company, The Pacific Telephone and Telegraph Company, or Wisconsin Telephone Company
Wholesale access to incumbents' networks. To allow new entrants enough time to fully build out their own networks, the Act requires the incumbent local exchange carriers to make available to entrants, at cost-based wholesale rates, those elements of their network to which entrants needed access in order not to be impaired in their ability to offer telecommunications services.
Universal service support made explicit. Prior to enactment of the Act, universal service
Universal service
Universal service is an economic, legal and business term used mostly in regulated industries, referring to the practice of providing a baseline level of services to every resident of a country...
had been funded through implicit subsidies, levied as above-cost business rates, urban rates, and above-cost rates for the “access charges” that long distance carriers paid as intercarrier compensation to local telephone companies for originating and terminating their subscribers’ long distance calls. Recognizing that new entrants would target those services that had above-cost rates, and thus erode universal service support, Congress included in the 1996 Act a provision requiring universal service support to be explicit, rather than hidden in above-cost rates. This requirement has only been partially implemented, however, and therefore significant implicit universal services subsidies still remain in above-cost rates for certain services.
Policy considerations of new environment
The regulatory framework created by the 1996 Act was intended to foster “intramodal” competition within distinct markets, i.e. among companies that used the same underlying technology to provide service. For example, competition was envisioned between the incumbent local and long distance wireline carriers plus new competitive local exchange carriers, all of which used circuit-switched networks to offer voice services.It did not envision the intermodal competition that has subsequently developed, such as wireless service competing with both local and long distance wireline service, VoIP competing with wireline and wireless telephony, IP video competing with cable television. Providers from separate regulatory regimes have been brought into competition with one another as a result of subsequent deployment of digital broadband technologies in telephone and cable networks. Voice and video services can now be provided using Internet protocol and thus might be classified as unregulated information services, but these services compete directly with regulated traditional voice and video services. Moreover, these digital technologies do not recognize national borders, much less state boundaries.
Given the focus on intramodal competition and the lack of intermodal competition, there was little concern about statutory or regulatory language that set different regulatory burdens for different technology modes. As a result, the current statutory and regulatory framework may be inconsistent with, or unresponsive to, current market conditions in several ways:
- Service providers that are in direct competition with one another sometimes may be subject to different regulatory rules because they use different technologies. Some examples are:
-
-
- For certain long distance calls, if the caller uses a wireless telephone number, the caller’s wireless carrier is subject to a cost-based “reciprocal compensation” intercarrier compensation charge for the termination of that call. But if the caller made an identical call, from the same location to the same called party, using a wireline telephone (and hence a wireline long distance carrier), that carrier would be subject to above cost “access charges” for the completion of the call.
-
-
-
- When a long distance call is made to a called party’s wireline telephone, that party’s wireline local exchange carrier can charge the calling party’s long distance carrier an above-cost access charge for terminating the call; but if an identical long distance call were made to ths same called party, from and to the same physical location, but to the called party’s wireless telephone, the called party’s wireless carrier is not allowed to charge the calling party’s long distance carrier any access charge for terminating the call. Indeed, the average intercarrier compensation rate ranges from 0.1 cents per minute for traffic bound to an information service provider (“ISP”) to 5.1 cents per minute for intrastate traffic bound to a subscriber of a small (rural) incumbent local exchange carrier; individual rates can be as low as zero and as high as 35.9 cents per minute — even though in each case basically the same transport and switching functions are provided. (See CRS Report RL32889, Intercarrier Compensation: One Component of Telecom Reform, at pp. 2-5.)
-
-
-
- the Federal Universal Service Fund is funded through an assessment on interstate telecommunications service revenues that exceeds 10% (the exact assessment rate varies from quarter to quarter); information services, even if they compete directly with the interstate telecommunications services, are not assessed.
- Economic regulations intended to protect against monopoly power may not be fully taking into account intermodal competition.
- The framework may not effectively address interconnection, access, and social policy issues for an IP architecture in which multiple applications ride on top of the physical (transmission) network layer.
