While portions of the act became effective immediately after President Bill Clinton signed the legislation, much of the implementation needed to wait for the Federal Communications Commission (FCC) to promulgate new or revised rules and regulations. Noting the historic nature of the bill, President Clinton claimed that the legislation would "provide open access for all citizens to the Information Superhighway." However, many public-interest groups expressed concern that the effect of the act would be to undermine public-interest values of access.

     At the time of passage, the act included several highly controversial provisions that were seen as restricting speech and violating constitutional protections. Within hours of the president's signing, a number of civil liberties groups, led by the American Civil Liberties Union (ACLU), sought an injunction against indecency provisions included in the legislation.

     The Telecommunications Act of 1996 is a complex reform of U.S. communication policymaking, which attempts to provide similar ground rules and a level playing field in virtually all sectors of the communications industries. The act's provisions fall into five general areas: radio and television broadcasting; cable television; telephone services; Internet and online computer services; and telecommunications equipment manufacturing.

     The Telecommunications Act fundamentally changed U.S. communication policy by abolishing many of the cross-market barriers that prohibited dominant players from one communications-industry sector, such as telecommunications, from providing services in another industry sector, such as cable television. Since 1996 new mergers and acquisitions, consolidations, and integration of services previously barred under FCC rules and antitrust provisions of federal law have occurred.

Radio and Television Broadcasting

     The act incorporated numerous changes to the rules dealing with radio and television ownership under the Communications Act of 1934. Notably, broadcasters received substantial regulatory relief from federal restrictions on station-ownership requirements. The basic structure of the broadcast industry was funda­mentally altered, abolishing 60 years of restrictions upheld since the Communications Act of 1934. Ownership limits on television stations were lifted, with group owners now able to purchase television stations with a maximum service-area cap of 35 percent of the U.S. population. Limits on the number of radio stations that may be commonly owned were completely lifted, although the legislation prescribes limits on the number of licenses that may be owned within specific markets or geographical areas.

     Terms of license for both radio and television were increased to eight years, and previous rules allowing competing applications for license renewals were dramatically altered in favor of incumbent licensees. New provisions under the act prevent the filing of a competing application at license-renewal time unless the FCC first finds that a station has not served the public interest or has committed other serious violations of agency or federal rules. This provision has made it very difficult for citizens' groups to mount a license challenge against a broadcast station. The language in the 1996 bill gives the FCC no guidance as to how to interpret the "public-interest" standard in light of the legislated mandates embedded in the act. According to public­ interest groups opposed to the relaxation of ownership provisions, the combined effect of the new rules has been to accelerate increased ownership of most major media outlets by a few communications conglomerates. Within five years of the act's passage, substantial consolidation within the broadcasting industry and telecommunications sectors had occurred.

     The Telecommunications Act of 1996 also made significant changes in FCC rules regarding station affiliations and cross-ownership restrictions. Stations may choose affiliation with more than one network. Although broadcasting networks are barred from merging or buying-out other networks, they have been freed to start new program services. For the first time, broadcasters can own cable television systems, and some television licensees have been granted waivers to operate newspapers in the same market. The legislation also affirmed the continuation of local marketing agreements (LMAs) and waived previous restrictions on common control of radio and television stations in the top fifty markets, the one-to-a-market rule.

     Perhaps the biggest concession to the broadcast industry centered around provisions for allowing the FCC to allocate extra spectrum for the creation of advanced television (ATV) and ancillary services. Eligibility for advanced television licenses was limited to existing television licensees, ensuring current broadcasters a future in providing digital and enhanced tele­ vision services. Subsequent actions by the FCC authorized an additional 6-MHz spectrum for a digital television service. The commission has developed a timetable and plan for migration to digital television. However, although the FCC has established a transition deadline, set for 2006, it seems unlikely that broadcasters will have digital television services in place by that time.

     Not all portions of the Telecommunications Act were welcomed by broadcasters. The use of the V-chip was opposed by many in the broadcast industry. The law mandates use of new technology to allow parents to exercise control over channels viewed, and section 551 requires the development of a system to identify and rate video programming that contains sexual, violent, or indecent material. Congress also included language within the act to mandate the manufacture of televisions with V-chip technology, and the FCC has implemented rules.

     Generally, however, the Telecommunication Act of 1996 provides for new possibilities for broadcasters and calls for the FCC to eliminate unnecessary oversight rules. Under the mandate, the FCC is required to revisit its regulatory requirements biennially to deter­ mine whether the rules are in the public interest. This review process has allowed the commission to restate its policy interpretations as leadership in the commission has changed.

Common Carriers and Telecommunication Services

     While the Telecommunications Act set out to create a deregulated environment to promote competition in telephony and speed the introduction of advanced communication services by opening all telecommunications markets to competition, there is debate within the policy community as to the effectiveness of the legislation. Within the area of long-distance telephony, major players have seen a sharp increase in competition from smaller service providers, but consolidation in the industry has  resulted  in  a  sharp  decline  of the number of regional Bell operating companies (RBOCs) providing local telephony service. Language within title 2 of the bill, meant to encourage competition within local telephony markets, has failed to generate meaningful competition in most areas of the United States.

