The Telecommunications Act of 1996 (hereafter referred to as Telecoms Act) is a major piece of legislation with myriad implications for the structure and performance of the telephone, radio, and cable TV industries. The Telecoms Act is 344 pages long and includes 714 sections (click on above links to read any or all of the Telecoms Act). We hit the highlights here.

	The Telecoms Act contains a number of provisions that are designed to increase competitiveness in markets for both local and long distance telephone service.
	The Telecoms Act is informed by the view that the local telephone service industry can no longer be characterized as a natural monopoly. Technical innovation (such as the emergence of wireless service) have made the socially optimal industry structure one that has at least two sellers.

Interconnection

Section 251: Telecoms carriers have "general duty to interconnect " with facilties of other telcoms carriers; and not to install features, functions, or capabilities that do not conform to industry standards.

Removal of barriers to entry

	Sec 253: Prohibits states or local governments from legally restricting firms from selling intrastate or interstate telecommunications service. Section does not apply if state-erected barriers to new competition are deemed necessary to promote universal service objective.
	Section 257: FCC required to complete a "proceeding" "for the purpose of identifying and eliminating, by regulations pursuant to its authority under this Act, market entry barriers for entrepreneurs and other small businesses in the provision of telecoms and information services.
	Section 259. Infrastructure Sharing. Requires FCC to issue new regulations that "require incumbent local exchange carriers to make available such public switched network infrastructure, technology, information, and telecoms facilitiesas may be requested by such qualifying carrier for the purpose of enabling such qualifying carrier to provide telecoms services." Does not require local exchange carrier to "take any action that is economically unreasonable or that is contrary to the public interest."
	Section 257 also stipulates that infrastructure should be made available to rivals at "reasonable rates."

Some economists and industry analysts view the Telecoms Act as a political conquest for the Baby Bells. Specifically, the Telecoms Act (conditionally) reverses two key provisions of the Modified Final Judgment. Specifically, the Telecoms Act

Permits the Baby Bells to enter the long distance market (contingent upon meeting several conditions delineated below).
Allows the Baby Bells to enter the electronic publishing industry (again, under restrictions set forth below).

Part III is "Special Provisions Concerning Bell Operating Companies."

Section 217 concerns entry of BOCs into "interLATA" market. (LATA means "local access and transport area"). Requirments for providing in-region interLATA services include:

Presence of a "facilities-based" competitor--meaning the BOC must have "entered into one or more agreements to provide access and interconnection to its network facilities to one or more unaffiliated competing providers of telephone exchange service."
Competitive checklist--a sample of items.

	Interconnection in accordance with section 251.
	"Nondiscriminatory" access to the poles, ducts, conduits, and right-of-way owned by the Bell operating company at "just and reasonable rates."
	Provide entrants access to 911 services.
	Directory assistance allows entrants customers to obtain telephone numbers.
	Operator call completion services.
	White pages directory listing for entrant's customers.
	Access of customers to databases necessary for call routing and completion.

Section 273: Sets forth conditions under which BOC's may integrate backward into manufacture of telecoms equip.

Section 274: BOCs permitted to enter the electronic publishing industry by joint ventures or "separated" affiliates (as defined in the Telecoms Act).

Other Noteworthy Provisions

	Section 314: Preservation of Competition in Commerce. Prevents the merger of telephone , cable, wireless, radio, companies where the effect of such mergers is to "substantially lessen competition or tend to create a monopoly."
	Section 330: New TV sets must include devices which enable parents to "block" programming that carries certain ratings or codes. (The V-chip section).
	Section 508: Game shows such as "Wheel of Fortune" or "American Idol" can't be "rigged."

Title VI contains a number of regulatory changes for the Cable TV industry. A few highlights:

	Section 612 is designed to limit foreclosure of cable distribution systems to independent programmers. Cable companies are required to designate channel capacity for "persons unaffiliated with the programmer." For example, Time Warner owns a large stake in TBS, which owns the Atlanta Braves. Hence, Braves telecasts is programming supplied by an affiliate. For example, a cable system of 55 to 100 channels must designate at least 15 percent for unaffiliated programmers.
	FCC has power to establish maximum rates for commercial use of designated channel capacity--designed to prevent TCI et al. from setting entry-deterring rates.
	Section 613. Ownership Restrictions. Cable companies prohibited from acquiring "direct" or satellite master antenna companies or provided "direct" T.V.
	Section 613:Lifts restrictions on media cross-ownership. For example, a firm can now own (directly or indirectly) a radio station, a newspaper, a television station, and a cable company in the same city.
	Section 614: Cable companies must carry the signals of at least three local commercial television stations (unless they have less than 300 subscribers).
	Section 615: Cable companies must carry one qualified noncommercial educational station (TCI carries AETN, for example).
	Section 621: A franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise.
	Section 622: Franchise fees cannot exceed 5 percent of gross cable system revenues.
	Section 623: FCC deregulates cable rates in markets that are "effectively" competitive.

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