- the Federal Universal Service Fund is funded through an assessment on interstate telecommunications service revenues that exceeds 10% (the exact assessment rate varies from quarter to quarter); information services, even if they compete directly with the interstate telecommunications services, are not assessed.
-
Generally speaking, the number of broadband networks is limited by cost constraint—huge, sunk, up-front, fixed costs—which do not apply to applications providers. In this new environment, there will be three broad categories of competition:
- 1. intermodal competition among a small number of broadband network providers that offer a suite of voice, data, video, and other services primarily for the mass market;
- 2. intramodal competition among a small number of wireline broadband providers that serve multi-locational business customers who tend to be located in business districts; and
- 3. competition between these few broadband network providers and a multitude of independent applications service providers. (In addition, there will continue to be niche providers that offer consumers users competitive options for specific services.)
These three areas of competition will all be affected by a common factor: will there be entry by a third broadband network to compete with the broadband networks of the local telephone company and the local cable operator?
There are four general approaches to the regulation of broadband network providers vis-a-vis independent applications providers (At present, the FCC follows the last two approaches):
- structural regulation, such as open access;
- ex ante non-discrimination rules;
- ex post adjudication of abuses of market power, as they arise, on a case-by-case basis;
- and reliance on antitrust law and non-mandatory principles as the basis for self-regulation.
There is consensus that the current universal service and intercarrier compensation mechanisms need to be modified to accommodate the new market conditions. For example, the current universal service funding mechanism is assessed only on telecommunications services, and carriers can receive universal service funding only in support of telecommunications services. Thus, if services that had been classified as telecommunications services are re-classified as information services, as recently occurred for high-speed digital subscriber line (“DSL”) services, then the universal service assessment base will decline and carriers that depend on universal service funding may see a decline in support. It therefore may be timely to consider whether the scope of universal service should be expanded to include universal access to a broadband network at affordable rates, not just to basic telephone service.
Major provisions
The 1996 Telecommunications Act is divided into seven Titles:Title I, "Telecommunications Service" : Helps to outline the general duties of the telecommunication carriers as well as the obligations of all Local Exchange Carrier
Local exchange carrier
Local Exchange Carrier is a regulatory term in telecommunications for the local telephone company.In the United States, wireline telephone companies are divided into two large categories: long distance and local...
s (LECs) and the additional obligations of Incumbent Local Exchange Carrier
Incumbent local exchange carrier
An ILEC, short for incumbent local exchange carrier, is a local telephone company in the United States that was in existence at the time of the breakup of AT&T into the Regional Bell Operating Companies , also known as the "Baby Bells." The ILEC is the former Bell System or Independent Telephone...
s (ILECs).
- Sec. 102. Eligible telecommunications carriers.
- Sec. 103. Exempt telecommunications companies
- Sec. 104. Nondiscrimination principle.
- Sec. 151. Bell operating company provisions.
Title II, "Broadcast Services" : Outlines the granting and licensing of broadcast spectrum by the government, including a provision to issue licenses to current television stations to commence digital television
Digital television
Digital television is the transmission of audio and video by digital signals, in contrast to the analog signals used by analog TV...
broadcasting, the use of the revenues generated by such licensing, the terms of broadcast licenses, the process of renewing broadcast license
Broadcast license
A broadcast license or broadcast license is a specific type of spectrum license that grants the licensee the privilege to use a portion of the radio frequency spectrum in a given geographical area for broadcasting purposes. The licenses are generally straddled with additional restrictions that...
s, direct broadcast satellite services, automated ship distress and safety systems, and restrictions on over-the-air reception devices
- Sec. 201. Broadcast spectrum flexibility.
- Sec. 202. Broadcast ownership.
- Sec. 203. Term of licenses.
- Sec. 204. Broadcast license renewal procedures.
- Sec. 205. Direct broadcast satellite service.
- Sec. 206. Automated ship distress and safety systems.
- Sec. 207. Restrictions on over-the-air reception devices.
Title III, "Cable Services" : Outlines the Cable Act reform, cable services provided by telephone companies, the preemption of franchising authority regulation of telecommunication services, video programming accessibility, and competitive availability of navigation devices.
