Its epic battle on the floor of the House, though, didn't even rate a passing mention in the Washington Post.

But that treatment is indicative of what is generally called the "Tauzin-Dingell Bill." It may be the single most important piece of telecomm legislation to come out of the Bush presidency. Or not. A lot depends on what happens next.

The '96 Act

The roots of the Tauzin-Dingell bill were laid by passage of what is arguably the single worst piece of legislation in modern history. Forged in an election year and written in great part by industry lobbyists, the Telecommunications Act of 1996 was intended by Congress to be the first serious overhaul of the 1934 Telecommunications Act.

But it is very hard to pass serious legislation in a year in which the president, one-third of the Senators and all of the members of the House of Representatives have to get themselves elected.

The Act quickly became a dream come true for almost every segment of the industry. For Democrats, it was a bill that hobbled the big companies and induced a new form of "managed competition" (even if it was mostly faux competition) into the local telephone markets. For Republicans, it was an opportunity to move telecommunications closer to deregulation. For the FCC, the Act was an opportunity to expand its role as the policy maker for all things telecommunication.

But the ink was hardly dry on the legislation before lawsuits were flying, the courts were dismantling parts of the Act wholesale and a new Republican-controlled Congress was threatening to abolish the FCC entirely.

Perhaps the most serious point of contention was an agreement made by the Baby Bells in order to gain entry into the very lucrative market for long-distance service. Before any Bell could offer long distance service, it had to first meet an 11-point checklist to prove that it had opened its own local calling service to competition. Part and parcel to this process was that the Baby Bells would permit a new class of competitors, the Competitive Local Exchange Carriers (CLECs), to have the run of the Bell Central Offices in order to compete for local and residential service.

The Baby Bells were willing to trade competition in their traditional strongholds to get into the long-distance game. For one thing, the profit margins were much higher. And for another, they were sufficiently financed and entrenched to pose a formidable challenge to the new CLECs. But this civil and rational agreement quickly ran into trouble.

At the FCC, which was intent on expanding its importance, the 11-point checklist for the Baby Bells quickly swelled to more than 11,000 points. The long distance companies, meanwhile, forged a partnership with the new CLECs to harass the Bells at the State level, challenging their petitions state-by-state to slow their entry into long-distance services while pushing the FCC to continue its firm regulatory hold. The Bells responded by hedging against CLEC entry into the local markets.

House Republicans were infuriated by the FCC actions and the resulting derailment of telecomm deregulation. In May of 1997, Reed Hundt resigned as chairman of the FCC and William Kennard took his place at the helm. An experienced litigator more moderate than his predecessor, Kennard nonetheless continued many of the policies Hundt had put into place.

It would take volumes to chronicle all of the skirmishes in the telephony wars of 1996 to 2000. In that period, the LD/CLEC coalition firmed up, while the Baby Bells went through a wave of acquisitions and consolidations that would bring the number of Baby Bells down to four: Verizon, BellSouth, SBC Corporation and Qwest.

Lawsuits and FCC filings raged across the landscape, with neither side making much progress. That would change in 2001.

A Sea Change

The election of George W. Bush to the White House brought and end to the expansion of the FCC. Under the helm of former Commissioner and now chairman Michael Powell, the stage was set for a massive reorganization of the agency. With this would come a new mission - the stimulation of the telephony markets and the elimination of untold thousands of regulations.

House Republicans who a year earlier had been sharpening their axes to kill the agency instead turned to building a legislative base of support for Chairman Powell. And they moved to break up the stalemate between warring factions of the telephony industry in order to introduce real competition.

The proper place to create such a legislative base is the House Committee on Energy and Commerce. Both the Chairman of the Committee, Rep. Billy Tauzin of Louisiana, and the ranking Democrat on the Committee, Rep. John Dingell of Michigan, were committed to open market competition and had no particular ax to grind against the Baby Bells. In early 2001, they jointly began work on legislation designed to eliminate the requirement that the Baby Bells open their local services to competition before entering the markets for long distance.

Before the bill was even introduced, however, shifting market priorities rendered that goal meaningless.

To begin with, long distance had become the biggest money loser in the telecomm game. The incredibly high margins for long distance evaporated as rates for domestic calls dropped to under three cents a minute at the retail level. Even international calls were suddenly inexpensive, crushing even the emerging industry of Internet telephony.

In spite of the regulatory hurdles involved, the Baby Bells were nonetheless meeting the checklist requirements in State after State, and were publicly vowing to have meet the requirements in all 50 states by the end of 2002.

Over at the FCC, the whole concept of "managed competition" for the Bells went to the recycle bin, leaving the CLECs to meet a grisly death. When FCC moved aggressively to reduce reciprocal compensation payments - money one telephone company pays to terminate calls in the operating area of another - to more reasonable levels, the CLECs were left with the reality that they were very small companies trying to compete head-on with mega-billion dollar corporations.

