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June 7, 2001
The Honorable James Sensenbrenner
U.S. House Committee on Judiciary
Washington, DC 20515
Dear Chairman Sensenbrenner:
As you prepare to move telecommunications legislation to the House floor, we want to call to your attention recent events that demonstrate serious problems with the 1996 Telecommunications Act:
· AT&T announced June 1 it would raise long-distance rates by up to 11 percent for its 28 million basic rate customers. These customers tend to be "low volume users" - people who make less than 50 minutes of long-distance calls a month. Low volume users make up about one-half of the U.S. population, yet long-distance companies have shown little interest in competing for their business. AT&T's latest rate hike did not prompt a competitive response from MCI Worldcom or Sprint. Obviously, there are inadequate competitive forces at play in the long-distance market.
· Cable and local telephone companies have recently boosted prices by up to 25 percent for high-speed Internet services. These companies used to claim that they wanted to compete against one another and challenge each other to offer consumers better deals for high-speed services. But the only price war between them today is the race to raise rates. A marketplace dominated by the cable and local phone industries is not competitive enough to keep prices in line. Scott Cleland, the investment analyst who heads the Precursor Group, recently told investors that "the Bells and cable are more duopolists than competitors in the new emerging residential broadband access market…. There is no price competition (May 30, 2001)." Lawrence White, who served as chief economist for the Justice Department's antitrust division during the Reagan Administration, expressed similar concerns about the ability of cable and local phone companies to coordinate price hikes in the high-speed market (Washington Post, June 3, 2001).
· Some cable companies have refused to air advertisements for digital subscriber line (DSL) Internet access services, which compete with cable Internet services. Cable companies are citing First Amendment protections, much as CNN did when it refused to air ads that predicted cable rates would skyrocket in the wake of the Telecommunications Act. We do not wish to challenge legitimate First Amendment concerns, but this effort to block ads does not appear to be a case of constitutionally protected free speech. It is a blatant attempt by cable companies to squelch competition from a different transmission system. It not only hurts competition; it undermines the free marketplace of ideas that the First Amendment is designed to promote.
These actions illustrate how the Telecommunications Act is being circumvented. Since none of the telecommunications bills on the table adequately addresses these concerns, we hope you will revamp them to rectify these consumer rip-offs. Thank you for your consideration.
Sincerely,
| Mark
Cooper Director of Research Consumer Federation of America |
Gene
Kimmelman Co-Director, Washington D.C. Office Consumers Union Washington DC Office |
