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 NBS100 TELECOM STUDY - "G" The Communication Act of 1996 - Regulatory Missteps

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• • This NBS100 report attempts to demonstrate the primary factor in America's lowly ranking in the deployment of advanced technologies and the reason why NBS100 claims for monetary damages for the regulatory seizure of Stubblefield's frequencies, that took place in 1908. Absent reform, telecom policies that inhibit investment and innovation will continue to undermine job creation and economic growth, while inducing businesses to locate abroad.
• •
Congress intended to modernize the nation's networks with passage of the Telecommunications Act of 1996. But through a series of missteps by state and federal regulators, the Act devolved into one of the worst examples of corporate welfare and regulatory abuse in recent times.
• •
In principle, the practice of forcing the "Baby Bells" and other so-called incumbent phone companies to share their wire line facilities with rivals at government-set rates, dubbed "forced access," has inhibited investment in new, more modern and competitive networks. In no other state is this regulatory debacle more apparent than California, which can ill afford continued losses in the telecom sector.
• •
This report utilizes a Timeline of regulatory enactments to examine the developments leading up to the passage of the 1996 Telecom Act, the effects of forced access in California, and the Challenges facing the telecom industry at a time of unprecedented regulatory uncertainty. Recommendations to lead lawmakers out of the forced-access morass are proposed.

T• • For more than a decade practitioners have relied on A Legislative History of the Communications Act (Oxford University Press 1989) to tease modern meaning out of the aging provisions of the Communications Act of 1934, which itself had origins in the Interstate Commerce Act of 1887 and the Radio Act of 1927 - established by an Act of CONGRESS.