By early 2001 it had become clear that the 1996 Act had failed in its effort to open the long distance markets or the local markets. Moreover, the implementation of the Act had caused investors to pump billions of dollars into competitive telephone companies that had little hope of surviving on their own.

Worst of all, the FCC's insistence on playing referee between the telephone companies had diverted its attention away from two other critical and emerging industries. The first was wireless communication, which was limited by a lack of available spectrum for many applications. The second was the cable broadband industry.

Cable, virtually unfettered by regulation and beyond the myopic view of the FCC, ran rampant in the markets for broadband Internet. Cable companies were able to establish a commanding lead for broadband, particularly in the residential markets.

The scenario was, in many ways, the worst possible for advocates of free market choice. Far from injecting competition and consumer choice into the telecommunications markets, the FCC had selected cable as the dominant player while miring the telephone companies - and to a degree the wireless and satellite industries as well - in a slog of regulation.

Newly named to the helm of the FCC, Michael Powell began to implement a new vision that would correct the problems of the past and put the agency on a new footing as the champion of consumer choice and enforcement. But those changes could not easily be effected in time to prevent cable from taking over the industry. What was needed, the Republicans believed, was legislation that could move more quickly to open the broadband Internet market to competition.

What emerged to perform this chore was H.R. 1542, the "Internet Freedom and Broadband Deployment Act of 2001" a.k.a. the Tauzin-Dingell Bill.

The Tauzin-Dingell Bill

From the moment it was introduced, the bill generated controversy. Democrats, and some Republicans, were outraged by what they saw as an effort to circumvent the entire point of the 1996 Act. Those who despised or distrusted the Baby Bells saw it as a sop to the country's largest firms at the expense of smaller competitors.

The long distance companies likewise reacted vehemently. AT&T had only recently announced that it would abandon the long distance markets to focus on broadband services, saw its very livelihood threatened. WorldCom, with its significant investment in UUNet, also did not like the idea of having to face four large, well-financed competitors in the data transmission markets. For the CLECs, the announcement of this legislation followed closely on the heels of the loss - albeit through a phase-out schedule - of their reciprocal compensation payments. The two together would be the final nails in the coffins of the "managed competitors."

The LD/CLEC coalition went into high gear to lobby against the bill, while the Baby Bells unleashed their lobbyists to push for its passage. None of this would have mattered much, since the bill was largely in step with Republican philosophies, and the Republicans controlled both house of Congress as well as the White House. Its passage should have been a simple matter of pushing it through the Republican leadership.

But in May of 2001, a relatively obscure Senator named Jim Jeffords defected from the Republican Party and put the Democrats in control of the Senate. The defection of Vermont's Senator caused a turnover in leadership of all of the Senate committees, including the pivotal Senate Commerce Committee.

Control of that committee went to Sen. Ernest "Fritz" Hollings - a man renowned for his dislike of technology companies and his almost pathological hatred for the Baby Bells. Almost immediately, Hollings told lobbyists for both sides that the Tauzin-Dingell bill would be killed in the Senate in his committee.

Washington came under a state of siege. Both sides spent millions of dollars on lobbyists and contributions, and millions more on newspaper, radio and television advertising. Confused consumers were left to believe either that the sky was falling or that Nirvana was near, depending on which ads they believed. Universally, everyone except the two warring factions became tired of the war.

As one hostess asked her cocktail guests, "Who is this person Tauzin-Dingell and why won't he get off the radio?"

Meanwhile the bill itself was being amended in the Commerce and Finance committees to make it more palatable to a larger audience. The Bells agreed to guarantees of consumer choice and open access for ISPs. They also committed to a five-year timetable for full deployment of Broadband to all telephone central offices within five years. And they publicly announced that the measure would apply only to next-generation fiber-optic networks, not the existing copper loop infrastructure. None of this satisfied the LD/CLEC coalition, which wanted to see the Baby Bells kept in a box under lock and key.

But that coalition was rapidly losing ground as the Congress and the public grew to believe that the LD/CLEC forces were interested primarily in protecting their own turf rather than giving more services and lower costs to consumers. The bill was scheduled for a vote soon after the Congress returned from it summer recess in mid-September.

9-11 and the Vote

Before the bill could even be moved to the House docket, the nation was swept up in the need to respond to the events of September 11. Any legislation that was not critical went on hold, and it was not until December that Billy Tauzin and his supporters could gain a commitment from House Speaker Dennis Hastert that the bill would come to a floor vote early in the 2002 session of Congress.

