Testimony of Gene Kimmelman
on behalf of
Consumers Union, Consumer Federation of America and Free Press
U.S. Senate Committee on Commerce, Science and Transportation
regarding
The Communications, Consumer's Choice, and Broadband Deployment Act of 2006
May 18, 2006
SUMMARY
Consumers Union, Consumer Federation of America, and Free Press appreciate the opportunity to testify on the Communications, Consumer's Choice, and Broadband Deployment Act of 2006 and the need for expanded consumer choice and access to competitive video and broadband services. We agree with and support the goals of the legislation: to expand viable, affordable competitive video offerings and increase access to vital broadband services.
Unfortunately, while the legislation takes some strong steps toward achieving the goal of expanded broadband access through a more robust Universal Service Fund and expanded access to unlicensed spectrum, it also takes steps backward by limiting the ability of communities to provide affordable broadband services. More importantly, the legislation falls far short of providing middle and low-income consumers, particularly those in rural areas, with meaningful competition and relief from skyrocketing costs and limited choices in the video marketplace. And without any requirement for competition, the bill simultaneously eliminates prohibitions against discriminatory cable pricing, strikes current requirements for, and rate regulation of, an affordable basic cable tier, and reduces consumers' ability to resolve service, billing and other disputes with cable and telephone companies in a timely manner. While the legislation ensures that cable-owned programming is made available to new competitors, that provision alone does nothing to hold down cable rates. Under S. 2686, it is most likely that competition will come only to the most privileged rather than those who most need the relief that competition brings. Consumers in areas unserved by new competitors will likely be made worse off.
As we noted in our testimony before the Committee earlier this year, over the last decade, consumers have suffered under monopolistic cable pricing that has resulted in a 68 percent increase in rates - nearly two and a half times the rate of inflation. Limited satellite competition has not policed cable rates. In addition to skyrocketing rates, consumers have virtually no choice among providers or channel offerings. Satellite television, the primary competitor to cable, has had virtually no price disciplining effect.
In the broadband market, consumers face at best a duopoly, where 98 percent of broadband lines in the nation are owned and controlled by cable and telephone companies. At best, consumers have a choice of only those two providers, and many have no choice at all: approximately 30 percent of Americans have only cable modem or DSL options, and 9 percent, mostly consumers in rural America, have none. Where broadband is available, it is often priced out of the average consumer's reach.
The deplorable state of competition within the video and broadband marketplace is the result of the failed policies of the 1996 Telecommunication Act, which did too little to promote meaningful competition in wireline communications services and went too far in deregulating cable rates. The result has been an explosion in mergers that have reduced competitive market options. Moreover, the Federal Communications Commission's (FCC) decision to deregulate broadband services has eliminated the possibility for markets to grow alternative wireline broadband providers and provided cable and telephone companies with both unprecedented power and an irresistible incentive to discriminate against Internet-based content and service providers that could compete with their own offerings.
Given the interest of the telephone companies in offering video services and the growing interest among communities in providing broadband services as an alternative to incumbents, Congress has a unique opportunity to correct the failed polices of the FCC and the 1996 Act by promoting competition that will both discipline cable rates and ensure that consumers not only have access to broadband, but also unfettered access to the competitive services offered via broadband wires. Congress also has the responsibility not to repeat the mistakes of the 1996 Act: prematurely deregulating rates and eliminating nondiscrimination rules before competition actually unfolds.
To serve consumers' interests, the public policy goal must be to maximize, as rapidly as possible, the benefits of new technologies and competitive markets to every American household. Without significant changes, however, S. 2686 is likely to make the majority of consumers worse off than they are now, bringing higher, not lower, video and broadband prices; reducing consumer protections; limiting access to competitive video and Internet-based service providers; and imposing greater barriers to municipally offered broadband services.