1887 - The United States Interstate Commerce Act
•• •
The United States Interstate Commerce Act of 1887 was created the Interstate Commerce Commission. The members of the commission were appointed by the President with the consent of the Senate. This was the first of the so-called Fourth Branch agencies. Its aim was to regulate surface transportation (initially railroads, later trucking), to ensure fair prices and regulate other aspects of the conduct of common carriers. The Interstate Commerce Commission started in trouble, since the ICC was given a mandate to manage interstate commerce, but was not authorized to enforce the law. The ICC started as a regulatory body without power, basically. The ICC's powers were expanded by subsequent laws.
• •
Its creation was a result of the 1886 United States Supreme Court case of Wabash, St. Louis & Pacific Railroad Company v. Illinois.
• •
The act was signed into law by President Grover Cleveland.
• •
Between 1910 and 1934, the ICC also had the power to regulate interstate telephone services, although it did little to exercise this power. Under the Communications Act of 1934, this authority was transferred to a new Federal Communications Commission.
•• •
The Interstate Commerce Commission is often cited as a classic example in which an agency intended to protect consumers is "captured" by the industry that it intended to regulate. The Commission was accused of acting in the interests of the trucking industry by causing prices to be set at artificially high levels and by using regulation to prevent new entrants from competing.
•• •
It was replaced by the Surface Transportation Board in 1995, after losing much of its strength due
1913 - Kingsbury Commitment -1913 (An Agreement Between AT&T and the U.S. Attorney General)
• • The Kingsbury Commitment of 1913 marked the beginning of AT&Ts monopoly. The Bell System and independent telephone operators reduced competition out of concern for government intervention. The government had been increasingly worried that AT&T and the other Bell Companies were monopolizing the industry.
• • Under Theodore N. Vail from 1907 AT&T had bought Bell-associated companies and organized them into new hierarchies. AT&T had also acquired many of the independents, and bought control of Western Union, giving it a monopolistic position in both telephone and telegraph communication. It is also credited with using almost illegal methods to eliminate competition. Vail stated that there should be "one policy, one system (AT&T's) and universal service, no collection of separate companies could give the public the service that [the] Bell... system could give." Faced with a government investigation for antitrust violations AT&T had to act.
• •
In the Kingsbury Commitment, actually a letter from AT&T VP Nathan Kingsbury of December 9, AT&T agreed with the Attorney General to divest itself of Western Union, to provide long-distance services to independent exchanges under certain conditions and to refrain from acquisitions if the Interstate Commerce Commission objected.
• •
The Commitment did not settle all the differences between independents and Bell companies and averted the federal takeover many had expected. However the Commitment played into AT&T's hands - the company was allowed to buy market-share, as long as it sold an equal number of phones. So AT&T was able to consolidate its hold on the most profitable urban markets, and interconnection only strengthened its hand in long-distance traffic. Between 1921 and 1934 the ICC approved 271 of the 274 purchase requests of AT&T.
• •
The entire network was nationalised during World War I from June 1918 to July 1919. Following re-privatization, AT&T resumed its near-monopoly position. In 1934, the government acted to set AT&T up as a regulated monopoly under the jurisdiction of the Federal Communications Commission. This was maintained until AT&T's forced divestiture in 1984.
• • See also: Hall Memorandum , United States Telephone Association , Sherman Antitrust Act, Willis Graham Act ,
• •
1927 - Federal Radio Commission
• •
The Federal Radio Commission (FRC) was a government body that regulated radio broadcasts in the United States from its creation in 1927 until its replacement by the Federal Communications Commission (FCC) in 1935. The Commission was created to license broadcasters and reduce radio interference, a benefit to both the broadcasters and the public. The Radio Act of 1927 superseded the Radio Act of 1912 , which had given regulatory powers over radio communication to the Secretary of Commerce and Labor. The Radio Act of 1912 did not mention broadcasting and limited all private radio communications to what is now the AM band.
• •
The Radio Act of 1927
• •
The Radio Act of 1927 (signed into law February 23, 1927) made almost no mention of the radio networks that were in the process of dominating radio. The only mention of radio networks was vague: The Commission {the Federal Radio Commission} shall "Have the authority to make special regulations applicable to stations engaged in chain broadcasting." Advertising was mentioned in the act with only slightly more authority than networking; merely requiring advertisers to identify themselves: "All matter broadcast by any radio station for which service, money, or any other valuable consideration is directly paid, or promised to, or charged to, or accepted by, the station so broadcasting, from any person, firm, company, or corporation, shall at the time the same is so broadcast, be announced as paid for or furnished as the case may be, by such person, firm, company, or corporation."
• •
