Educators Join Battle Over Role of 'Telcos' in Cable Broadcasting

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The debate quietly raging over the future role of the nation's telephone companies in cable broadcasting holds important implications for the schools, educators and telephone-company and cable-industry officials say.

For the past year, the nation's regional telephone companies, or "telcos," have been arguing in the halls of the Congress that lawmakers should repeal an existing law that bars their involvement in cable broadcasting.

While this apparently will not happen this session, the Congress is expected to revisit the issue next year.

In the meantime, several education groups have asked that a court-ordered ban against the telephone companies' entering the "information-generating business" be lifted.

The changes would, telephone-company officials argue, allow them to underwrite the widespread development of their fiber-optic networks by competing on an equal footing with the cable-television industry.

In essence, industry experts explain, the cable operators and telephone companies are arguing over who will have the right to transmit services and materials to every school and home in the country.

"Schools have a direct stake in these issues," Daniel J. Hunt, director of education affairs for Northern Telecom Inc., said, noting that few precollegiate educators seem to be aware of the debate.

Experts argue that fiber-optic cable--essentially an extremely thin glass rod capable of transmitting the highly defined beams of light emitted by a laser--has the potential to revolutionize the way computer data, video images, and voice messages are transmitted.

"Not every school can afford the latest computer or satellite technology to receive educational programming, but every school has a phone," the National School Boards Association wrote in its twice-a-month newspaper earlier this month.

But, telco officials say, the massive investment that would be needed to pay for the cost of wiring every school and home with fiber-optic cable could only be made responsibly in the short-term if telephone companies were allowed to create programming to supply their networks.

And the public schools are among the first places that the telephone companies have chosen to demonstrate the value of the array of services they could offer in a deregulated "fiber world."

Thus, almost unwittingly, schools have become an important player in what one industry observer has called the "telco-cable Punch and Judy show."

'Wiring' America

Although estimates vary widely, it is apparent that enormous profits are at stake as the telephone companies and the cable industry lobby and counter-lobby over who should have the right to "wire America."

And while the battleground eventually will encompass the homes of almost every American, it is in the classrooms where some of the first skirmishes are taking place.

Earlier this month, for example, a full-page advertisement in several major national newspapers argued that "America's students could have low-cost access to the nation's scholars over existing telephones lines. But government restrictions limit their choice."

The ad was underwritten by a handful of the major telephone companies.

Writing about the developing conflict in this month's issue of Phi Delta Kappan, Shelley Weinstein, the president of the Edsat Institute, a nonprofit Washington-based research group, argues that the "debate has major constitutional and educational implications."

Both the cable industry and the telephone companies are very aware of the potential markets untapped in the schools. And both are making strenuous efforts to gain inroads in them. (See story, this page.)

"Schools are a very fertile market because their [telecommunications] needs are underdeveloped," according to Mr. Hunt of Northern Telecom, a national concern that supplies digital switching equipment for fiber-optic networks.

Court Request

Ironically, industry officials and others say, little of the debate has yet to receive widespread attention from educators.

Ms. Weinstein contends in her article that educators tend to ignore such questions, in part because they take place at the federal, rather than the local, level.

She points out that more than 275 "key education leaders" appeared on Capitol Hill during the recent hearings on the Education Department's budget for the 1991 fiscal year.

Even though Congressional hearings on the fiber-optic issue were conducted during the same time period, she wrote, "it is difficult to think of 275 national education officials--or even one--who appeared" at the sessions.

On a separate front, however, several education and children's-advocacy groups--including the NSBA, the Council of Chief State School Officers, and Action for Children's Television--have asked a federal court to lift the ban prohibiting the telephone companies from entering the information-generating business.

The ban was reaffirmed by the court in 1988, in the wake of a followup review of its 1984 decision ordering the breakup of the American Telephone & Telegraph Company.

A decision on the request to lift the ban is expected by the end of the year.

Henry Geller, the Washington lawyer who prepared the brief filed on behalf of the NSBA, the CCSSO, and 24 other organizations, said the request before the court and the debate currently under way in the Congress represent two strategies in "a two-front war."

Although a favorable court ruling would help pave the way for the telephone companies to provide some new information services, Mr. Geller said, a change in the federal cable law would still be needed to make all of the changes sought by the telcos.

Several telephone and telecommunications companies are currently conducting trials of the medium's applications in education, including interactive video and data transmission.

Company Demonstrations

In several states, including California, Connecticut, Florida, Mississippi, New York, and Oklahoma, companies are working to show how schools can use fiber links to share computer data or produce distance-learning programming.

In four Connecticut high schools, for instance, students and teachers are connected through a fiber-optic cable system that transcends traditional school boundaries.

The fiber-optic system was installed as part of a statewide experiment undertaken by Southern New England Telephone Company--the smallest of the Bell operating companies created by the divestiture of at&t--called "Links to Learning."

Under the recently concluded project, SNET worked with the Connecticut Department of Education and schools throughout the state to showcase ways in which the telephone company could provide direct technological support and services to education.

"Our interest in bringing the interactive video and voice into the public-school environment was to let the teachers and students experiment with it so that we and they could see what kind of uses could made of this technology," said William G. Seekamp, SNET's manager of media relations.

Mr. Hunt said Northern Telecom's fiber-optic trials in Mississippi and Florida have goals similar to the SNET project.

Offering such services to schools, Mr. Hunt said, is viewed as a way to meet a demand in what he termed "an underserved market."

But, he added, the trials have a more universal application.

