The Telecommunications Act of 1996, a rewrite of the Communications Act of 1934, significantly altered federal communications policy. In its provisions it deregulates cable television service; allows local telephone companies to provide cable television service; requires v-chips in new televisions, which allow parents to block access to objectionable and adult programming; increases the number of television stations that a single company may own; and bans the knowing transmission of indecent material to minors on the Internet. The latter provision, part of the Communication Decency Act (CDA), created criminal penalties for transmitting obscene, indecent, and patently offensive materials online.

Shortly after its passage, the CDA became the most controversial part of the new Telecommunications Act when free-speech proponents expressed concerns about the breadth of its speech restrictions. In Reno v. American Civil Liberties Union (1997), the U.S. Supreme Court held that the Internet as a medium is entitled to as much First Amendment protection as the print medium and that the CDA was overbroad and impinged on protected speech. The Court ultimately invalidated the CDA provisions criminalizing “indecent” and “patently offensive” speech; the ACLU had not challenged the provision banning obscene online communications.

Another provision of the Telecommunications Act of 1996 (sec. 505) required cable operators to either completely scramble sexually oriented programming or limit broadcast of such programming during periods when children could be in the viewing audience. Even before enactment of this provision, cable operators had scrambled such programming, but the technology used by most had allowed for some adult programming to air due to “signal bleed.” Section 505 sought to end signal bleed by requiring cable operators to use more sophisticated technology; however, because this technology was very expensive, most cable operators chose to comply with the provision by limiting their transmission of sexually oriented programming to the hours between 10:00 p.m. and 6:00 a.m. Partly because of this, the Playboy Entertainment Group challenged the regulation for being content-based and too restrictive on the broadcast of protected speech, and in United States v. Playboy Entertainment Group (2000) the U.S. Supreme Court struck down the provision, holding that Congress should seek a less restrictive method of shielding children from inappropriate material.

Another consequence of the Telecommunications Act was a flurry of media mergers.The act significantly reduced regulations on media concentration and cross-ownership of media outlets. This deregulation led to less competition and allowed such companies as AOL/Time-Warner and Viacom to purchase multiple media outlets in local markets.

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