The act did not authorize the Federal Radio Commission to make any rules regulating advertising. The content of any programming could not have "obscene, indecent, or profane language." Otherwise anything could be programmed, though the Federal Radio Commission could take into consideration programming when renewing licenses. A forerunner of the "equal time rule " was stated in section (18) of the Radio Act of 1927 which ordered stations to give equal opportunities for political candidates. The act did vest in the Federal Radio Commission the power to revoke licences and give fines for violations of the act.
• •
The Radio Act of 1927 divided the country into five zones. Each was to have one person to be on the commission. The Davis amendment to the act required that each zone was to have equitable allocations of licenses, time of operation, station power, and wavelength. This greatly complicated things for the commissioners; e.g. the northeast had a greater population than the southwest, thus a greater need, but it still had to have as many stations as the southwest.
• •
On February 25, 1928 Charles Jenkins Laboratories of Washington, DC became the first holder of a television license from the Federal Radio Commission.
• •
Formation of the Commission
• •
President Calvin Coolidge nominated five men to the commission: Admiral W.H.G. Bullard as chairman, Colonel John F. Dillon , Eugene O. Sykes, Henry A. Bellows , and Orestes H. Caldwell .
• •
The first three were confirmed by the Senate and the first two died soon afterward. Bellows and Caldwell didn't receive salaries, but stayed on anyway. These three did conduct a badly needed reallocation of frequencies. In October Bellows left the commission to return to Minneapolis where he had been a broadcaster. In November 1927 Harold Lafount and Sam Pickard joined the commission. In March 1928 Caldwell was barely confirmed and Ira Robinson became chairman, the commission was finally complete.
• •
Radio Licensing
• •
In the spring of 1928, the commissoners made drastic reallocations and told 164 stations to justify their existence or be forced to stop broadcasting. Eighty-one stations did survive, most with reduced power. Educational stations didn't fare very well. They were usually required to share frequencies with commercial stations and operate during the daytime, which was considered worthless for adult education.
• •
KFKB Milford, Kansas had been renewed several times by the Federal Radio Commission. It was the most popular station in the nation. KFKB was owned by a "surgeon" who, among other things, espoused, over the airwaves, goat glands as a cure for various illnesses. The American Medical Association was very upset over his prescriptions, so in 1930 the Federal Radio Commission denied his request for renewal. Dr. John Brinkley , the "surgeon", appealed on the grounds of censorship. The U.S. Court of Appeals denied his appeal. The court ruled that the Federal Radio Commission could consider past programming content without it being censorship. This, however, didn't stop the ever-popular Dr. Brinkley, who almost won the governorship of Kansas in 1928 by write-in votes. He simply beamed his programs to the United States over 100,000 watt XER Mexico. This was twice the power of any broadcast radio station save one experimental 500,000 watt station WLW Cincinnati.
• •
WNYC, the municipal station of New York City, was assigned a part-time, low-power channel. It appealed and lost. Even though the station was government owned, the Federal Radio Commission said that city ownership did not give the station any special standing concerning the "public interest, convenience, and necessity." This was representative of the decline of public broadcasting. Both cases asserted the right of the Federal Radio Commission.
1934 - FCC - Federal Communication Commission
In Congress passed the Communications Act, which remained unchanged for almost sixty years. The Federal Communications Commission, created by the act replaced the Federal Radio Commission.
Communications Act of 1934 - The U.S. Communications Act of 1934 replaced the Federal Radio Commission with the Federal Communications Commission.
• •
Before passage, there was an interesting debate in Congress. Senators Robert Wagner of New York and Henry Hatfield of West Virginia offered an amendment to the then proposed Communications Act. Educators wanted more of radio to be given to them; they had been termed a "special interest" by the Federal Radio Commission and their stations were forced to share frequencies. This amendment would have given 25% of all radio broadcasting facilities to non-profit institutions and organizations. It would also have allowed these educational stations to sell advertising in order to become self-sufficient. Senator C.C. Dill , a pro-industry spokesman opposed this amendment. It would have meant eliminating numerous commercial stations, but that is not what Dill publicly complained about. He expressed horror over the advertising. He said there was too much advertising already. Not all educators supported the advertising clause, so a compromise was struck. The issue was to be given to the new Federal Communications Commission to study and to hold hearings on and to report back to Congress. Hatfield and Wagner stuck to their guns, however, and proposed the bill anyway, the Hatfield-Wagner amendment died and the Communications Act was passed.
• •
The Federal Communications Commission reported back, saying that commercial stations had ample time for educational and other public service programs. The Commission called for cooperation between commercial and educational interests and other non-profit groups. The educators lost, but the commercial broadcasters didn't exactly win; they had to put on public affairs programs.

