The document discusses issues with Section 301 of the 1996 Telecommunications Act regarding cable reform. It argues that while the Act aimed to increase competition, it has instead allowed consolidation resulting in limited choices and high prices for consumers. Specifically, Section 301's broad categorization of equipment costs and assumption that installation charges would not vary significantly have not accounted for technological changes and local monopolies. The document proposes amendments to Section 301, such as more specific equipment categorization based on type and usage, and holding companies accountable if providing faulty equipment or limited service choices due to local monopolies. The goal is to update the law for current market realities and benefit consumers.

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Stephen Hilton
George Bohrer
Communication Law and Ethics
5/1/15
1996 Telecommunications Act: Section 301 - Cable Reform Act
Within the world of communications, it's become difficult to keep up with emergence of
new technology that has been coming out almost every year with companies such as Apple Inc.,
Microsoft and other online websites such as Netflix or Facebook remaking media with each year
passing year. It’s become so rapidly different that today’s media laws are already considered
obsolete. This is true with the Telecommunications Act that was passed by the FCC in 1996. It
was approved by the FCC to replace “the regulatory framework of a monopoly era with a radical
deregulatory approach that promised new consumer benefits through competitive market forces.”
- (Kimmelman, Cooper, and Herrera 1) The main issue with this law however, is that it has
effectively done the complete opposite. The reasons for why new competition has not been able
to emerge into the market is in large part due to politicians, regulators, and antitrust officials
allowing both telephone and cable companies to effective destroy it. This has resulted with
consumers having a very limited choice in service and the high cost in prices for these services
as well. However, instead of destroying the Telecommunications Act all together, it would be
more efficient if this was changed within certain areas, such as Section 301, the cable reform act.
The first priority will be to address the issues that are caused by Telecommunications Act, then

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addressing the issues that are within section 301, then provide possible solutions to those issues
and argue how these changes will effects it would have on our society.
The Telecommunications Act of 1996 was established to add further onto the 1934
Communications Act with the creation of the Internet. However, it has become quite evident that
it failed to take into many unknown factors such as smaller companies become merged or bought
out by much larger companies that absorbed them through the deregulated market or the dot.com
bubble of the late 1990s to early 2000s. This has caused so much damage especially to upstart
companies as there is now a massive paywall that blocks them from entering into the market.
Instead of the Telecommunications Act creating more competition within the market, “it left an
opening for companies that were looking to merge in order to gain even more market share, thus
setting the stage for the union of SBC with AT&T and Verizon with MCI..” - (Kimmelman,
Cooper, and Herrera. 1) It has become clear that the situation has become terrible due to the 1996
Act and it needs to be properly addressed. However, destroying any act and completely rewriting
it would become a long-time consuming process that the current state of Congress would likely
be incapable of handling within a reasonable timeframe. The Telecommunications Act when it
was first created seemed sound on paper, but “policies based on partial models will typically
entail unanticipated effects that are not known until after the policies are in place. That is, to a
degree all policies are "experiments" with uncertain outcomes.” - (Bauer 3) To make this process
more efficient, it would be easier to change what doesn’t work within the act and focus on
improving on that portion. The act that will need to be improved with 1996 Act would be Section
301, the cable reform act. This section stats:
Section 301(j) of the 1996 Act requires that "[t]he Commission allow cable operators to
aggregate, on a franchise, system, regional, or company level, their equipment costs into

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broad categories regardless of the varying levels of functionality of the equipment within
each such broad category." That section also provides that "[s]uch aggregation shall not
be permitted with respect to equipment used by subscribers who receive only a rate
regulated basic service tier. - Telecommunication Act, Section 301
The article states that the cable operators aggregate their equipments cost regardless of
functionality. This can be seen as understandable because technology can be similar but in
different forms of equipment that serve the same exact purpose. However, the issue is that by
labeling the subject ‘broad’ within any statement of a law is very likely to be open to
interpretation to any lawyers, regulators, investors, etc. This can be seen as way to help combine
the equipment of different companies in case customers are using more than one service. but it
can create distortion in the law that can make the idea of equipment that is used on a ‘rate
regulated basic service tier’ be changed to mean any form of equipment, no matter how many
different, can be charged for the installation of the equipment. This law is not at all unreasonable,
but with the current market it will need to be changed. This is because of the limited services
within local communities, which is due in part to local monopolies. This means that the rate is
going to be high costing for any customers and because there is such a limited choice in services.
More importantly there are several other areas within the law that are a cause for concern. For
example,
Our rules have only permitted this flexibility for equipment costs, however, not for
installation charges. This was done because we believed that equipment charges were less
likely to vary significantly between systems, whereas installation charges are more
dependent on local labor and other costs that can vary among communities. -
Telecommunications Act, Section 301

