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Nick Escobar
Mr. Bradley
Government P.2
October 16 2016
Mock Congress Research Paper
Six major corporations own and control well over half of all the media companies in
America. The Telecommunications Act of 1996 was passed in order to attempt to increase
competition within the media. This was supposed to be achieved by removing regulatory barriers
for entry. The Telecommunications Act of 1996 did this, but not well enough. The bill did not
properly account for the increase in intermodal competition. Currently, wire to wire competition
has not improved due to the bills passing. The Communications Act of 2016 should become a
law in order to increase intermodal competition, break up large monopolies, and prevent future
mergers.
Increasing intermodal competition is extremely beneficial for everyone involved. As the
statutory language of the Telecommunications Act stands, some providers that are competing
with one another may be subject to different regulations due to the bills focus on intramodal and
not intermodal competition. "In almost all geographic markets today, however, the mass market
broadband market structure is characterized by duopoly provision of broadband network services
(cable modem service from the local cable system or DSL service from the local telephone
company) (Goldfarb)." Mass media companies are abusing the lack of intermodal competition
regulations to create duopolies. These companies are using the absence of economic regulations
on intermodal competition to prevent smaller companies from entering the market. "On the other
hand, it implies the need of joint use of the network facilities by competitors. Any entrant will

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have little success in recruiting customers if it cannot offer them the possibility to connect to
customers of the rest of the telecommunications firms. (Beker)." Smaller companies that cannot
properly use intermodal resources are at an extreme disadvantage in obtaining profit, due to there
being no regulations around it. "Interconnection between two telephone networks is exactly the
kind of messy problem that is best suited to the dealmaking that underpins the business process.
(Cato Institute)." Big business is abusing their freedom of economic regulations about intermodal
competition to expand their monopolies and stomp out any competition. While the Act does a
poor job regulating intermodal competition, it also does a poor job in breaking up the media
monopolies that have been in place for ages.
Large corporations own a majority of everything we hear and see regarding the media.
The Telecommunications Act did not do enough to stop this from occurring. "The Act was
claimed to foster competition. Instead, it continued the historic industry consolidation reducing
the number of major media companies from around 50 in 1983 to 10 in 1996 and 6 in 2005.
(Bagdikian)." In fact, the Act did the opposite of what it had been intended to do. Competition
vastly decreased in the years following the act. "The Telecommunications Act of 1996 has failed
to establish wire-to-wire competition for cable TV service. Open video systems are virtually nonexistent. Head-to-head (cable v. cable) "overbuilding" has failed to seriously challenge the cable
wire monopoly. (Consumers Union)." The failure of the effectiveness of the Act is clear in the
lack of growth in competition. The same major cable companies have owned the majority of the
TV network since the Act was passed. "Before the 1996 Act was passed, the largest four ILECs
owned less than half of all the lines in the country while, five years later, the largest four local
telephone companies owned about 85% of all the lines in the country. (Consumers Union)."
Incumbent local exchange carriers, (ILECs) owned less of the telephone lines before the Act than

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after. This is again due to the fact of the statutory language of the bill being too lenient towards
ILECs, as they were the major issue at the time. With current monopolies being an issue, the law
as is, must be changed to prevent future mergers.
Corporations merging with smaller companies can create issues for both the consumer
and the general public. These mergers were not contained with the law originally, therefore they
must be prevented to protect consumers. "The FCC ruled that competitive LECs can buy, as
UNEs, all the components of the ILECs net, one by one, as already provided to customers, and
that all the elements must remain as they were provided to customers. (Miller)." The FCC has
ruled since the passing of the law, that if a merger does occur, then everything that is provided
must remain the same. This helps customers keep what they are used to, so that they don't suffer
a major change in quality. "The interconnection sections impose so many restrictions, and direct
the Commission to write so many rules, that one must fear that the regulatory costs of this open
access regime will exceed its payoff in reduced rates or improved service quality.
(Krattenmaker)." This shows how poorly the law attempts to support new competition. Currently
smaller companies see mergers as the only way for them to get paid, due to all the regulations.
"...the FCC jumped in and set detailed terms for interconnection based on economic cost models
bearing only a passing resemblance to markets. The FCCs models attempt to establish the cost
of interconnection to the existing telephone companies and, in the view of those companies, they
do so in a confiscatory manner. (Cato Institute)." While the FCC is attempting to make changes
to discourage mergers. However, they aren't completing this goal well enough. This means new
improved tactics need to be used. Even with all these supposed issues with the current bill, some
believe it is accomplishing exactly what it is supposed to do.

