Stoking Competitive Fires

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The following is an excerpt from testimony Federal Communications Commission chairman Kevin Martin delivered to the House Subcommittee on Telecommunications and the Internet on March 14.

Consumers today are benefiting from technological developments and innovation in media. [Digital video recorders], [video on demand] and [high-definition] programming offer more programming to watch at any given time then ever before.

While consumers have an enormous selection of channels to watch, they have little choice over how many channels they actually want to buy. For those who want to receive 100 channels or more, today’s most-popular cable packages may be a good value. But according to Nielsen, most viewers watch fewer then two dozen channels. For them, the deal isn’t as good.

The cost of basic-cable services have gone up at a disproportionate rate — 38% between 2000 and 2005 — when compared against other communications sectors. The average price of the expanded basic cable package, the standard cable package, almost doubled between 1995 and 2005, increasing by 93%.

The [U.S. Government Accountability Office] and the commission’s most recent cable price survey found that while cable does face some competition from [direct-broadcast satellite], DBS and cable do not seem to compete on price. In other words, the presence of a DBS operator does not have an impact on the price the cable operator charges its subscribers.

Significantly, however, where a second cable operator is present, cable prices are significantly lower — almost 20% ($43.33 without competition vs. $35.94 where there is competition).

Congress recognized that competition in the video-services market benefits consumers by resulting in lower prices and higher quality of services. Indeed, one of the Communications Act’s explicit purposes is to “promote competition in cable communications,” and Congress expressly prohibited local authorities from granting exclusive franchises.

In December of last year, the commission took steps to implement Section 621 of the act, which prohibits local authorities from unreasonably refusing to award a competitive franchise.

We need to continue to take steps to remove regulatory barriers to competition in the video market by, for instance, ensuring that consumers living in apartment buildings are not denied a choice of cable operators. We need to continue our efforts to create a regulatory environment that encourages entry by making sure that competitive providers have access to “must-have” programming that is vertically integrated with a cable operator.

Promoting competition and choice must continue to be a priority in the voice arena as well. We need to continue to ensure that new entrants are able to compete with incumbents for telecommunications services. For example, we recently made clear that new telephone entrants, such as cable and other [voice-over-Internet protocol] providers, must be given access to local telephone numbers and be able to interconnect with incumbents to deliver local calls to them.

Similarly, the ability to port numbers between providers is critical. Customers should not be held hostage because a provider refuses to allow a customer to transfer his or her phone number to another wireless or wireline carrier. We need to ensure that porting numbers between providers, including between wireline and wireless carriers, is as efficient as possible.

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