Vol. 1, No. 4, 02 April 1999
FCC RATE REGULATION ENDS/CABLE CONSUMER BILL OF RIGHTS CAMPAIGN BEGINS
On March 31, 1999, the role for the Federal Communications Commission in the regulation of cable television rates ended. The FCC no longer has the authority to receive or act upon consumer complaints regarding cable television service. Since 1993, the FCC has resolved more than 18,000 complaints involving more than 5,700 communities and resulting in nearly $100 million in consumer refunds. The sunset of FCC cable regulation is a result of the Telecommunications Act of 1996, adopted with an expectation that cable prices would be driven by competitive forces by now.
Cable television is currently available to 96% of American households and over 67 million (67.4%) subscribe to at least basic cable. The cable industry saw revenue of nearly $34 billion in 1998 divided by the 10,845 cable systems. Cable operators still have 85% of the multichannel video programming marketplace.
Also on March 31, FCC Chairman William Kennard launched the Cable Consumer Bill of Rights Campaign aimed at informing consumers of their rights concerning cable service. "The FCC will work hard to make sure consumers are aware of all their options in the newly deregulated cable marketplace. We will also continue our work to make cable rates reasonable by removing barriers to competition in the video marketplace," Chairman Kennard said.The campaign lists eight options consumers have concerning their cable service.
Even with the end of FCC rate regulation, cable consumers still have the following rights:
The campaign says that consumers should expect:
Finally, the campaign encourages consumers to:
CABLE BUILDS OUT FOR THE FUTURE
Cable rate deregulation comes at the same time operators are making heavy investments in their infrastructures. In 1998, $7.74 billion was invested in upgrading cable facilities. Technically, cable systems are upgrading to 550Mhz-750MHz, creating new bandwidth to provide a host of new services. Current estimates say that 70% of all cable homes are passed by 550-750MHz facilities and by the end of the year 78% will be passed by 550MHz facilities and 55% will be passed by 750MHz or higher facilities; 86% of cable homes will be passed by a system that allows interactive online services and/or telephony.
Some industry analysts actually point to these investments as the reason cable rates may remain low in the near-term future. "These companies don't want to be thought of as cable companies but [as] broadband companies offering a variety of services," said Bruce Leichtman, director of media and entertainment strategies for the Yankee Group. "One of the worst things they could do is egregiously raise video rates. They need to be aware that if they upset people with video pricing, that will affect other services."
Many systems are rolling out digital cable and some 1.4 million subscribers have already signed up. This number is expected to grow to 9.8 million by the end of next year and to climb to 38.6 million by 2006. In the space it currently takes to provide one channel, digital compression can squeeze 12 channels of programming. TCI's National Digital Television Center offers operators some 155 digital networks. Digital cable also makes High Definition Television (HDTV) service available. Cable operators want to bundle non-video services as well including high-speed Internet access and telephony.
Cable operators have made free, high-speed Internet access available to 2,500 schools through Cable's High Speed Education Connection program. Broadband cable allows access speeds that are 50-100 times faster than standard modems on conventional telephone lines.
It is a refocus on non-video services that has driven recent consolidation in the cable industry. Late last month, Comcast and MediaOne Group, two of the nation's biggest cable companies, announced a $53 billion merger and focused not on the word "cable," but "broadband." AT&T recently acquired Tele-Communications Inc (TCI) for more than $30 billion and is focusing on using the cable giant's infrastructure to deliver Internet access and local phone service. As information delivery systems move to digital technology, new rivalries are forming. Cable companies will not be competing against themselves -- they will be competing with local phone giants to provide high-speed Internet access and, eventually, telephony.
In February, AT&T also reached an agreement with Time Warner to offer AT&T-branded cable telephony service to residential and small business customers over Time Warner's existing cable television systems in 33 states. With its merger with TCI and agreements with five TCI affiliates and Time Warner, AT&T will be able to offer local phone service to more than 40% of US households within the next 4-5 years. Time Warner expects to have sufficiently upgraded 85% of its facilities by year's end and 100% by the end of 2000.
The cable industry is also invested heavily in two, high-speed online services -- Road Runner and @Home. Road Runner is a joint venture of Time Warner, MediaOne Group, Microsoft, Compaq, and Advance/Newhouse. Road Runner provides both the technical infrastructure and the programming. Time Warner Cable and MediaOne have predicted that, by 2000, all of their cable facilities will be upgraded and capable of delivering Road Runner to the 27 million homes passed by their systems. Partners in @Home include Comcast, Cox Communications, TCI, Cablevision Systems, Century Communications, Jones Intercable, and Prime Cable. The combined reach of these and other partners provides exclusive access to more than half of all homes passed by cable in North America.
With the cable industry changing so quickly, many are raising both traditional and new concerns about access to these networks. Many are concerned that the public's voice is being squeezed off cable systems and that competitive providers of broadband services may not have access to cable facilities.