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This is interesting because if installation charges are based more on local labor then why
is it that was considered insignificant? One possibility was because of companies at that time.
“In 1996, seven Bell companies and GTE were the dominant providers of local service and 90%
of all long distance traffic was carried by AT&T, MCI, and Sprint. Today, there are three Bell
companies; there is no GTE; Verizon has acquired MCI; and the AT&T parent has been taken
over by its SBC offspring.” - (Simon 589) Many companies now are either the pre-established
companies-turned media-giants or were absorbed into these new media giants after being bought
out or bankrupt. Now the issue of local monopolies have popped up within local and state areas,
it causes the installation charges to become more dependent on the labor and not the company
itself. However, the law states that it was done because they didn’t expect any ‘significant’
changes with the system. This will likely need to be changed in order to specify how the off
chance of any significant changes were to occur within these rules after the establishment of the
law was initiated. According to statistics, cable rates can be “measured on a per channel basis,
they have increased by sixty-four percent. This cable rate increase is two and a half times the rate
of inflation. However, since consumers do not get to buy cable service on a per channel basis,
but are forced to buy the whole bundle on a take-it-or-leave-it basis, one should measure the
impact as the increase in the monthly bill. Using that analysis, we see that cable rate hikes have
led to a near-doubling of the cost of the average monthly cable bill. As a total monthly bill, they
have increased eighty-six percent since 1995. This means that the true cost of cable has increased
at a rate that is almost four times the rate of inflation.” - (Bernaski 273) This is indication of the
market forces not working the way they are intended and there needs to be changes in order for
this issue to be resolved.

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Based on what has been analyzed from Section 301, it is clear there is changes that need
to be implemented into it for the current marketplace. The 1996 Act was created to implement
structures and rules designed to assure that the courts would keep the antitrust laws in place.
However, “the world is a very different place now. Cable companies are offering Internet and
telephony services and local phone companies are offering long distance, Internet, and video
services. In addition, the explosion of Wi-Fi and Wi-Max has revolutionized the traditional way
of doing business.” - (Simon 589) Thanks to the new ways of our current market, the changes
that need to be made need to be seen as a response to this current marketplace. First, the broad
categorization of equipment needs to be changed because new emerging technology that has
sprung within the last 20 years, it is surprising how The United States is still relying on old lines
that were established within the 1950s through 1960s even today. However, technology that is
used by an franchise, system, regional, or company level entity or any form of business needs to
have their equipment categorized specifically based on the amount of different equipment, and
the amount of wattage that it will be utilized by the equipment on a monthly basis. Based On
these two subjects, the equipment will be considered low, medium, or high costing to a customer
and will be categorized into one of these three categories. Low costing equipment will be
considered low-risk, and require little installation but will be considered under penalty if the
equipment is found to be faulty hardware, then the customer who requested the purchase within
the first 6 months of purchase will be eligible to receive a refund if the cost of equipment
exceeds over $250 upon purchase. The way that businesses operate using local monopolies to
help them squander their customers by offering them limited choice in terms of what services are
available should make them responsible for giving their customers bad service just for being
lazy. The issue lies in how much this could be in legal costs because courts typically will have to

