Powell Hits Windy City, Warns Against Blowing It

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Chicago— The Windy City was a choice locale for Federal Communications Commission chairman Michael Powell to say that cable operators shouldn't try to blow away the competition.

Powell, appearing at his first National Show since he became chairman in January, told the industry it stood to gain the most from the digital revolution, but jealous opponents who claim that cable is abusing its market power could "snatch defeat from the jaws of victory"

Cable, Powell said, has the means to keep the federal government at bay — but not for long, if the din from competitors and consumers begins to resonate with Washington lawmakers and regulators.

"I would submit [cable] has the most positive regulatory environment to operate in decades," said Powell. "But will it last? Sadly, with the history of this industry, at times you have to ask yourself that question."

Powell mentioned four areas in which a clumsy cable industry could invite government intervention were the political tide in Washington to shift.

Cable, he said, must become a partner in the digital transition and not be viewed as an obstacle — an apparent reference to the carriage of digital-TV stations.

"Help make this a reality in a commercially viable way," he said.

Cable operators, he said, should not use their ownership of facilities and programmers to exclude unaffiliated networks from reaching their subscribers.

If cable uses its vertical power in a deleterious fashion, he said, "that will raise the ire of consumers and the government and could result in the erosion of a healthy regulatory environment that currently exists."

On broadband access and interactive television — two issues now under FCC review — Powell said cable must preserve choice and promote innovation.

The industry must also ensure that consumer satisfaction remains high and that subscribers continue to see value in the prices they pay for cable services.

"Prices, choice and quality — if thwarted — will amplify calls for government intervention, as it has so often," Powell said.

In one sense, by asking cable to cut deals with competitors, Powell essentially told the industry that in doing so, it would do itself some favors.

But in another sense, he was telling the industry not to make him look bad in Washington. After all, Powell has legally and rhetorically backed cable on each of the issues on which he said the industry should now voluntarily cede some ground.

Center for Digital Democracy president Jeff Chester questioned Powell's sincerity with respect to FCC retaliation against the cable industry.

"He isn't going to do anything," said Chester, who patrolled the show floor looking for engineering papers on how cable operators can discriminate technologically against competitors. "All of his actions suggest, 'Don't worry.' "

Chester said his Washington, D.C.-based group planned to raise the cable-rate hike issue in a letter to new Senate Commerce Committee Chairman Ernest "Fritz" Hollings (D-S.C.).

"We are going to make this an issue. We are going to complain about rising cable rates," Chester said.

The other political heavyweight in Chicago was new Senate Majority Leader Tom Daschle (D-N.D.), who gave an upbeat appraisal of the cable industry and promised regulatory stability. Many cable people read Daschle to mean that the Senate would not act on a House bill that would deregulate the Baby Bell phone companies' broadband offerings.

In the speech, Daschle extolled the cable industry for public-affairs programming symbolized by C-SPAN and for wiring schools and libraries to the Internet.

"I want to thank you for that," he said, adding that C-SPAN had made "every elected official accountable to those who actually elected them."

But Daschle came with his own message, geared toward including rural states like his own South Dakota into the broadband universe. He called on media and telecommunications companies to back his party's effort to make broadband access available nationwide.

"As part of our Democratic technology agenda, we are setting the ambitious goal of delivering access to broadband Internet to every American by the end of the decade," Daschle said. "I love our small towns. I hope they are a part of Americana that we don't lose."

At another point in his remarks, Daschle said: "Working together is not an option, it's a requirement."

Although he stressed concern that broadband service must reach small towns, Daschle avoided taking a stand on any of the hot-button issues that face the cable industry in Washington, including rate regulation, open access, interactive-television regulation and media consolidation.

Daschle praised cable for responding to the Telecommunications Act of 1996 by rolling out new services and introducing competition in nonvideo markets, saying those moves prompted other providers to respond in kind.

The landmark law, he said, was premised on "the firm foundation" of competition leading to new services and keeping prices down.

"In this rapidly changing world, that foundation must remain stable," said Daschle, who received a round of applause.

Time Warner Cable chairman and CEO Joe Collins said Daschle's support for regulatory stability was "good stuff."

National Cable & Telecommunications Association president Robert Sachs, speaking a few hours before Daschle, declared that 60 million homes have access to high-speed cable facilities and that the industry's rollout embraced all regions and demographic groups.

"We are making broadband happen and not just for a select set of ZIP codes," said Sachs. "We don't intend to leave rural America and underserved urban neighborhoods stranded on the wrong side of the digital divide."

Daschle became majority leader two weeks ago, after Vermont Sen. Jim Jeffords quit the Republican Party to become an Independent. That move gave the Democrats control of the chamber for the first time since 1995.

Daschle ducked reporters after the speech to race back to the Senate.

"I have to get back to Washington to mow Jim Jeffords' lawn," Daschle quipped.

If Daschle steered clear of cable rate issues, Congressional aides in Chicago addressed them head on, noting that consumer reaction hasn't been uniform. Some consumers see higher prices as a necessary consequence of new services while others feel they are being gouged, they said.

Rep. Fred Upton (R-Mich.), chairman of the House Telecommunications and the Internet Subcommittee, receives about 400 hundred letters a week from voters and rarely is asked to take action against the cable industry.

"People understand they are getting more and they are going to pay a little more and they are getting a great return on that investment," Upton aide Will Nordwind said at a show seminar.

Nordwind cited Charter Communications Inc.'s rebuild of its Kalamazoo, Mich., system —in Upton's district — as an example in which rates went up to cover upgrade costs and new services.

"We know they have built out that system with tremendous new benefits for the consumers," said Nordwind. "Rep. Upton has not gotten any negative mail about the cable companies."

Other Congressional aides suggested that rates are still a sore spot that require cable operators to do a better job of explaining the relationship between price and value.

"Maybe cable has to make a better effort in basically explaining to the public why your bill is increasing," said Yardley Pollas, an aide to Rep. Bobby Rush (D-Ill.), a member of the House Energy and Commerce Committee, which oversees the cable industry.

Courtney Anderson, an aide to Rep. John Shimkus (R-Ill.) — also an Energy and Commerce member — said rate hikes usually trigger a reaction from her boss's constituents.

"One thing you will see in congressional offices is when the cable bill goes up or when you can't get a certain station, that's when you hear from the constituents," Anderson said. "The cost increases — it really upsets people."

But Anderson said cable rates look a lot better when compared to the cost of taking a family to the movies, when the prices of tickets and snacks are factored in.

"It really is a good deal if you put it into perspective," Anderson said.

Victoria Bassetti, Democratic chief counsel for the Senate Subcommittee on Antitrust, Business Rights, and Competition, said Congress receives an "almost staggering" amount of mail when cable rates go up, but she said that in part reflects the importance of TV in the lives of millions of Americans.

"It's incredibly important to people," she said.

But Bassetti said one problem cable faces is that people see the cost of consumer electronic devices drop as quality rises, but see cable rates rise as quantity and quality increase.

"In terms of addressing attitudes, I am not sure there is a magic bullet," Bassetti said. "There is no way the cable industry can turn itself into the model of the consumer-electronics industry, but I think that's what [cable] is kind of going up against to a certain degree."

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