- Sec. 301. Cable Act reform.
- Sec. 302. Cable service provided by telephone companies.
- Sec. 303. Preemption of franchising authority regulation of telecommunications services.
- Sec. 304. Competitive availability of navigation devices.
- Sec. 305. Video programming accessibility.
Title IV, "Regulatory Reform" : Outlines regulatory forbearance, a biennial review of regulations, regulatory relief, and the elimination of unnecessary Commission regulations and functions.
- Sec. 401. Regulatory forbearance.
- Sec. 402. Biennial review of regulations; regulatory relief.
- Sec. 403. Elimination of unnecessary Commission regulations and functions.
Title V, "Obscenity and Violence" : outlines regulations regarding obscene programming on cable television
Cable television
Cable television is a system of providing television programs to consumers via radio frequency signals transmitted to televisions through coaxial cables or digital light pulses through fixed optical fibers located on the subscriber's property, much like the over-the-air method used in traditional...
, the scrambling of cable channels for nonsubscribers, the scrambling of sexually explicit adult video service programming, the cable operators' refusal to carry certain programs, coercion and enticement of minors, and online family empowerment, including a requirement for the manufacture of televisions that block programs using V-chip
V-chip
V-chip is a generic term for technology used in television set receivers in the USA, Canada, and Brazil which allows the blocking of programs based on their ratings category. It is intended for use by parents to manage their children's television viewing...
technology. Title V also gives a clarification of the current laws regarding communication of obscene materials through the use of a computer.
- Sec. 501. Short title.
- Sec. 502. Obscene or harassing use of telecommunications facilities under the Communications Act of 1934.
- Sec. 503. Obscene programming on cable televisionCable televisionCable television is a system of providing television programs to consumers via radio frequency signals transmitted to televisions through coaxial cables or digital light pulses through fixed optical fibers located on the subscriber's property, much like the over-the-air method used in traditional...
. - Sec. 504. Scrambling of cable channels for nonsubscribers.
- Sec. 505. Scrambling of sexually explicit adult video service programming.
- Sec. 506. Cable operator refusal to carry certain programs.
- Sec. 507. Clarification of current laws regarding communication of obscene materials through the use of computers.
- Sec. 508. Coercion and enticement of minors.
- Sec. 509. Online family empowerment.
- Sec. 551. Parental choice in television programming.
- Sec. 552. Technology fund.
- Sec. 561. Expedited review.
Title VI, "Effect on Other Laws" : Outlines the applicability of consent decree
Consent decree
A consent decree is a final, binding judicial decree or judgment memorializing a voluntary agreement between parties to a suit in return for withdrawal of a criminal charge or an end to a civil litigation...
s and other laws and the preemption of local taxation with respect to direct-to-home sales.
- Sec. 601. Applicability of consent decrees and other law.
- Sec. 602. Preemption of local taxation with respect to direct-to-home services.
Title VII, "Miscellaneous Provisions" : Outlines provisions relating to the prevention of unfair billing practices for information or services provided over toll-free telephone calls, privacy of consumer information, pole attachments, facilities siting, radio frequency emission standards, mobile services direct access to long distance carriers, advanced telecommunications incentives, the telecommunications development fund, the National Education Technology Funding Corporation, a report on the use of advance telecommunications services for medical purposes, and outlines the authorization of appropriations.
- Sec. 701. Prevention of unfair billing practices for information or services provided over toll-free telephone calls.
- Sec. 702. Privacy of customer information.
- Sec. 703. Pole attachments.
- Sec. 704. Facilities siting; radio frequency emission standards.
- Sec. 705. Mobile services direct access to long distance carriers.
- Sec. 706. Advanced telecommunications incentives.
- Sec. 707. Telecommunications Development Fund.
- Sec. 708. National Education Technology Funding Corporation.
- Sec. 709. Report on the use of advanced telecommunications services for medical purposes.
- Sec. 710. Authorization of appropriations.