     The Telecommunications Act also provides for ca­ble television and other public utilities to be able to provide telecommunications services in competition with telephone companies. High-speed broadband services using cable modems and Internet telephony are two examples of services allowed as a result of the legislation, although the introduction and consumer acceptance of such services has been relatively slow. Common carriers were allowed to provide video services through telecommunications networks on a nondiscriminatory basis. To make competition among common carriers more viable, telephone-number portability was mandated in the act, as was access to local network connections.

     The law preserved the long standing notion of providing "universal service" (affordable telecommunications services to all users), and language within the act called for making enhanced telecommunications services available to rural as well as urban users. The act also provided for the interconnection of all schools to advanced telecommunication services, paid through access fees assessed to long-distance telephone calls. Hospitals and libraries benefited from universal access provisions of the act.

     Perhaps the most controversial portion of the Telecommunications Act of 1996 was subsection title 5, the Communications Decency Act (CDA). The CDA made it a criminal offense for Internet Service Providers (ISPs) to knowingly disseminate indecent material to minors. Prior to passage of the bill, language in the CDA was roundly criticized by civil rights and First Amendment groups alike, and Congress, fearing a constitutional challenge to the entire legislative package, provided for fast-track judicial review of title 5. In June 1997, in Reno v. ACLU, The U.S. Supreme Court declared the Communications Decency Act to be unconstitutional, although it continued to affirm the FCC's right to enforce an indecency standard on broadcasters.

     States and local entities are restricted under the act from imposing local zoning regulations to prohibit the placement and growth of the wireless telecommunication services within the local community.

Cable Television Services

     The Telecommunications Act lifted the cable/tele­phony company (telco) cross-ownership and service restrictions that had been imposed by the Cable Act of 1984. A wide range of cross-ownership barriers between broadcast, cable. and telecommunications were lifted in the hope of spurring competition. As a result, AT&T, the largest long-distance carrier in the United States, became the largest cable operator when it purchased TeleCommunications Incorporated (TCI), to provide enhanced telecommunications services via cable. The act also deregulated upper-tier rates for cable services and allowed cable operators to aggregate their equipment costs in more traditional accounting methods in hopes of providing incentives for new programming and services.

     Cable operators were eligible to purchase broadcasting facilities and to provide telecommunication services that could compete with telephony companies. Broadband services, such as high-speed cable modems, and IP telephony are examples of advanced services that Congress hoped would provide competition to common carriers. Five years after the pas5.age of the act, however, only 6 percent  of  Americans were receiving advanced services through cable operators.

The Telecommunications Act's Impact

     The overall impact of the Telecommunications Act of 1996 on consumers has been hard to gauge. Generally, the law's passage coincided with a buoyant economy and a broad expansion of telecommunication investment and growth of Internet services. Investment in telecommunications grew at an unprecedented 25 percent per year rate until 2001, when there was a marked slowdown in each of these areas. However, an overextension in installing new telecommunication infrastructure and shaky accounting practices caused the demise of many small and large telecommunications companies. As a result, since 2001 there has been a general retrenchment of telecommunications revenues and deflation of investment in the industrial sector. In the five years after the law passed, telecommunications services did not see the expected increase in competition or lowering of costs associated with moving toward a market economy. By 2002, traditional local telephone companies still controlled 92 percent of all local traffic, and long-distance telephone services look virtually unchanged from 1996. Growth in wireless telephony has been significant, but the major players are giant telecommunications conglomerates.

     Competition within industry segments has failed to materialize. Cable television has seen some growth in competition from direct broadcast satellite services, but the number of players in the broadcasting field has generally diminished, marginalizing smaller broadcasters in favor of larger group owners. Competition between service sections has failed to materialize too, as both cable- and satellite-service companies continue to consolidate. The hoped-for competition between cable- and telecommunications-service providers has also not occurred. Few telecommunications companies appear interested in providing video-service options, and growth in IP telephony has failed to meet industry expectations. In broadcasting, most television stations missed the deadline for meeting FCC requirements in the transition to digital television, and consumer acceptance of digital sets has been slowed by standardization problems between broadcasters and cable operators for set-top boxes and digital must-carry requirements.

     Critics of the legislation point to the continued convergence of telecommunications services among several large media conglomerates as an indication that the act has failed in its intent to establish new and low­ cost alternatives to traditional telecommunication services. Consumer groups point to rising cable and local telephone rates as indicators of failed attempts to stimulate cross-industry competition. While growth in telecommunications is seen as essential, the overall effect of the Telecommunications Act of 1996 in the first five years since its passage was disappointing.