Forum: Anstrom Warns Against Reregulating the Cable Industry

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The following is an excerpt of National Cable TelevisionAssociation president Decker Anstrom's 'State of the Industry' address to the WashingtonMetropolitan Cable Club on Jan. 28.

Just two years ago, the landmark Telecommunications Act of1996 became law. After years of debate and controversy, policymakers and consumer andindustry representatives hailed this new act as the foundation for a new era ofcompetition and innovation.

Since then, cable companies have been working hard todeliver on that promise, as the video marketplace becomes increasingly competitive:

• We're guaranteeing customer service.

• We're making an extraordinary commitment toeducation and children.

• We're providing the best programming on television.

• We're the leader in inventing and offering newhigh-speed-data and Internet access services.

• And we're forming new partnerships with computer andlong-distance companies that will accelerate the delivery of competitive services --including digital TV and telephone service.

Other markets, however -- most notably the local telephonemarket -- have not seen such progress yet.

Now, two years later, some of these same observers arerushing to declare the act a failure. And some are retreating to the tired, discreditedregulatory prescriptions of the past.

What happened? Simply put, we have experienced a good,strong dose of reality, and we have learned three important lessons.

First, change -- especially big change -- takes time. The1996 Act opened up markets and established the regulatory blueprint for competition. Butit took six to 12 months after the act was signed for the regulatory fine print to befilled in. And it has taken months of strategic planning, technology development andfinancial investment to put the pieces together -- from the people to the products neededto enable companies to deliver new services and to tackle well-entrenched incumbents.

The second lesson is that you simply can't trust theregional Bell operating companies. SBC Communications Inc. and its fellow Bell companiesactively participated in shaping the Telecommunications Act. But rather than meeting therequirements that they helped to write, SBC and others rushed to a federal district courtin west Texas to convince a judge that these provisions are unconstitutional. That is abreathtaking breaking of one's word.

The third lesson that we have learned is that as technologyevolves, competition in telecommunications is inevitable, although it may unfold inunpredictable ways. For example, just two years ago, the delivery of data and information,including Internet access, belonged to a handful of information-service providers and thelocal telephone companies.

Today, over 3,000 local information-service providerscompete to sign up customers. Cable, satellite and wireless companies are challenging thephone companies' painfully slow copper-wire distribution system. And the phone companiesthemselves are trying to respond with fast new technologies. No one predicted that.

Further, a dizzying array of business and technologypartnerships are forming that will spur the marriage of the digital revolution, thecomputer and the Internet with cable, telephone, satellite and wireless technologies. Thiswill bring more innovation and choices.

Both Vice President Al Gore and House Speaker Newt Gingrichhave understood and highlighted the significance of these 'Information Age' developments-- particularly what these new information and Internet services mean for schools andkids. And cable companies, through Cable in the Classroom and our High-Speed EducationConnection, are now bringing this vision to reality all across America. That, I'd argue,is a very tangible early return on the 1996 Act.

In recent weeks, however, we have heard new complaintsabout cable-price increases and calls for new, stringent regulation of the cable industry.These cries for more government intervention into the cable TV business revolve around twoquestions:

First, where's the competition?

The facts make it clear that competition is growingsteadily in the video marketplace. More than 10 million households now subscribe tocable's competitors. And during 1997, as many people signed up for one of cable'scompetitors as for cable.

Further, as the Federal Communications Commission's recentcompetition report shows, last year, direct-broadcast satellite subscribership grew 46percent, while cable grew at 2 percent. And an increasing number of communities also haveaccess to telephone company, municipal or MMDS video services.

Second, why are cable prices increasing faster than therate of inflation?

Cable prices -- like everything else in the economy --reflect costs. And cable's costs have increased sharply, as operators invest in innovativenew services and technologies.

The FCC's rules appropriately allowed cable companies toreflect some increased costs in our prices. And FCC rules explicitly acknowledged thatprogramming costs might well exceed inflation, but this was desirable if cable offeredmore and better programming.

The facts show that cable's investments have providedstrong value to our customers -- both in terms of quantityand qualityofcable programming.

Cable is also introducing new competitive services andtechnologies -- including digital TV, high-speed data and Internet access and localtelephone service -- that demand billions of dollars in investment.

That's not to say that the cable industry is not sensitiveabout cable-price increases, because we are. But it's important that this debate bebalanced and that the whole story be told.

In fact, it's worth noting that cable's DBS, telephone andwireless competitors don't charge lessthan cable. Just last month, Bell AtlanticCorp. raised its cable prices 74 percent in Dover, N.J., and BellSouth Corp. launched adigital MMDS system in New Orleans priced $10 per month higher than cable.

That should tell objective observers that cable's pricesare responsible and that we offer a strong value.

Our critics also need to be consistent. Why, for example,don't we hear about a government-sanctioned monopoly that operates with antitrust immunity-- the National Football League -- that extracts a 100 percent increase in TV rights frombroadcasters and cable without offering any better value or product?

What is particularly myopic about the new calls for moreprice regulation of cable is that we've been there before. We know that price regulationwill hurt consumers. Regulation will shut down cash flow, scare off investors andultimately stop programming, services and technology in their tracks.

I'll be blunt here: Reregulation of cable would be acolossal mistake -- nothing less -- and we will oppose reregulation with all of ourenergy.

If the government freezes prices, or tries to decide whatcosts are allowable or how companies can market their services, the $6 billion that thecable industry plans to invest each year in new technology and infrastructure will be putat risk and, with it, our new services and technologies.

In the end, of course, we recognize that it is importantfor cable to communicate that we are delivering a strong value. We should deliver thismessage confidently, because we have a great story to tell.

Competition is still developing. But two years after theTelecommunications Act became law, we see the future in communities like Orange County,Calif.; Columbus, Ohio; and Hartford, Conn., where cable and phone companies are goinghead-to-head; we see the future in the thousands of schools already wired to the Internet;and we see the future in the digital services offered by cable, satellite and wirelesscompanies.

It's a complex transition to get there. But it's a futureworth some patience. And it most certainly is not a future that we should delay withintrusive governmental micromanagement.

I say to Washington: The cable industry can, and will,deliver the future. Just let us.

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