The Solution: Move Decision Making Out Of Washington
Tue Aug 12 13:20:55 2003

(CONT'D)The Failure Of Cable Deregulation: A Blueprint For Creating A Competitive, Pro-Consumer Cable Television Marketplace

August 2003

The Solution: Move Decision Making Out Of Washington, Give Consumers Real Choices And Create Conditions That Give Competition A Chance

Since its inception and growth throughout the second half of the 20th century, cable television service has brought an enormous amount of popular news and entertainment programming into the living rooms of America. The cable industry has used public rights of ways to access those homes and in turn made huge profits. This report makes clear that the cable industry has not lived up to its public and civic responsibilities as holders of valuable public franchises and licenses. Congress, the FCC, and state and local governments must examine the recommendations made in this report and take appropriate action to restore competition to the multichannel video market. Fortunately, the harmful effects of cable deregulation are not insurmountable. Consumers could still reap the benefits of the 1996 Act's pro-competitive intent through a new model. The building blocks of a truly pro-competitive model are as follows:

Congress must empower state public utility commissions (PUC) to regulate all cable rates and charges for video services until meaningful competition emerges. Congress should grant state public utility commissions the authority to regulate all cable rates and charges and to combat anti-competitive predatory-pricing business practices. With the 1996 Act's deregulation, rates for the cable programming tier to which the vast majority of consumers subscribe have inflated without restraint. Consumer rate protections at the state level are needed, but state PUC rate regulation is only necessary and desirable until robust competition that actually disciplines cable prices emerges.

Return authority to local communities. Preemptive provisions of the Act have thwarted attempts by local communities to protect cable subscribers from the worst of the industry's depredations. These preemptive provisions must be abolished so that policy control may be returned to community leaders who are closest to consumers and who are most committed to ensuring that their communities have access to multiple providers of competitively priced video services.

Introduce la carte programming requirement to expand consumer choices. Consumers should be able to choose their own suite of programming, rather than being force-fed the programming tiers that cable operator want them to purchase. Consumers must be given the right to purchase every individual channel on an la carte basis at fair, reasonable and nondiscriminatory prices.

Adopt reasonably priced leased-access rates. Cable operators have avoided their obligation to lease channel capacity to independent programmers by setting the prices so high that no competing provider could possibly pay current fees and remain commercially viable. In order to promote competition with diverse and independent programming, reasonably priced leased access must be adopted. This pro-competitive pricing should be based upon the FCC's existing rate-setting methodology, which was designed to promote competition in the telecommunications market.

Ensure consumer input with a public board member. A public member representing subscribers should be placed on the board of directors of any cable operator with a greater than four percent market share of cable households as a condition of franchise or FCC approval. Such a public member should have no current or prior affiliation with a cable, broadcast or DBS distributor or programmer, or any of their industry trade associations, and should be barred from joining such a board as a public member for five years after serving in any such affiliation. Public members should be selected by a committee of outside directors and approved by the shareholders. This would ensure better consumer input and assist in preventing insider dealing and financial mismanagement, as has occurred with some of the nation's leading cable operators.

Empower the viewers and citizens. Citizen-viewers should have a direct voice in the process of cable regulation and the opportunity to use that voice to create their own well-funded news and public affairs channels. When cities negotiate franchise agreements with cable companies, they should require that cable operators include billing inserts that invite consumers to join a local Cable Action Group that would operate a local Audience Channel, well-funded and equipped by the cable company. Such a group would serve a dual purpose: operating the local channel and organizing consumers into a mobilized interest group to advocate for pro-consumer and pro-democracy media policy. Alternatively, local or state governments could assist in fundraising for the Cable Action Group, by collecting membership dues through inserts in tax or license renewal mailings. Illinois Citizen Utility Board (CUB) is funded in this manner and represents the interests of Illinois gas, electric, phone and other utility ratepayers.

Ensure access to vital programming. Newly formed competitors cannot survive, let alone thrive, if cable operators are allowed to continue their anti-competitive practices of locking up must-have programming, such as sports and other regional channels. The existing federal program-access law must be modified to eliminate loopholes that have allowed the cable industry to continue these anti-competitive practices and undermine the emergence of wireline competitors. Additionally, cable operators should be prohibited from entering into exclusive contracts for equipment or other technical services that prevent competitor access to such programming.
Prohibit cable broadband content restrictions to allow consumers full use of the Internet. Cable operators have a long history of restricting consumer access to content that cable operators disfavor. With the cable industry's ongoing dominance of the broadband market, cable operators must be prohibited from restricting consumer access to Internet content based on the source or nature of the consumer's request.

U.S. PIRG 218 D St., SE Washington, D.C. 20003 202-546-9707 ph 202-546-2461 fax

The state PIRGs created U.S. Public Interest Research Group (U.S. PIRG) in 1983 to act as watchdog for the public interest in our nation's capital, much as PIRGs have worked to safeguard the public interest in state capitals since 1971. Our organization's roots at the state level, and U.S. PIRG members across the country, give us a unique "outside the beltway" perspective and provide the grassroots power necessary to influence the national policy debate.
U.S. PIRG Report Release on Cable Deregulation (08/12/2003) 

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