Broadcast and cable TV execs who had hoped to feast off a deregulatory dinner got considerably less than a full meal last week, as a Senate panel radically pared back an information highway bill on the eve of the vote.

Still, by a 17-2 margin, the Senate Commerce Committee adopted legislation March 23 designed to unshackle 61 years of communications law and unleash unfettered competition between cable, long distance, and local telephone company providers. The vote came during a Keystone Kops-like hearing in which members of both parties griped about last-minute changes in a bill offered by committee chairman Larry Pressler (R-S.D.).

Similar legislation died in Congress last year, and this year’s version faces an uncertain fate given the bare-knuckled lobbying clout of affected industries.

Most striking about last week’s bill was the degree to which broadcast and cable language changed prior to passage. A day before the vote, lawmakers received from Pressler legislation that would have immediately lifted all TV and radio ownership rules and eliminated most cable rate regulation within a year.

But 24 hours later, the bill had been radically altered in an apparent effort to win Democratic support. Industry and Senate sources said the overhaul came after Pressler’s staff was accused of reneging on a promise to include compromise language worked out with ranking committee Democrat Ernest Hollings(D-S.C).

One Senate aide described the process leading up to the vote as “total meltdown,” with Pressler caving in to many of Hollings’ wishes for less deregulation.

Sen. Bob Packwood (R-Ore.) called the bill “overwhelmingly too regulatory” and was joined by Sen. John McCain (R-Ariz.) in voting against the measure.

Looming in the distance is a potentially nasty fight on the Senate floor, where broadcasters and cablers may be relying on Majority Leader Bob Dole (R-Kan.) to battle for more substantial deregulation. Presidential politics could ultimately be a factor, if Dole and Sen. Phil Gramm (R-Texas) try to one-up each other in a bid to grab the deregulatory mantle.

Under the bill, price controls on cable operators in a given market will remain intact until a telephone company begins offering video programming over phone lines in that market. Cablers also can avoid continued FCC rate regulation if they can prove they are not “bad actors.” A bad actor is defined as a company whose rates “substantially exceed” the national average.

All broadcast ownership rules remain in place under the legislation, except for a rule forbidding common ownership of a TV station and cable system in the same market.

The bill retains Federal Communications Commission rules that forbid group broadcasters from owning more than 12 TV stations or 40 radio stations nationally. However, the law would be changed to allow a broadcaster to own TV stations that reach 35% of U.S. homes, up from the current level of 25%.

The measure also:

* allows telephone companies to immediately enter the cable TV business, and vice versa;

* extends to 10 years the license term of both TV and radio stations (that’s up from the current term of five years and seven);

* permits mergers and joint ventures of telephone companies and cable operators;

* bans the transmission of pornography and indecent material on the Internet;

* retains the FCC rule that forbids foreigners from owning more than 25% of U.S. broadcast properties, but nixes a similar rule for foreign investment in U.S. telephone companies;

*makes the FCC the final arbiter on whether broadcasters get access to a transitional channel to provide digital TV.

National Assn. of Broadcasters prexy Eddie Fritts said he is “deeply disappointed” with the legislation, claiming the fate of broadcasters “has been left entirely to the devices of the most regulatory FCC in recent history.”

The bill represents a major loss for the Big Three networks and Fox Broadcasting Co., which had pressed for relief from local ownership rules and the 12-station, 25% national audience cap. (Web affiliates, by contrast, have lobbied for retention of the 25% cap.)

Network reps were banking on lawmakers settling on repeal of the 12-station rule and adoption of a 50% national audience limit. Sources said web execs were stunned to learn that Pressler’s revised bill retained the 12-station rule, while raising the national audience cap to only 35%.

Fox lobbyist Preston Padden said the “competitive realities of the marketplace warrant the complete repeal of the antiquated broadcast ownership restrictions.”

CBS lobbyist Marty Franks said, “Rumors of our demise are a tad premature. We think the 35% figure may end up being a floor and not a ceiling.”

Also angry over parts of the legislation were the cable industry, consumer groups, Vice President Al Gore and the Clinton administration’s Justice Dept.

Decker Anstrom, head of the National Cable Television Assn., said his group opposes the “bad actor” clause because the FCC would retain its role overseeing cable regulation. “We continue to support the complete lifting of price regulation of cable programming service tiers,” said Anstrom.

Staff aides and lobbyists who attended Thursday’s session were critical of Pressler’s handling of the vote. “He (Pressler) lost control” of the hearing, said one who attended. Another described the process as “pathetic,” while a third observer – noting that the bill emerged with Hollings’ imprint – cracked that “Chairman Hollings ran a great show.”

Pressler claimed that very little changed in the legislation during the week, a remark that drew hearty guffaws from those in attendance.

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