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from: New York Times

June 9, 2006
House Backs Telecom Bill Favoring Phone Companies

By STEPHEN LABATON
WASHINGTON, June 8

The House of Representatives approved the most extensive telecommunications legislation in a decade on Thursday, largely ratifying the policy agenda of the nation's largest telephone companies.

The bill passed by a lopsided vote of 321 to 101.

Supporters of the legislation said it would promote competition and lower costs by enabling the telephone companies to offer bundled packages of video, telephone, broadband, wireless and mobile phone services in new markets. They said the legislation was an important antidote to rapidly rising cable television subscription rates.

But even as the House took up the measure on Thursday, the political action had already swung to the Senate, which has been peppered by lobbyists and executives from many major telecommunications companies in recent days as it prepares to draft its own version. The prospects there are uncertain.

The House bill, sponsored by Representative Joe L. Barton, the Texas Republican who heads the House Energy and Commerce Committee, would make it much easier and cheaper for the phone companies to offer video services across the country by pre-empting the regulatory authority of municipal franchise officials. The telephone companies have been waging an expensive and protracted town-by-town war with their cable rivals, to offer video services.

The legislation would replace the regulatory role of more than 30,000 local franchising authorities with a national system supervised by the Federal Communications Commission. The current process has significantly slowed the ability of companies like Verizon and AT&T (formerly SBC Communications) to challenge the cable and satellite television companies with their own version of video services.

In a concession to the telephone and cable companies, the legislation does nothing to prevent the phone and cable providers from charging Internet content providers a premium for carrying services like video offerings that could rival those of the telecom companies.

Representative Edward J. Markey of Massachusetts and a group of other Democrats sought to amend the legislation to prohibit such practices and thereby, they said, ensure the Internet's vitality. Support for the provision, which backers call "Net neutrality," brought together such competitors as Google and Microsoft.

But the amendment failed by a vote of 269 to 152.

The largest telephone companies did not get everything they sought, however. The legislation threatens to delay any effort by the Federal Communications Commission to require Internet telephone providers to make the investments needed to connect customers to 911 services.

Still, the House bill reflected the considerable clout of the telephone industry in the House, and in particular its ties to the Republican leadership there. Rivals of the phone companies, particularly the cable industry, appear for now to have more important allies in the Senate. And the Senate's rules and customs, unlike those in the House, make it easier for a smaller number of lawmakers to influence and delay legislation.

In the meantime, the flurry of activity is proving to be lucrative on K Street, as every major lobbying firm has been enlisted and campaign coffers are filling with millions of dollars from the telephone, cable, software and high-tech industries trying to shape the legislation. In recent days the phone companies began to run attack ads on television and in local newspapers against Google over its "Net neutrality" stand.

The legislative calendar leaves little time for the two chambers of Congress to reach a final agreement on a telecommunications bill as ambitious as the one considered by the House. But some executives predicted a narrower one could stand a better chance of final passage.

The White House issued a statement on Thursday supporting the House legislation, saying it would "promote competition in both video and voice markets."

Representative Fred Upton, the Michigan Republican who heads a telecommunications and Internet subcommittee and is a co-sponsor of the measure, said it would bring "deregulatory parity" and that "for the consumers that have these services, it probably will mean a reduction of about $30 to $40 a month."

House Democrats raised several objections to the legislation. They said the new national franchise rules would sharply reduce the amount of money that cable companies now give towns and cities for public, educational and government programs. They said the failure to include build-out requirements for the telephone companies for their new video services would mean that people living in less affluent neighborhoods would be unlikely to see the benefits of any new competition for broadband and subscription television services.

But most of the criticism was over the bill's failure to include a provision that would prevent the cable and phone companies from charging the content providers for offering premium, or faster, Internet services.

The critics say that such a provision is vital to protect the free-wheeling architecture of the Internet. They also say it is necessary to prevent the telephone and cable companies, which are increasingly going into the content business, from favoring their own products over those of others. If the telephone companies can charge more to particular content providers, the critics say, the telephone and cable companies will ultimately offer broadband services that more closely resemble television services, with more limited choices than those now available on the Internet.

"The imposition of additional fees for Internet content providers would unduly burden Web-based small businesses and start-ups," said Representative Nancy Pelosi of California, the Democratic leader. "They would also hamper communications by noncommercial users, those using religious speech, promoting civic involvement and exercising First Amendment freedoms."

The legislation gives the Federal Communications Commission the authority to enforce a year-old broadband policy statement that provides consumers access to the lawful Internet content of their choice. Those favoring the Markey amendment said that the commission's antidiscrimination principle was inadequate to ensure that content providers would not, in effect, be blocked if the telephone companies begin to require companies like Google and their smaller rivals to pay for premium services.

The phone companies and their Congressional allies say that such restrictions are both unnecessary and would discourage investment in upgrading networks. They also say that the legislation goes far enough to protect consumers. And they say that as there is increasing competition for broadband services, it would be impossible for a phone or cable company to be competitive by blocking or limiting Internet choices.

"A free and open Internet is crucial to formulating an effective policy," said Representative Clifford B. Stearns, a Florida Republican who is a co-sponsor of the bill. "For now, strict strong enforcement provisions that are in the bill are a tough deterrent to discrimination."