Telecommunications Act of 1996

The Telecommunications Act of 1996 was the first successful overhaul of the Communications Act of 1934. The act deregulated media ownership and regulated sexual, violent, and obscene media content. One profound consequence of the act has been the increased concentration of media ownership.

President Clinton signed the Telecommunications Act of 1996 after Congress passed it by a large margin. The objectives of the Act are to promote competition, to reduce regulation, to provide low-cost and high-quality services for the consumers, and to encourage the spread of new telecommunications technologies. Because the advancement of digital technology facilitates convergence, media companies and politicians both saw that the act would lead the United States to a new “information age.” Media and telecommunications companies criticized previous regulations as outdated and obsolete. The act also helped the administration of President Bill Clinton to promote the concept of the “information highway.”

The act affected five major areas of regulation: (1) telecommunications services, (2) broadcast services, (3) cable services, (4) regulatory reform, and (5) obscenity and violence. With regard to telecommunications services, digital technology allows the transmission of data and video as well as voice. Before the act, local telephone companies had monopolistic control of the domestic market. The act requested local telephone companies to share the market with other companies. On the other hand, local telephone companies were allowed to enter the long-distance service market. It was believed that the telecommunications service cost for consumers would drop because of competition.

With regard to broadcast television, before the act a television company could not reach more than 25 percent of television households, it could not own more than 12 television stations, it could not own cable television, and its broadcast license lasted for only five years. Now that the act is law, a television company can reach up to 35 percent of television households, there is no limit on the number of television stations a company can own, a television company can own cable television, and a broadcast license lasts for eight years. With regard to radio, before the act a radio station could not own more than 40 stations, and it could not have more than four stations in a single market. Now that the act is law, there is no limit on how many stations a radio company can own, and it can now own up to eight radio stations in a local market. The removal of limits and the increase of possible market share were expected to increase competition in the broadcast market.

With regard to cable services, the act abolished all regulation on rates for nonbasic services. The act allows broadcast television companies to own cable companies, and it permits telecommunications companies to provide cable services. The act also prohibits local cable franchising authorities from making certain demands of cable companies. For example, local franchises are not allowed to set technical standards for cable companies. The deregulation of cross-ownership was expected to increase opportunity and flexibility for broadcast, cable, and telecommunications companies. It was also believed that consumers would have more choices of media content and cable service providers.

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