Laissez failure

The Telecommunications Act of 1996 was hailed at the time as a landmark achievement of that Congress. As the 1998 Congress convenes this week, it may find that landmark in need of rebuilding, if not bulldozing.

Here’s what the act promised: lower cable rates; lower phone bills; unfettered competition; and an electronic flood of stunning new information, productivity and entertainment services pouring into homes and businesses.

Here’s what the act delivered: higher prices; zero competition; and nothing much new. Umpteen home shopping channels and non-stop infomercials don’t count.

For the consumer, the most noticeable flop has been in cable, where rates for service beyond bare-bones basic rose more than 8 percent in 1996 and nearly 7 percent in 1997. This at a time when consumer prices for all goods and services went up less than 2 percent each year. Additionally, local phone rates are up, as are in-state toll calls and pay phones. The only decline is where competition already existed — interstate long-distance. All in all, it’s a high price to pay for the ability to call Grandma on the cheap every Sunday.

And competition is what this was supposed to be about. In signing the act two Februarys ago, President Clinton — echoing the sentiments of supporters in Congress, the Federal Communications Commission and the industry — predicted that consumers would “receive the benefits of lower prices, better quality and greater choices.”

The premise was that establishing a timetable for the elimination of government rate regulation would set off a free market free-for-all, in which cable and telephone companies would start invading each other’s turf, conquering the customer with better and cheaper stuff. Not only has that not happened — a recent FCC report found that only 81 communities in the entire country have a choice of cable companies — but key provisions intended to open the $100 billion local phone business to competition and to keep internet porn away from kids were struck down in court. Higher bills and a V-chip that probably won’t even work cannot be what the authors had in mind.

Faced with mounting evidence of this laissez-faire failure, the FCC, in its incomprehensible way, decided last month that what’s needed when unbridled competition doesn’t work is to unbridle it some more. In a way as yet undefined, the FCC now plans to sweet-talk these communications monopolies to compete, apparently having not heard of the attitude horses have toward being led to water.

The next big date coming up is March 31, 1999, a little more than a year away, when the last existing cable regulations are set to expire. Consumer groups, led by Consumers Union, already are lobbying hard for a rate freeze or tighter pricing rules. Some members of Congress are calling for repeal of the entire law, others for repeal of the 1999 expiration date to give the industry time to keep its end of the bargain.

At the very least, Congress should cancel the expiration date — the communications has had two years to show it could compete for the consumer’s benefit and it hasn’t come through. The average monthly cable is fast approaching $30, and that’s a high price to pay to look at exercise bikes and cubic zirconium.