Kennard: Cable Rates Are Too High

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Washington -- Federal Communications Commission chairman
William Kennard said last week that consumers are paying too much for cable television,
although he remains hopeful that a new satellite-competition law will check future
increases.

"In video competition, that is another area where we
need much, much more competition for the simple reason that cable rates are still too
high. They have been increasing at a rate that is well in excess of the rate of
inflation," Kennard said in a National Press Club speech here on the fourth
anniversary of the Telecommunications Act of 1996.

The FCC also released a report last week that clashed in
part with Kennard's message. The report said, "Overall cable bills have risen by 1.8
percent between 1998 and 1999 in real terms," but on a per-channel basis, "rates
have decreased," although it did not say by how much.

Kennard said two out of three new multichannel-video
subscribers are picking direct-broadcast satellite service over cable. That trend, he
added, should continue now that DBS carriers have the legal authority to provide dish
owners with their local TV signals.

"That will enable them to be a more formidable
competitor to cable," Kennard said.

President Clinton signed the bill Feb. 8, 1996, in the
Library of Congress, using that venue to signal his goal of making the library's vast
resources available to anyone at affordable rates.

Kennard said the law is moving rapidly in that direction,
citing plunging long-distance rates since the breakup of AT&T Corp. in 1984 and the
explosive growth in wireless communications and the Internet more recently.

The Internet, he added, has grown from 27 million online
users in 1994 to 80 million today. He said 40 percent of U.S. households have Internet
access and Internet traffic is doubling every 100 days.

"Nothing in the history of any telecommunications
technology has grown that fast. And that growth has been possible in large measure because
of the pro-competitive environment established by the '96 Act," Kennard said.

Kennard pointed to one area where the goals of the 1996 law
have not been realized: local phone competition.

"Our biggest challenge in the coming months and years
is to bring in more competition in the local phone market. Too many Americans still have
only one choice in local telephone, and that really does have to change," he said.

Kennard said trends in the local phone market were
encouraging. Cable operators have signed up 130,000 phone customers in an effort to
provide local phone service to as many as 50 million U.S. households by 2005. And more
than 300 competitive local-exchange carriers have arisen, adding about 1 million phone
lines per quarter.

After the speech, United States Telecom Association
president Roy Neel accused the FCC of holding back local phone companies with regulation,
compared with cable companies, which can enter data markets with virtually no
restrictions.

"They are basically giving away the farm to
AT&T-TCI [Tele-Communications Inc., now AT&T Broadband & Internet Services] in
terms of their high-speed-access business and keeping a stranglehold on the very companies
that can most readily and most quickly build out these services to every American wherever
they live," Neel said.

Neel added that the FCC should repeal rules that require
phone companies to share their voice lines with competitive data providers and rules that
require the establishment of separate subsidiaries for enhanced services.

"The fact is that they are keeping their foot on the
neck of the local phone companies in their ability to invest in these services," he
said.

Consumer groups also used the anniversary to slam FCC
implementation of the law, oversight of cable rates and review of cable- and phone-company
mergers.

In a two-page letter to Clinton sent Feb. 7, the Consumer
Federation of America and the Consumers Union said the law's promise of greater
competition and lower prices has not been realized.

"We need you to step back in and direct those charged
with implementing this law to change course and put an end to unfair rate increases and
anti-competitive mergers," the letter said.

The groups said cable rates shot up 24 percent since 1996,
costing consumers at least $3 billion in savings. Meanwhile, they added, the FCC allowed
long-distance carriers to collect $4 billion per year in new fees -- an increase that hit
low-volume long-distance customers the hardest.

The National Cable Television Association accentuated the
positive last Wednesday in a letter to House Commerce Committee chairman Thomas Bliley
(R-Va.). NCTA CEO Robert Sachs noted that by the FCC's count, noncable video providers
added about 10 million subscribers between 1996 and June 1999.

Sachs added that cable operators pumped $10.8 billion into
infrastructure improvements last year, for a total of $31 billion since 1996. And cable
rates rose only a "moderate" 3.8 percent on average between mid-1998 and
mid-1999, while big-expense categories like programming rose by double-digits, according
to the trade association.

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