Press Release January 25, 1999	Contact: 202/462-6262 Gene Kimmelman, kimmge@consumer.org Consumers Union Washington, DC Office

Consumers Union Reacts to Supreme Court Ruling on Telecom Act

WASHINGTON - Following are excerpts from an interview conducted with Gene Kimmelman, co-director of the DC Office of Consumers Union, reacting to the Supreme Court ruling on the Telecommunications Act of 1996:

"There has been a terrible cloud under this landmark Telecommunications Act since the day it was passed because companies have been suing companies over what the law means. Today, we finally have clarification from the Supreme Court, the dust settles from all the legal challenges and we finally have clear guidelines as to what the federal regulatory powers are versus the states. Hopefully this will now create an opportunity to move forward with a clear set of guidelines to open local telephone markets, which have always been monopolies, to more competition.

"The 1996 Telecommunications Act was an effort to open all telecommunications and television markets to competition and break down barriers to competition. And it gave federal regulators certain obligations to break up past monopolies. Unfortunately, it has been tied in litigation since day one, because there are ambiguities in the law. Today the Supreme Court has given the federal regulators clear authority to establish pricing rules and opportunities for competitors to break into the local telephone monopoly and uses some of its equipment to offer consumers choice in local telephone service - something we've never had, we've always had local phone monopolies. So, hopefully now the dust settles from the legal challenges and consumers will see federal regulators move aggressively to do what this law was all about: offer consumers more options and hopefully lower prices.

"With a huge industry, interest groups fighting each other, it is not surprising that there be ambiguity in the law. But the biggest problem with this law is it tries to do something that we've never had done before, that is break open monopolies - local phone monopolies, cable monopolies - and infuse competition. Today's ruling will hopefully clarify some of the rules. It still requires federal regulators to move aggressively to open up these local monopolies. Consumers have virtually no choice, either for cable television or local phone service, and now we have some clarity. The other big problem that Congress did not recognize is the market itself. It is extremely expensive to build the infrastructure to compete with the incumbent monopoly. It has been slow going, and way more expensive than Congress thought. And even with this ruling, we have a long way to go until most consumers see any competition for choice for local phone service and possibly longer for cable television.

"The legal battles go at a very different pace than the technology and the economy. While this has been brewing in the courts and there has been ambiguity and a cloud over the whole industry, what we see in the marketplace is competition is much more difficult to develop, economically it is very costly, and it may not be there, even with clear guidelines from the courts. Most consumers are unlikely to have a choice for local phone service; most consumers still have only one cable monopoly serving them. So even with clear rules from the courts we still have an enormous economic problem, a marketplace problem, in getting across the board competition for television service or telephone service.

"I think the problem here is at the high end of the market where consumers spend a lot of money are willing to use a lot of services, will draw suppliers who will compete with monopolies. But most consumers don't spend enough to bring in the vendors who could offer than more options and lower price. The cost of building infrastructure and offering competitive services is too high. So unfortunately we may have persistent monopoly for local phone service and cable television long past this court ruling and more clear guidelines from the companies. "