The Act makes a significant distinction between providers of telecommunications services and information services. The term 'telecommunications service' means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.' On the other hand, the term 'information service' means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service. The distinction comes into play when a carrier provides information services. A carrier providing information services is not a 'telecommunications carrier' under the act. For example, a carrier is not a 'telecommunications carrier' when it is selling broadband Internet access. This distinction becomes particularly important because the act enforces specific regulations against 'telecommunications carriers' but not against carriers providing information services. With the convergence of telephone, cable, and internet providers, this distinction has created much controversy.
The Act both deregulated and created new regulations. Congress forced local telephone companies to share their lines with competitors at regulated rates if "the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer." (Section 251(3)(2)(B)) This led to the creation of a new group of telephone companies, "Competitive Local Exchange Carrier
Competitive local exchange carrier
A competitive local exchange carrier , in the United States, is a telecommunications provider company competing with other, already established carriers ....
s" (CLECs), that compete with "ILECs" or incumbent local exchange carrier
Incumbent local exchange carrier
An ILEC, short for incumbent local exchange carrier, is a local telephone company in the United States that was in existence at the time of the breakup of AT&T into the Regional Bell Operating Companies , also known as the "Baby Bells." The ILEC is the former Bell System or Independent Telephone...
s.
Most media ownership regulations were eased, and the cap on radio station ownership was eliminated.
Title V of the 1996 Act is the Communications Decency Act
Communications Decency Act
The Communications Decency Act of 1996 was the first notable attempt by the United States Congress to regulate pornographic material on the Internet. In 1997, in the landmark cyberlaw case of Reno v. ACLU, the United States Supreme Court struck the anti-indecency provisions of the Act.The Act was...
, aimed at regulating Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
indecency and obscenity, but was ruled unconstitutional by the U.S. Supreme Court for violating the First Amendment
First Amendment to the United States Constitution
The First Amendment to the United States Constitution is part of the Bill of Rights. The amendment prohibits the making of any law respecting an establishment of religion, impeding the free exercise of religion, abridging the freedom of speech, infringing on the freedom of the press, interfering...
. Portions of Title V remain, including the Good Samaritan Act, which protects ISPs from liability for third party content on their services, and legal definitions of the Internet.
The U.S. Congress is currently considering legislation that would overhaul the Telecommunications Act of 1996.
The Act codified the concept of universal service
Universal service
Universal service is an economic, legal and business term used mostly in regulated industries, referring to the practice of providing a baseline level of services to every resident of a country...
and led to creation of the Universal Service Fund
Universal Service Fund
The Universal Service Fund was created by the United States Federal Communications Commission in 1997 to meet Congressional universal service goals as mandated by the Telecommunications Act of 1996...
and E-rate
E-rate
E-Rate is the commonly used name for the Schools and Libraries Program of the Universal Service Fund, which is administered by the Universal Service Administrative Company under the direction of the Federal Communications Commission .-Function:...
.
Claims made in opposition to the act
When the smaller CLECs faced financial problems, the trend toward competition slowed, turning into a decade of reconsolidation. [Marcus] The two largest CLECs, Teleport Communications Group (TCG) and Metropolitan Fiber SystemsMetropolitan Fiber Systems
Metropolitan Fiber Systems Inc, later known as MFS Communications Company, was a last mile provider of business grade telecommunication products such as long distance, and Internet access through its own fiber rings in major central business districts throughout North America and Europe...
(MFS) were acquired by AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
and MCI
MCI Communications
MCI Communications Corp. was an American telecommunications company that was instrumental in legal and regulatory changes that led to the breakup of the AT&T monopoly of American telephony and ushered in the competitive long-distance telephone industry. It was headquartered in Washington,...
/WorldCom.
Looking back five years after the bill, the Consumers Union reported that wire to wire competition, the reason that sold the bill, had not succeeded as legislators had hoped. CLECs had captured just under seven percent of total lines in the country, and only three percent of homes and small businesses. Wire to wire competition only accounted for one percent of total lines nationwide.
The Consumers Union also raises one other major point. The Telecommunications Act of 1996 did not foster competition among ILECs as the bill had hoped. Instead, of ILECs encroaching on each other, the opposite occurred - mergers. Before the 1996 Act was passed, the largest four ILECs owned less than half of all the lines in the country while five years later the largest four local telephone companies own about 85% of all the lines in the country.
