Groups Call Cable Deregulation A Failure For Consumers:
New Report Provides Blueprint For Reform

Washington, D.C. (8/12/03) – Increased industry concentration and anti-competitive practices by cable providers since cable industry deregulation in 1996 have prevented competitors from gaining enough market share to give consumers real choices, lower cable rates or improve cable service quality, according to a new report released by the U.S. Public Interest Research Group.

The report compares industry and deregulation proponent promises in 1996 to cable consumer realities in 2003: cable rates have skyrocketed; service levels have declined; industry consolidation has increased enormously; cable continues to deny competitors access to critical programming; wireline competition is virtually non-existent; and the industry now dominates the broadband Internet market, giving it enormous and unregulated influence over America's digital future.

"Since deregulation seven years ago, the cable industry has price-gouged consumers by raising its prices more than 50 percent," said Ed Mierzwinski, U.S. PIRG consumer program director, "Congress promised that deregulation would bring competition and lower prices. Instead, the industry has raised prices and used anti-competitive practices to prevent consumers in nearly every market from having a choice of cable providers, a choice that would lower their rates and improve their terrible service."

The study, The Failure of Cable Deregulation: A Blueprint For Creating a Competitive, Pro-Consumer Cable Television Marketplace, was endorsed today by Consumer Federation of America, Center For Digital Democracy, Media Access Project and Consumers Union.

"The solution to cable's unfettered abuse is for Congress to move decision making out of Washington, return authority to local communities, and give consumers real choices. In Washington, the FCC has simply lost touch with reality," said Mark Cooper, Research Director of Consumer Federation of America, and the author of the 2002 book Cable Mergers and Monopolies.

Among the key recommendations of the report were the following:

· Congress must empower state public utility commissions (PUC) to regulate all cable rates and charges for video services until meaningful competition emerges and also return largely-diminished authority to local communities and their franchising authorities to protect consumers from the industry's worst abuses.

· Introduce an à 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 operators want them to purchase.

· Ensure access to vital programming by preventing the cable companies from their anti-competitive practices of locking up must-have programming, such as sports and other regional channels. Modify the existing federal program-access law to eliminate loopholes that have allowed the cable industry to continue these anti-competitive practices and undermine the emergence of would-be wireline competitors.

· Empower viewers by putting a citizen board member on every large (greater than four percent of cable households) cable company's board and by requiring as a condition of franchise renewal 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.

The report also documented that the deregulated cable industry's growing dominance over the emerging broadband Internet poses real threats to diversity and democracy on the Internet. Unlike DSL broadband, which is owned by regulated phone companies required to share their networks, cable Internet service providers can lock out their competition. As cable companies dominate the user interface they could limit consumer access to Internet content from online competitors, from streaming video to movie channels.

"If Congress and the American public pay attention to this report, it may be early enough to forestall the cable monopoly from hijacking the Internet," added Andrew Jay Schwartzman, President of the Media Access Project. "The Internet as we know it is in jeopardy. If the cable television model is extended to the Internet, the open and interactive system which characterizes the dial up Internet will be lost. Those who read this report will see how important it is not to let that happen."

"Cable's powerful stranglehold threatens consumers, competitors and communities. With the impending new FCC give-away on cable ownership policy, the public must take immediate action to restrain this media monopoly. Both the future of TV and the broadband Internet are at stake," said Jeff Chester, executive director of the Center for Digital Democracy. "Cable's threat to democracy and diversity on the Internet, our virtual town square, cannot be overstated."

The groups called on Congress to turn the report's recommendations into actions to protect cable consumers.

"The American public has little idea how the cable industry has flouted the intent of Congress, co-opted the FCC, and reaped tremendous profits at the public's expense," said report author Jay R. Halfon. "This report details the overwhelming evidence of the cable industry's abuses, particularly its success at quashing wireline competitors, who have had the only success impacting cable rates.
"The proposals outlined today provide a roadmap for action to protect consumers from the cable monopoly," Halfon concluded.

Contacts:

Ed Mierzwinski or Jen Muellem, U.S. PIRG (202) 546-9707
Jay Halfon, PIRG, 917-318-6158
M ark Cooper, CFA, 301-384-2204
Jeff Chester, CDD, 202-452-9898
Andrew Jay Schwartzman, MAP, 202-232-4300

U.S. PIRG is the national advocacy office for the state Public Interest Research Groups. State PIRGs are nonprofit, nonpartisan public interest advocacy groups. www.uspirg.org

The Consumer Federation of America (CFA) is a non-profit association of 300 pro-consumer groups, which was founded in 1968 to advance the consumer interest through advocacy and education. www.consumerfed.org

The Center for Digital Democracy is a Washington-based nonprofit organization dedicated to maintaining the diversity and openness of the media, focusing especially on the new broadband communications platforms. www.democraticmedia.org

Media Access Project (MAP) is a thirty year old non-profit tax exempt public interest telecommunications law firm which promotes the public's First Amendment right to hear and be heard on the electronic media of today and tomorrow. www.mediaaccess.org

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