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Press
Release Contact:
Monday, February 5, 2001
Gene Kimmelman
(CU) 202-462-6262
Consumers Union Washington DC Office
Mark Cooper (CFA) 301-384-2204
FIFTH
ANNIVERSARY OF TELECOMMUNICATIONS ACT
OFFERS CONSUMERS LITTLE TO CELEBRATE
Consumer groups release report on skyrocketing cable TV rates
and lack of local phone competition
WASHINGTON, D.C. - This week marks the fifth anniversary of the Telecommunications Act, a landmark law that promised consumers more choices and lower prices for everything from cable television to local phone service.
But Consumers Union (CU) and Consumer Federation of America (CFA) say the anniversary offers little to celebrate as a handful of huge companies continue to monopolize the cable TV and local telephone industries.
Since the act became law on February 8, 1996, cable rates have risen nearly three times as fast as inflation. Most of the local phone service market still belongs to the regional Bell monopolies, which, thanks to a series of mergers, have shrunk from seven companies in 1996 into just four today.
"This law has clearly failed to deliver the benefits that Congress and the White House promised consumers five years ago," said Gene Kimmelman, Co-Director of CU's Washington DC office.
In a new report entitled "Lessons From the 1996 Telecommunications Act," CU and CFA said the law's failure stems predominantly from the fact that the major providers of cable and local phone service chose to merge rather than compete.
"The biggest players have refused to open their markets, refused to negotiate in good faith, litigated every nook and cranny of the law, and avoided head-to-head competition like the plague," said Mark Cooper, Research Director of CFA, the author of the report.
The largest cable TV companies still refuse to invade each other's markets, agreeing to merge and swap assets instead, creating an industry dominated by a handful of dominant companies, each with highly clustered regional monopolies. Cable monopolies have saddled consumers with huge rate increases and sought to impose their closed business model on the broadband Internet by making it nearly impossible for outside companies to offer Internet services over the monopolies' cable lines.
Faced with the monopolies' foot dragging, the Federal Communications Commission (FCC) lacked the adequate authority over cable monopolies and the backbone to force the local phone monopolies to open their markets. The problem has not been too much FCC action, but too little.
"If consumers are ever to see the promised benefits of competition in communications markets, policymakers in Washington and the states must begin to be genuinely pro-competitive and worry less about being pro-business," Cooper said.
"While we would like to see the FCC eliminate unnecessary regulations that fritter away public resources, certain targeted regulations must be imposed to demolish monopolistic impediments to competition," Kimmelman added.
In their report, CU and CFA reached the following conclusions:
· Policymakers must require effective competition - demonopolization - before deregulation.
· Policymakers must recognize that the monopoly elements in the industry - the cable wires and telephone wires - require effective regulation to promote competition in the content and services delivered over those wires.
In order for the Telecommunications Act to deliver on its original promises, CU and CFA say public officials must do the following:
· Policymakers must step in to stop abusive cable TV pricing practices, and open up new avenues for cable competition.
· Policymakers must define high-speed Internet access, whether provided by cable TV or telephone companies, as a telecommunications service and implement an obligation to provide nondiscriminatory access to these networks.
· Policymakers should enforce ownership limits that promote diversity and rivalry, and antitrust officials must block further consolidation that undermines potential competition.
· To promote meaningful competition among providers of local phone service, federal and state regulators must press the market opening principles of New York and Texas across the country.
Consumers Union, publisher of Consumer Reports magazine,
is an independent nonprofit testing, educational and information organization
serving only the consumer. We are a comprehensive source of unbiased advice
about products and services, personal finance, health, nutrition and other consumer
concerns. Since 1936, our mission has been to test products, inform the public
and protect consumers
The Consumer Federation of America is the nation's largest consumer advocacy group, composed of over two hundred and forty state and local affiliates representing consumer, senior, citizen, low-income, labor, farm, public power and cooperative organizations, with more than fifty million individual members.