• • ///
1934 - FCC Federal Communications Commission
• • Regulatory powers
• •
The Federal Communications Commission has one major regulatory weapon, revoking licenses, but short of that has little leverage over broadcast stations. It is reluctant to do this since it operates in a near vacuum of information on most of the tens of thousands of stations whose licences are renewed every three years. Broadcast licenses are supposed to be renewed if the station meets the "public interest, convenience, or necessity."
• •
The Federal Communications Commission rarely checks except for some outstanding reason; burden of proof would be on the complainant. Fewer than 1% of station renewals are not immediately granted, and only a small fraction of those are actually denied.
• •
Note: Similar authority for regulation of Federal Government telecommunications is vested in the National Telecommunications and Information Administration (NTIA).
• •
The Federal Communications Commission (FCC) is an independent United States government agency, created, directed, and empowered by Congressional statute.
• •
The FCC was established by the Communications Act of 1934 as the successor to the Federal Radio Commission and is charged with regulating all non-Federal Government use of the radio spectrum (including radio and television broadcasting), and all interstate telecommunications (wire, satellite and cable) as well as all international communications that originate or terminate in the United States. The FCC took over wire communication regulation from the Interstate Commerce Commission. The FCC's jurisdiction covers the 50 states, the District of Columbia, and U.S. possessions.
The Body of the Organization
• •
The FCC is directed by five Commissioners appointed by the President and confirmed by the Senate for 5-year terms, except when filling an unexpired term. The President designates one of the Commissioners to serve as Chairperson. Only three Commissioners may be members of the same political party. None of them can have a financial interest in any Commission-related business.
• •
As the chief executive officer of the Commission, the Chairman delegates management and administrative responsibility to the Managing Director. The Commissioners supervise all FCC activities, delegating responsibilities to staff units and Bureaus. The current FCC Chairman is Michael Powell, son of former Secretary of State Colin Powell. The other four current Commissioners are Kathleen Abernathy , Michael Copps , Kevin Martin , and Jonathon Adelstein .
History - Report on Chain Broadcasting
1940 - In 1940 the Federal Communications Commission issued the "Report on Chain Broadcasting." The major point in the report was the breakup of NBC (See American Broadcasting Company), but there were two other important points. One was network option time, the culprit here being CBS. The report limited the amount of time during the day, and what times the networks may broadcast. Previously a network could demand any time it wanted from an affiliate. The second concerned artist bureaus. The networks served as both agents and employees of artists, which was a conflict of interest the report rectified.
Allocation of television stations
• •
The Federal Communications Commission assigned television the very high frequency (VHF) band and gave TV channels 1 to 13. The 13 channels could only accommodate 400 stations nationwide and could not accommodate color in its state of technology in the early 1940s.
1940 - In 1944 CBS proposed to convert all of television to the ultra high frequency (UHF) band, which would have solved the frequency and color problem. There was only one flaw in the CBS proposal: everyone else disagreed. In 1945 and 1946 the Federal Communications Commission held hearings on the CBS plan. RCA said CBS wouldn't have its color system ready for 5&endash;10 years. CBS claimed it would be ready by the middle of 1947. CBS also gave a demonstration with a very high quality picture.
1945 - In 1945 the Federal Communications Commission moved FM radio to a higher frequency. The Federal Communications Commission also allowed simulcasting of AM programs on FM stations. Regardless of these two disadvantages, CBS placed its bets on FM and gave up some TV applications. CBS had thought TV would be moved according to its plan and thus delayed. Unfortunately for CBS, FM was not a big moneymaker and TV was. That year the Federal Communications Commission set 150 miles as the minimum distance between TV stations on the same channel.
1946 - In October of 1946 RCA presented a color system of inferior quality which was partially compatible with the present VHF black and white system.
1947 - In March 1947 the Federal Communications Commission said CBS would not be ready, and ordered a continuation of the present system. RCA promised its electric color system would be fully compatible within five years; in 1947 an adapter was required to see color programs in black and white on a black and white set.
1948 - There was interference between TV stations in 1948 so the Federal Communications Commission froze the processing of new applications for TV stations.
• •
On September 30, 1948, the day of the freeze, there were thirty-seven stations in twenty-two cities and eighty-six more were approved. Another three hundred and three applications were sent in and not approved.
• •
After all the approved stations were constructed, or weren't, the distribution was as follows: New York and Los Angeles, seven each; twenty-four other cities had two or more stations; most cities had only one including Houston, Kansas City, Milwaukee, Pittsburgh, and St. Louis.
• •
A total of just sixty-four cities had television during the freeze, and only one-hundred-eight stations were around. The freeze was for six months only, initially, and was just for studying interference problems. Because of the Korean Police Action, the freeze wound up being three and a half years.
• •
During the freeze, the interference problem was solved and the Federal Communications Commission made a decision on color TV and UHF. In October of 1950 the Federal Communications Commission made a pro-CBS color decision for the first time.
• •
The previous RCA decisions were made while Charles Denny was chairman. He later resigned in 1947 to become an RCA vice president and general counsel. The decision approved CBS' mechanical spinning wheel color TV system, now able to be used on VHF, but still not compatible with black-and-white sets.
1951 - RCA, with a new compatible system that was of comparable quality to CBS' according to TV critics, appealed all the way to the U.S. Supreme Court and lost in May 1951, but its legal action did succeed in toppling CBS' color TV system, as during the legal battle, many more black-and-white television sets were sold
• •
When CBS did finally start broadcasting using its color TV system in mid-1951, most American television viewers already had black-and-white receivers that were incompatible with CBS' color system. In October of 1951 CBS was ordered to stop work on color TV by the National Production Authority , supposedly to help the situation in Korea. The Authority was headed by a lieutenant of William Paley, the head of CBS.
1951 - The Federal Communications Commission, under chairman Wayne Coy, issued its Sixth Report and Order in early 1952. It established seventy UHF channels (14 to 83) providing 1400 new potential stations. It also set aside 242 stations for education, most of them in the UHF band.
• •
The Commission also added 220 more VHF stations. VHF was reduced to 12 channels with channel 1 being given over to other uses and channels 2&endash;12 being used solely for TV, this to reduce interference. This ended the freeze.
1953 - In March of 1953 the House Committee on Interstate and Foreign Commerce held hearings on color TV. RCA and the National Television Systems Committee , NTSC, presented the RCA system. The NTSC consisted of all of the major television manufacturers at the time. On March 25, CBS president Frank Stanton conceded it would be "economically foolish" to pursue its color system and in effect CBS lost.
• •
On December 17, 1953, the Federal Communications Commission reversed its decision on color and approved the RCA system. Ironically, color didn't sell well. In the first six months of 1954 only 8,000 sets were sold; compared with 23,000,000 black and white sets. Westinghouse made a big, national push and sold thirty sets nationwide. The sets were big, expensive and didn't include UHF.
• •
The problem was that UHF stations would not be successful unless people had UHF tuners, and people would not voluntarily pay for UHF tuners unless there were UHF broadcasters. Of the 165 UHF stations that went on the air between 1952 and 1959, 55% went off the air. Of the UHF stations on the air, 75% were losing money. UHF's problems were the following:
• •
(1) technical inequality of UHF stations as compared with VHF stations;
• •
(2) intermixture of UHF and VHF stations in the same market and the millions of VHF only receivers;
• •
(3) the lack of confidence in the capabilities of and the need for UHF television. Suggestions of de-intermixture (making some cities VHF only and other cities UHF only) were not adopted, because most existing sets did not have UHF capability. Ultimately the FCC required all TV sets to have UHF tuners under the All Channels Act. However over four decades later, UHF is still considered inferior to VHF, despite cable television, and ratings on VHF channels are generally higher than on UHF channels.
• •
The allocation between VHF and UHF in the 1950s, and the lack of UHF tuners is entirely analogous to the dilemma facing digital television fifty years later in the 2000s. The All Channels Act is again being used to force this transition, however at significantly greater cost to the consumer this time around.
• •
Source: from Federal Standard 1037C
• •
See also: concentration of media ownership, Fairness Doctrine, frequency assignment, open spectrum, British equivalent Ofcom, Mercedes Divide • • From Wikipedia, the free encyclopedia. ODDBALL TELECOM STORY

