article

Telecom Heading Down TV, Radio Consolidation Path

Posted: 02/2001

The Letter

Telecom Heading Down TV, Radio Consolidation
Path

You
can see it coming, and when it does, Sen. John McCain, R-Ariz., will look like a
prophet.

For years, as Chairman of the Senate Commerce Committee, McCain has been
critical of the Telecommunications Act of 1996. His aim has been focused at
radio, television and cable offerings because the consolidations within those
media brought on by mergers and acquisitions have reduced competition.

Even before the Telecom Act was passed, the FCC (www.fcc.gov)
had begun to relax radio and television ownership rules, which originally
limited the number of media outlets a single company can have in a market. After
the act, the consolidation occurred so quickly that now, the number of radio
owners in the country has shrunk drastically.

Simply put, the local, mom and pop stations–once the staple of local news
and entertainment for small towns across the country–have become endangered
species.

Powerful communications conglomerates have become more powerful, owning
radio, television and, in some cases, even print in the same cities, where just
20 years ago, this was an FCC violation.

The promise of lower prices in cable also failed to materialize. This is in
part because mergers and acquisitions have leveraged companies, which now have
to find ways to pay for their exorbitant buyouts of other cable outlets. Another
reason is that the cable companies spread the cost of converging telephony
services with cable on to the current consumers.

What happened in the radio, television and cable industries telegraphed what
was to come in telephony. At first, spurred by the chance of more open models
and the need to create new applications to drive that competition, the industry
exploded. Every conceivable industry niche has had a player or two or three.

However, we are observing that as the big players recognize particular needs
that can better their service are being offered by smaller, sometimes fledgling
companies, the alliance/partnership or even merger/acquisition talks begin. Of
course the costs are passed on to the end user.

With a slowing economy, and the recognition that economic change is a slow
process that can take months, many more of the smaller companies–ASPs, ISPs and
CLECs–that believe they were getting a boost with the Telecom Act, are going to
be gobbled up by industry giants, which are eager to reduce the competition and
shore up their near monopolistic grip, or they will shut their doors because
they will find they simply can’t compete.

Any way you look at it, in the short term the Telecom Act provided an
exciting period of innovation and growth. However, in the long term, McCain
appears to have identified true weaknesses in legislation that no longer looks
to ensure lower prices and more competition.

Bruce Christian
Editor in Chief


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