Robert Crandall
Robert Crandall
Robert Lloyd "Bob" Crandall is the former president and chairman of American Airlines. Called an industry legend by airline industry observers, Crandall has been the subject of several books and is a member of the Hall of Honor of the Conrad Hilton college.-Life:Robert Crandall was raised in Rhode...
has argued that the forced-access provisions of the 1996 Act have had little economic value, and the primary, sustainable competitive forces in phone and related, non-'radio', telecommunications are the wireline telephone companies, the cable companies, and the wireless companies.
The Act was claimed to foster competition. Instead, it continued the historic industry consolidation reducing the number of major media companies from around 50 in 1983 to 10 in 1996 and 6 in 2005. An FCC study found that the Act had led to a drastic decline in the number of radio station owners, even as the actual number of commercial stations in the United States had increased.
Consumer activist Ralph Nader
Ralph Nader
Ralph Nader is an American political activist, as well as an author, lecturer, and attorney. Areas of particular concern to Nader include consumer protection, humanitarianism, environmentalism, and democratic government....
argued the act was an example of corporate welfare
Corporate welfare
Corporate welfare is a pejorative term describing a government's bestowal of money grants, tax breaks, or other special favorable treatment on corporations or selected corporations. The term compares corporate subsidies and welfare payments to the poor, and implies that corporations are much less...
spawned by political corruption, because it gave away to incumbent broadcasters valuable licenses for broadcasting digital signals on the public airwaves. There was a requirement in the act that the FCC not auction off the public spectrum which the FCC itself valued at $11–$70 billion.
Information service
"The offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making availableinformation via telecommunications.” (Title I, Section 3(20) of the 1934 Act)
See also
- Communications Act of 1934Communications Act of 1934The Communications Act of 1934 is a United States federal law, enacted as Public Law Number 416, Act of June 19, 1934, ch. 652, 48 Stat. 1064, by the 73rd Congress, signed by President Franklin D. Roosevelt, codified as Chapter 5 of Title 47 of the United States Code, et seq. The Act replaced the...
- COPE Act of 2006Communications Opportunity, Promotion and Enhancement Act of 2006The Communications Opportunity, Promotion and Enhancement Act of 2006 was a bill in the US House of Representatives. It was part of a major overhaul of the Telecommunications Act of 1996 being considered by the US Congress. The Act was sponsored by Commerce Committee Chairman Joe Barton , Rep....
- Forced-access regulationForced-access regulationForced-access regulation refers to any regulation put into place by the state forcing private communication carriers to allow its competitors to use their networks for their own business purposes....
- Internet Freedom and Nondiscrimination Act of 2006Internet Freedom and Nondiscrimination Act of 2006The Internet Freedom and Nondiscrimination Act of 2006 is a bill in the United States House of Representatives. It is one of several bills on the topic of network neutrality proposed as part of a major overhaul of the Telecommunications Act of 1996. The Act is sponsored by Rep. James Sensenbrenner...
- Telecommunications Act of 2005Telecommunications Act of 2005The Telecommunications Act of 2005 is a proposed United States telecommunications law thatmakes regulatory changes to broadband Internet providers,Voice over IP providers, andBroadband Video services. Some of...
- Orwell Rolls in His GraveOrwell Rolls in His GraveOrwell Rolls in His Grave is a 2003 documentary film written and directed by Robert Kane Pappas. Covered topics include the Telecommunications Act of 1996, concentration of media ownership, political corruption, Federal Communications Commission , the controversy over the US presidential election...
, 2003 documentary film
External links
- FCC - Telecom Act of 1996 webpage with copies of the Act
- Analysis of The Telecommunications Act of 1996. This article by Fritz Messere (Associate Professor of Communication Studies at SUNY Oswego) describes the impact of the Act on radio and television broadcasting, Internet and on-line computer services, and provides sources and suggested further reading.
- Harvey J. Levin: Pioneering the Economics of the Airwaves
- The Invisible Resource: Use and Regulation of the Radio Spectrum