• • ///
1996 - Telecommunications Act of 1996 -
Telecommunications Act of 1996 - Telecommunications Act of 1996 is the largest major revision of the law governing how communications industries are regulated in the United States, since the Communications Act of 1934.
• •
The industries directly affected by the law include: over-the-air television and radio stations, cable television operators, satellite broadcasters, wireline telephone companies (local and long distance), wireless telephone companies, and others.
• •
The general intent of the revision is summarized, among experts, as deregulation and promotion of facility-based competition . Many agree that the Telecom Act has not fulfilled those goals well. Yet there are contradictory accounts as to how and why it has failed, what should be done.
• •
Title V was the Communications Decency Act, the child protection portions of which were subsequently struck down, leaving the legal protection against liability for the words of others.

 • • As can be seen, the principal problem of wireless and land-line networking, is the regulatory seizure of private property,
which invariably skews investment incentives. Congress forced incumbent local telephone companies to share their facilities with rivals at regulated rates. By lawmakers' reasoning, competitors would need to establish market share before they would build independent facilities with which to compete.
• •
Congress delegated to the FCC the authority to determine which facilities should be shared, and how various parts of the network, called "unbundled network elements" (UNE), as well as the entire network platform (UNE-P) would be priced. However, lawmakers did establish an eligibility baseline for this subsidized access. It was not intended to be an entitlement. Eligibility was supposed to be based on whether a competitor would be "impaired" from competing if there was denied access.
• •
Section 251 of the 1996 Act directs the FCC to "consider, at a minimum, whether … the failure to provide access to such network elements would impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer." (Emphasis added.)
• •
The FCC established a pricing formula for network elements, called "Total Element Long- Run Incremental Cost" (TELRIC), based on the cost of building and operating a hypothetical maximum-efficiency network. The rates subsequently calculated by most states cover an irrationally broad range, and most have proven to be economically unsustainable.