Public, Educational, and Governmental (PEG) access television channels on cable TV serve a wide range of community organizations, including churches, synagogues, Lions and Rotary Clubs, local political party organizations, high schools and colleges. PEG access centers exist because local franchise authorities provide for capacity, services, facilities, and equipment as compensation for the cable companies' use of state and local rights-of-way. Through PEG access centers, thousands of community groups and over one million individuals produce more than 20,000 hours of new local programming each week -- more than all programs produced by NBC, CBS, ABC, Fox and PBS combined.
A recent survey conducted by the Center for Applied Research and Rural Studies at the Central Michigan University found strong public support for PEG access in Midland (MI), a city of 38,000 residents. 93% of respondents said they were aware of the public/governmental access channels. 77% said they watched public access programs and 65% said they watch government access programs. 68% said they were satisfied with access programming, 11% were dissatisfied and 21% said they didn't know. Most interesting was the fact that 77% said they supported the use of franchise fees to support MCTV, 19% were opposed, and 13% said they were interested in taking a short course in TV production.
But as new cable channels proliferate, some are trying to take control of PEG channels away from the communities they serve. In the Washington (DC)- Baltimore (MD) area, The Forum Network, a joint project of the $900-million Gannett funded Freedom Forum and public television station WETA, is trying to reach a June deadline for launch by "borrowing" for 12-18 months PEG channels. The Alliance for Community Media, is a national non-profit membership organization which educates and advocates on behalf of PEG access, is fighting The Forum Network's proposal.
"It's appalling," said Bunnie Riedel, executive director of the Alliance. "The Freedom Forum is supposed to promote free speech, not try to bury it by grabbing the people's media." Ms. Riedel believes that the Freedom Forum and WETA do not understand the importance of access channel capacity for community use. "The access community has fought long and hard to carve out a media space reserved for people in communities to be able to communicate with each other. This is the one place in media where governmental and educational institutions can serve the community. And, it's the one place where non-profits, community groups and individuals can become active participants in media, rather than just passive recipients of media."
For more information, call Bunnie Riedel at 202-393-2650 or visit the website at (www.alliancecm.org).
A second battle over access is the fight to open broadband cable networks to competitive Internet Service Providers (ISPs). Many see the move from low-speed, dial-up access to the Internet to high-speed access through digital networks as a major development for the global network. Broadband networks could bring whole new opportunities to businesses and consumers and provide a more vibrant space for commerce, culture and civic participation.
On January 28, the FCC released a Report to Congress which concluded that the deployment of broadband services was proceeding well and that regulation of the industry was premature. The FCC's decision has put off the issue of open access to broadband networks for the time being.
One day earlier, A group of nonprofits -- including the Consumer Federation of America, Consumer's Union, Consumer Project on Technology, Computer Professionals for Social Responsibility, the Media Access Project, and the Center for Media Education -- filed a petition with the Commission asking that cable broadband be opened to competition as soon as possible. The group asked FCC Chairman William Kennard to conduct an expedited rulemaking or other proceeding to insure that all Americans can speak and be heard on the Internet, and that competing Internet service providers will be able to provide choice and competition to their customers.
According to the filing, the current closed, monopolistic, cable TV system hurts consumers by denying them choice and raising prices, while also threatening the open, competitive nature of the Internet. The groups are asking the FCC to "retain in the broadband world the same openness and competition that exists in the narrowband world."
"This is a key issue for consumers," said Jamie Love, executive director of the Consumer Project on Technology. "The government should fight monopolistic control over information bottlenecks. The FCC can do something useful to protect consumers, or it can do nothing. We want some action. The FCC has had years to anticipate this dispute. It is time to provide leadership that protects consumers and ensures a level playing field in the important area of Internet content and commerce."
In its filing, the group argues that as broadband services emerge, it is critical to ensure that the last mile of infrastructure used to access Internet services develops in an open, accessible and competitive manner.
"We're at a fork in the information superhighway," said Andrew Schwartzman, president and CEO of the Media Access Project. "One way leads to open access, boundless innovation and free expression. The other has us follow the same path that made cable TV the closed, unresponsive and overpriced monopoly Americans have grown to hate."
According to the filing, the FCC's "public interest mandate requires it to promote the free flow of information in the marketplace of ideas. The Internet is not only the most dynamic engine for economic growth ever created, but it also has the potential to expand and transform artistic, social and political discourse." Smaller Internet service providers will be unable to extend their creative services if they are denied access to some or all of the broadband customer base.
"No one industry should be allowed to be a gatekeeper to the Internet," said Jeff Chester, executive director of the Center for Media Education. "The FCC's failure to ensure Internet broadband competition is setting in motion forces far more harmful than most potential Y2K threats. Unless the Commission acts swiftly, e-commerce will be harmed, consumers gouged, and diversity of sources stifled."
In Oregon, two local jurisdictions are attempting to have @Home opened to competitive ISPs. AT&T has sued claiming damages from attempts by Portland and Multnomah counties to unbundle the high-speed data service. Regulators are asking that the US District Court dismiss the lawsuit.
For more information on the fight to open cable networks, see No Gatekeepers.org (www.nogatekeepers.org) and the openNet Coalition (www.opennetcoalition.org). Each provide an easy means for you to participate in this policy debate.
©Benton Foundation, 1999
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Last updated: 02 April 1999 rta