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handle cases such as this and it could lead to many possible headaches to due to this being a
business, so it would be more efficient to have this behavior penalized without the need for a
court hearing to avoid having too much issue with time consumption.
Another area that needs to be taken care of is installation costs. This is based on local
labor costs which means that it separates the main body of the company from having any legal
responsibility outside of the installation of the equipment. This is a problem as the labor force
will be the ones taking up the payment for the installation, but the cost for it typically is very
high, especially if the customer has to pay the cable bill monthly. The high costs today has lead
many people to want to use the Internet instead because of the high rates of cable today, which is
the reason for why Internet typically is cheaper buying cable with companies such as ComCast.
But these huge rates aren’t just affecting the customers who are buying cable. “Local phone
rates, which are still regulated, increased at just about the rate of inflation. Because competition
never took much hold, there was some discounting for big bundles of local service, but that was
extinguished when AT&T and MCI were gobbled up by SBC and Verizon. In markets where
prices were deregulated prematurely, like special access, profits have soared.” - Kimmelman
(516) What needs to be fixed here is that there needs to be regulation for level of installation of
the equipment that is implemented. Unfortunately simply trying to tax the installation or
equipment would fall back onto the consumer to pay up because companies simply have too big
a grasp on the local market. To make up for this issue, we need to instead to change the
installation rate because of local monopolies and the proper solution is to have the local labor
that are responsible for the installation have that any equipment that is installed for the usage of
cable, Internet, phone etc. hat falls into any of the previously stated categories needs to be first be
categorized based on the cost of installation, in which case the customer has the option to have

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the equipment that is being replaced no longer put onto the monthly bill. This is case where
companies charge for equipment that is no longer usable or is faulty still possibly being charged
under a customer’s bill, in which case there will be a penalty if this gets reported to company’s
customer service and request a refund. However, customer service typically for most companies
who have a huge control over a local community will just force the customers through a rotating
door system in which they try to convince the customers to keep their service. Its best for
companies who have more than seventy five percent of a local communities’ landlines under
their ownership to provide a quick dial solution to this under new regulation in which they are to
immediately have less than 10 minute wait time for customers, and provide a quick dial to
suggest what issue the customer has, what category that they had selected and then give the
address, phone number, and name of the person. The report will be submitted to the company's
branch within that person’s county area and will need to respond back to the request within 24
hours or the customer can have a complaint filed to the local government, who under the new
regulation are obligated to have the company have the company address the request submitted
within an additional 24 hours or face a penalty fee. It seemingly doesn't solve the situation right
away, but it provides more support for customers who need to have any issues with their
installation addressed within a fairly quick time period.
In conclusion, the Telecommunications Act of 1996 is obviously flawed since it is partly
reasonable for our current state within the telecommunications market, where there are a very
small number of competitors and capitulates to the demand that private networks rule. Thanks to
this, consumers are forced to pay higher prices and be given fewer real choices, while the current
state of the economy is starving for innovation to improve its current predicament. “Without
aggressive public policies that promote increased competition and open returns, the market

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conditions necessary to foster affordable and open democratic networks for communications
cannot survive.” - (Kimmelman 518) It’s clearly obvious that the act as whole cannot be
discarded for a new one, but small subtle changes within the act can provide a better solution for
much of what our current market needs and is definitely an possibility for the near future.
Work Cited
1. Kimmelman, Gene, Mark Cooper, and Magda Herrera. "The Failure Of Competition
Under The 1996 Telecommunications Act."Federal Communications Law Journal 58.3
(2006): 511-518. Academic Search Complete. Web. 28 Apr. 2015.
2. Bauer, Johannes M., and Steven S. Wildman. "Looking Backwards And Looking
Forwards In Contemplating The Next Rewrite Of The Communications Act." Federal
Communications Law Journal 58.3 (2006): 415-438. Academic Search Complete. Web. 4
May 2015.

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3. Bednarski, Anastasia. "From Diversity To Duplication: Mega-Mergers And The Failure
Of The Marketplace Model Under The Telecommunications Act Of 1996." Federal
Communications Law Journal 55.2 (2003): 273. Academic Search Complete. Web. 28
Apr. 2015.
4. DiCola, Peter. "Choosing Between The Necessity And Public Interest Standards In Fcc
Review Of Media Ownership Rules." Michigan Law Review 106.1 (2007): 101-133.
Academic Search Complete. Web. 28 Apr. 2015.
5. Parker, James G. "Statewide Cable Franchising: Expand Nationwide Or Cut The Cord?."
Federal Communications Law Journal 64.1 (2011): 199-222. Academic Search
Complete. Web. 4 May 2015.
6. Simon, Samuel A. "Are You Better Off Today Than You Were Ten Years Ago?
Residential Consumers And Telecommunications Reform." Federal Communications
Law Journal 58.3 (2006): 589-592. Academic Search Complete. Web. 4 May 2015.