Media's Legislative Outlook

Congress prepares to rewrite telecom laws

After spending the first half of the month swearing in new members and
preparing for President Bush's inauguration, Congress is set to get serious
about passing new laws.

Next week, the House and Senate Commerce Committees start debating the
rewrite of the nation's telecommunications laws. The biggest fights will be
over simplifying, or eliminating, rules forcing telephone companies to share
their networks with rival providers. Other big changes on the table would add,
not eliminate, regulation.

There is some good news for the industry: Not a single piece of
telecommunications legislation must pass this year. Below, we handicap the
chances of passage for various media provisions.

DTV deadline: The most pressing issue
facing the TV business is transition to all-digital broadcasts. All eyes are on
Senate Commerce Committee Chairman Ted Stevens (R-Alaska), who is expected to
be the deciding factor in a disagreement between his House Commerce Committee
counterpart Joe Barton (R-Texas) and FCC Chairman Michael Powell.

Barton wants to set the deadline as early as possible, preferably 2006.
Powell has said a 2009 date is necessary to allow consumers time to buy DTV
sets. Although the FCC in theory could set the date on its own, Powell risks
angering Barton unless Stevens backs him up, preferably by passing a “hard”
2009 deadline.

Outlook: There's growing consensus
among rank-and-file lawmakers that old analog channels must be reclaimed by the
government soon so they can be turned over to spectrum-hungry local emergency
services or auctioned to wireless companies. If a telecom rewrite passes this
year, a DTV deadline is certain to be included. If larger communications law
becomes too difficult to pass, a DTV subsidy will pass on its own.

Video over telephone: A huge fight is
brewing over telephone companies' bid to offer TV-quality video over Internet
lines. Their plan is to serve mostly high-income (and high-profit) customers.
To focus on these customers, phone giant SBC already has asked the FCC to
exempt video from rules requiring cable companies to serve an entire market.
FCC approval would give SBC a leg up on cable operators, which must serve
low-income (and lower-profit) neighborhoods.

Outlook: If SBC and other phone
companies make quick inroads signing up video customers, cable will insist that
anti-redlining rules on Internet video service get added to the telecom bill.

Indecency/cable à la carte:
House Telecommunications Subcommittee Chairman Fred Upton (R-Mich.) and Sen.
Sam Brownback (R-Kan.) promise to revive legislation raising fines on
broadcasters that violate the FCC's indecency restrictions. Parents groups
also are searching for a lawmaker to sponsor legislation that would allow cable
customers to refuse racy basic channels they don't want kids to see.

Outlook: As long as the networks
don't get racier, the smut police are likely to fail again. The hysteria over
indecency has dissipated, and so has momentum to crack down. But one ill-timed
f-word or sex scene, and the media's critics will get a second wind.

Media ownership: Media lobbyists and
anti-consolidation activists will beg Congress to pass opposing versions of
legislation rewriting the FCC's broadcast-ownership limits. But there's no
way Congress will change the commission's limits in any direction: Either
loosening or tightening the rules would generate an unwanted backlash from the
losing side.

Outlook: The FCC has until Jan. 31 to
request Supreme Court review of a lower-court order against its rules. If the
FCC asks the justices to take the case, the court likely will be tied up with
it for most of the current congressional session. If the FCC drops the case,
the commissioners will be obligated to spend the next year doing their own
rewrite. Either way, Congress will stay out of the fight.