"These are a precursor of the kind of services that we will be able to deliver to the public in a fiber world," he said. "It gives us an opportunity to show the world very aggressively what it's all about.''

State Projects

Recognizing the potential of fiber-optic technology in enhancing distance learning, several states, most notably Minnesota, are undertaking projects of their own to connect their schools via fiber-optic cable, according to "Linking for Learning," a report on distance learning issued by the Congressional Office of Technology Assessment.

But many argue that the cost of the undertaking is too great for state governments to bear.

The issue was clearly laid out in a report to the Kentucky legislature prepared by David Hornbeck, a consultant who helped that state devise its sweeping reform program last spring.

In a section dealing with educational technology, Mr. Hornbeck "strongly" recommended that the state lay the necessary groundwork for the establishment of a fiber-optic network to serve the school system's information needs.

Mr. Hornbeck noted, however, that "the installation of a full system is too costly for the state by itself."

He suggested that "the private sector will be seeking the opportunity to lay fiber-optic cable along rights of way owned by the state."

"The telephone companies will be major players" in such a venture, he added.

And indeed, one measure introduced during this year's Congressional debate by a telco supporter, Senator Conrad Burns, Republican of Montana, specifically stated that education would be one of several sectors of society to benefit from "increased competition" among telecommunications providers.

House and Senate backers of allowing telephone companies into the market agreed not to offer such provisions as amendments to cable-regulation legislation after key lawmakers argued that they would be sufficiently controversial to kill those bills. The House approved a bill without the telco language, HR 5267, last month.

Opponents blocked Senate action on a companion bill, S 1880, on Sept. 28. While a compromise that could resurrect the bill is reportedly in the works, the legislation would have only a short time to clear the Congress and could then face a Presidential veto.

If it died, the Congress would likely revisit the issue of cable regulation next year, giving telco proponents another chance. They will also have an opportunity to raise their proposal in hearings planned on the broader issue of telephone deregulation.

Re-Regulation Considered

The genesis of the debate can be traced back to the Congress's passage in 1984 of sweeping legislation to deregulate cable-television rates and limit local-government control over the industry.

According to Andrew Schwartzman, executive director of the Media Access Project, a Washington-based consumer watchdog group, the measure gave cable companies a free hand to set rates, a function previously under the purview of local governments.

"In essence," he said at a recent forum in Washington, the "Congress substituted no regulation for what had been previously regulated."

Freed from regulatory restraints, "the cable industry has grabbed as much as it can hold with two hands," Mr. Schwartzman said.

Complaints from angry cable subscribers, who argue, among other things, that cable operators are overcharging their customers, have prompted federal lawmakers to reconsider the regulatory issue.

But cable's large MSOs, or multiple-system operators, argue that amending the 1984 law to permit the telephone companies to compete in the programming arena would create a powerful new monopoly.

Such would be the case, cable operators say, because the telephone companies would not only own a far-flung distribution mechanism, but would also end up controlling the available programming.

Meanwhile, the telephone companies charge that, unbridled by the 1984 cable act, the cable companies themselves have become insensitive monopolies with a lock on programming.

Fiber's Capability

Ironically, the MSOs themselves are investing in fiber-optic cable as a means to ensure "greater reliability and clarity" of their video signals, according to the 1990 edition of the U.S. Industrial Outlook, published by the U.S. Commerce Department.

Because fiber-optic cable transmits information on a beam of light, vast amounts of data may be transmitted through a single line by controlling the wavelength of the light. To help explain the capacity of fiber-optic cable, experts note that a pair of single-fiber wires could transmit all human knowledge ever recorded within a minute's time.

The system also is immune to the effects of extremely hot or cold temperatures, rain, noise, and other distractions that impair the effectiveness of copper cable, the mainstay of most telephone and cable systems.

The vast capacity of the line and the fact that it transmits signals "digitally" also mean that fiber-optic cables are able to transmit voice, computer data, and video over one line.

More important, in distance-learning applications, signals can travel to and from their source without the added costs for additional equipment associated with satellite or cable-based systems, making them truly "interactive."

The first fiber-optic cables were successfully tested by the Corning Glass Company in 1970, roughly at the same time that development of a low-cost laser was coming to fruition in the Bell Laboratories.

And although fiber first went on the market at a cost of several dollars a meter--far higher than conventional copper cable--subsequent development has succeeded in driving the price down to about 12 cents a meter today.

The costs of wiring with copper or with fiber have steadily been converging over the past few years to the point where, within the past six months, "there has been a crossover" on the cost curve, Mr. Hunt of Northern Telecom said.

"The economics are now neutral and will effectively favor fiber" in new installations, Mr. Hunt said.

But the costs of replacing the millions of miles of existing copper wire, particularly to individual homes, are staggering, perhaps as high as $250 billion, making the cost-effective rewiring of the entire telephone system a long-term investment.

The telephone industry argues, however, that if the 1984 cable law were amended, then it would become economically feasible to lay the fiber-optics cable because there would be an economic incentive--in effect, a subsidy paid by programmers--to underwrite the rewiring over the short term.

Meanwhile, because of the complexity of the issues being thrashed out, few industry observers expect the debate to be resolved soon.

And, they predict, it is unlikely that either the the telephone companies or the cable operators will back down from their positions.

"This issue is not going to go away," Gerry Lederer, executive director for the U.S. Telephone Association, said. "It is a long-term effort on behalf of the telephone companies."

Vol. 10, Issue 08

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