MORE STORY - NBS100f Exhibit "F" / EXECUTIVE SUMMARY / The NBS100 Report
See Introduction - Communication Act of 1996 Exhibit "F"


ByLine / Source of Study
A How-To Guide for Business
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Have you ever wondered who first invented and paid for the cost to patent "Firewire" and the "Wireless Telephone®™©'? Did you ever wonder, when talking back and forth on a cellular phone, or when using a wireless router to connect your lap top to the internet, what created the ether or frequency that carries the voice?2006/ImagesStub/nbsPayToPlayTruck108p.jpg
---- If you are in the wireless business, (a wireless telephone company, a Wi-Fi/Wi-Max Broadcasters, etc.) -- you probably know the answer . . . and now's the time to get ready for 2008 -- the 100th year -- of the "Wireless Telephone®™©" patent.
---- It's also the year for the Olympic Games . . . and it could be just the right time to introduce your new wireless video telephone, webcasting "live" sporting events from Beijing, China!

• • The Early Years Alexander Graham Bell patented the telephone on March 7, 1876. During the course of the next 20 years, the average number of daily calls per 1,000 population grew relatively slowly, from four to 37. *• • 06 Nathan B. Stubblefield's, Mechanical Telephone Patent No. 378,183, February 21, 1888. Click to Go To US Patent Office -- then Click Full Text to refresh page, serviced over 38 locals in Murray, Kentucky. State by State franchises for telephone rights or territorial deeds were sold in various parts of the United States. By 1889, his telephone system tied into the Bell system. (See NBS100 Timeline)
• • Just shortly before the Bell patent was to expire, in 1893, the world first wireless telephone was demonstrated in 1892, by Nathan B. Stubblefield. His wireless telephone worked along side his own telephone system, connected to his own local Murray, Kentucky Telephone company.
• •
But once the Bell patents did totally expired in 1894, with no regulatory constraints, thousands of competitors, including Nathan B. Stubblefield, in Murray Kentucky, began wiring the nation, with their various telephone systems and territorial franchise agreements. The daily calling average per 1,000 people increased from 37 in 1895, to 391 in 1910.
• • In May, 1898, Stubblefield was issued his - Wireless Telephone Transmission Coil Patent that enabled him to publicly expand his company and wireless voice transmitter into the newly discovered WIRELESS TELEPHONE & TELEGRAPH business. See, United States Patent No. 600,457, Granted May 8, 1898. Click to Go To US Patent Office -- then Click Full Text to refresh page. By 1908, both Stubblefield and DeForest were enabled to file their WT and Radio Patents, that created the Internet and Wi-Fi connection. Stubblefield Received His All Purpose - Wireless Telephone Patent, Number 887,357 1908 0512 - PATENT: Click to Go To US Patent Office -- then Click Full Text to refresh page. The DeForest Audion Patent Number Three, #879, 532 Covering The Device As A Detector - Was Issued On February 18, 1908. (See NBS100 Timeline)
• •
1896, could be the starting point for the 100th anniversary of the Communication Act of 1996. It could also be analogized to the Dot Com era that commenced when Congress open the door in 1996 to the Internet. The marketing and selling of his wireless telephone stock certificates along with other companies ran rapid, that created the big bust of 1911.


Section - Study A: / "NBS100J" / PCI STUDY: CROSSED LINES: Regulatory Missteps
Section - Study B: / "NBS100K" / NBS STUDY: Ddiaries - Follow The Money
Section - Study C: / "NBS100L" / NBS STUDY: LookRadio - Follow The Money
Section - Movie Treatment: / "The Movie" / NBS Film Treatment: The Movie - Wireless


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