The vote finally came to be on February 27. By this time, with another election year in full swing and members of Congress loathe to alienate contributors of either side, the vote was closer than anticipated - it passed by a margin of 2-to-1 rather than the projected 3-to-1. Opponents and supporters had filed an incredible 30 amendments, but in the end only one was attached to the bill. That amendment, based on a request by the FCC's Michael Powell, increased the fines that can be levied against the Baby Bells for breaking the rules from $120,000 per day to $1 million.

For all the enormous millions spent, support for the bill split along predictable lines. On one side were the long distance companies, the CLECs, ISPs who were affiliated with the CLECs, and consumer groups wary of the power of the Baby Bells. On the other were the Baby Bells, technology firms looking to boost deployment of Broadband, the independent ISPs and consumer groups committed to open markets.

The bill may reach the Senate floor for a vote, or may not. But whether the bill ever becomes law, it will have a significant impact. Not for what it is, or what it does, or even what it signals. It will be significant because America wants broadband at home, and this bill will help to deliver it.

What It Really Means

There are three schools of thought about what the Tauzin-Dingell bill "really means."

The first is that it is serious reform legislation that will have a rocky time in the Senate, but will eventually pass and be signed into law. In this scenario, it becomes the basis for a new generation of fiber-optic services delivered by the Baby Bells. It stimulated the cable, wireless and satellite Internet industries to kick into high gear, bringing strong competition in all markets. Consumers finally get the high-speed Internet service they want at home.

There are several things wrong with this scenario, not the least of which is that none of the major players really seems interested in delivering low-cost broadband Internet to residential areas. They want the high-margin business customers who are willing to pay $400 to $1,000 per month in fees. Residential customers currently can generate less than $50 per month for the same service, and have such high requirements for assistance in installation and use as to make the whole arrangement difficult to profit from.

And this scenario will require that the bill side-step Fritz Hollings and the Commerce Committee to somehow get to the Senate floor. This is a possibility under the arcane rules of the Senate, but is still a long shot.

The second thought is that it doesn't matter what happens in the Congress - the real action is in the FCC, where Chairman Michael Powell has introduced four "Notice of Proposed Rulemaking" actions that will dismantle the "managed competition" mindset of the old FCC and introduce true competition between segments of the Internet industry. Under this scenario, passage of the Tauzin-Dingell bill by the Senate would be nice but not essential.

In this scenario, the purpose of the bill is to send a message to the FCC that the Congress supports Powell's efforts. This makes it easier for Powell to achieve his goals in the face of a firmly-entrenched FCC bureaucracy used to the "old way" of doing things.

While this school of thought has some traction, it falls short of justifying the tens of millions of dollars spent on the campaign. There are easier and cheaper ways to send signals, even in Washington.

The real message of the Tauzin-Dingell bill is to serve as the foundation for the next generation of development for the Internet. In this scenario, the bill communicates five key messages:

§ Whatever the nation elects to do with the old copper-line POTS network for telephony, it is time to move past the breakup of AT&T and the battle between the long distance and Bell companies. This is a new century, with new challenges that can't be mired in decades-old battles for turf.
§ "Managed competition" was doomed to failure in a market increasingly driven by consumer choice and real competition. The Congress is willing to accept the short-term loss of some competitors in order to build true competition among strong segments. In such a case, look for the government to largely approve both the AT&T/Comcast merger and the acquisition of DirecTV by EchoStar.
§ Rollout of broadband Internet will be the price paid by the Baby Bells and others for the ability to build the more profitable networks they desire for data. That is, companies will be given less regulatory restraint in return for meeting consumer expectations - including a specific timetable for deployment of DSL.
§ Consumers will be given a choice of ISPs on each service, and the ISPs will be given access to broadband Internet networks in order to service their customers. This access was provided under FCC rules, but as those rules are dismantled ISPs will lose their ability to resell Broadband. At the same time, the large Broadband players need a skilled force in the field to help customers - especially residential customers - get signed up, installed and in operation. Section V of the bill spells out the framework for this ISP access.
§ Woe be to the wicked. The sole amendment in the bill raises fines for non-compliance to a level that puts teeth in FCC enforcement efforts. Clearly, the bill is intended as a warning to all segments of the industry that they will get more freedom - but a hanging judge if they step out of bounds.

In this scenario, the Tauzin-Dingell bill (or some follow-on form of it) will eventually pass the Senate. For the bill is most of all a call for a different approach. It is the foundation block for a new vision of regulation and enforcement for both basic and advanced telecommunications services.

And it may just be the first step toward ubiquitous deployment of broadband Internet supported by a new generation of Internet Service Providers.

About the Author

Dave McClure is President and CEO of the US Internet Industry Association (USIIA). He may be reached with questions or comments via email at dmcclure@usiia.org