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Those opposing any changes to this bill might say that the bill doesn't need to focus on
intermodal competition since it deals with intramodal competition just fine, and that it did
succeed in limiting monopolies. "By 2001, concentration within the industry actually increased,
with only four companies in the United States handling 95 percent of local telecommunications
service. (Brotman)." The law did not sufficiently deal with intramodal competition as much as
people thought it did. "However, the lack of consumer choice within the broadband industry
could also pose several problems. As provided by the 1996 Telecommunications Act, the FCC
allowed large national and multinational firms to bid for frequency rights. Consequently, it was
difficult for small, local efforts to compete against large corporations. (Economidies)." The Act
did little to nothing to properly limit monopolies in the media. Monopolies ended up expanding
rather than falling apart. The Telecommunications Act did not succeed in achieving what it set
out to do.
The Communications Act of 2016 should become a law in order to increase intermodal
competition, break up large monopolies, and prevent future mergers. This consolidation of the
media that has been common recently can lead to many different problems. Corporations can
control what news is released to the public and how expensive basic media tools are for the
public. The Communications Act of 2016 must be passed to prevent corporate greed regarding
the media from reaching the public and effecting it negatively.

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Works Cited
Bagdikian, Ben H. The New Media Monopoly. Boston: Beacon, 2004. Print.
Beker, Victor A. THE U.S. TELECOMMUNICATIONS ACT OF 1996 FOUR YEARS LATER (n.d.): n.
pag. THE U.S. TELECOMMUNICATIONS ACT OF 1996 FOUR YEARS LATER. AAEP. Web.
18 Oct. 2016. <www.aaep.org.ar/anales/works/works2000/BEKER.PDF>.
Brotman, Stuart N. "Was the 1996 Telecommunications Act Successful in Promoting
Competition?" Brookings. Brookings, 08 Feb. 2016. Web. 19 Oct. 2016.
<https://www.brookings.edu/blog/techtank/2016/02/08/was-the-1996-telecommunications-actsuccessful-in-promoting-competition/>.
@CatoInstitute. "Why The Telecommunications Act Is Failing." Cato Institute. Cato, 06 Jan. 1997.
Web. 19 Oct. 2016. <http://www.cato.org/publications/commentary/why-telecommunicationsact-is-failing>.
Consumers Union. LESSONS FROM 1996 TELECOMMUNICATIONS ACT: (n.d.): n. pag. Consumers
Union. Consumers Union. Web. 18 Oct. 2016. <http://consumersunion.org/pdf/lesson.pdf>.
Economides, Nicholas. "The Telecommunications Act of 1996 and Its Impact*." The
Telecommunications Act of 1996 and Its Impact. NYU, Sept. 1998. Web. 19 Oct. 2016.
<http://www.stern.nyu.edu/networks/telco96.html>.
Goldfarb, Charles B. Telecommunications Act: Competition, Innovation, and Reform. New York:
Novinka, 2006. Telecommunications Act. CRS, 13 Jan. 2006. Web. 18 Oct. 2016.
<https://net.educause.edu/ir/library/pdf/EPO0635.pdf>.
Miller, Steven. "Telecommunications and Federal Deregulation." Telecommunications and Federal
Deregulation. UTexas, 15 Apr. 2002. Web. 19 Oct. 2016.
<https://lbj.utexas.edu/rhodesprp/01_02/divide/dereg.htm>.