Bill fails to ensure that consumers benefit from new video competition


FOR IMMEDIATE RELEASE
April 25, 2006
Consumer groups released the following letter on the Energy and Commerce Committee’s markup on April 26 of the Communications Opportunity, Promotion and Enhancement Act.
The letter addresses the bill’s lack of consumer protections. The bill does not ensure that low- and middle-income consumers who most need cable rate relief will benefit from new video competition. Moreover, it may result in higher cable prices and lower quality cable service and impede competition in Internet-based services.
Contact: Jeannine Kenney or Jennifer Fuson (202) 462-6262
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Consumers Union * Consumer Federation of America * FreePress * US PIRG
April 25, 2006
The Honorable John Dingell
Committee on Energy and Commerce
U.S. House of Representatives
Washington, D.C. 21515
Dear Representative Dingell:
Tomorrow, when the Energy and Commerce Committee takes up the Communications Opportunity, Promotion and Enhancement Act, we urge your support for amendments that address the bill’s significant consumer protection shortcomings. In its current form, the legislation represents a significant step backward for consumers. The bill does not ensure that low- and middle-income consumers who most need cable rate relief will benefit from new video competition. Moreover, it may result in higher cable prices and lower quality cable service for lower and middle income households and impede competition in Internet-based services.
While the legislation laudably protects community rights to establish broadband networks, it eliminates other protections that ensure all residents have access to competitive, advanced communications services. The legislation abolishes local communities’ authority to ensure all residents are served by new and existing cable providers without establishing reasonable build-out requirements in its place, opening a wide door to redlining. Skepticism that telephone companies will offer their video services to all residents rather than just the wealthiest is particularly warranted given SBC’s statements last year that it would roll out Project Lightspeed, the company’s IPTV video offering, to 90 percent of its high-value customers. It defined “high-value” customers as those willing to spend up to $200 on communications services per month. Similarly, Verizon’s conduct to date strongly suggests it is seeking franchise agreements for its FiOS service in only the wealthiest counties in the country. Not only does the bill fail to impose any build out or service obligation on new video market entrants, its prohibitions on economic redlining are weak and ineffective. Anti-redlining provisions, in the absence of build out requirements, have little practical effect.
In addition to failing to assure that competition will come to those consumers who most need price relief, the bill allows incumbent cable providers to increase rates and degrade service. As soon as a telephone company offers video service to just a single customer in a franchise area, the cable incumbent is immediately eligible for a national franchise whether or not actual competition exists, freeing it from its existing obligations to charge uniform rates and uniformly upgrade services to all of its customers. As a result, cable providers can subsidize rate cuts offered to wealthier consumers in competitive areas and jack up rates and deny upgrades to low-income consumers not served by the new entrant.
The bill also rolls back state and local authority to establish and enforce strong consumer protections without providing for strong federal consumer protections. It leaves resolution of the tens of thousands of consumer complaints in the hands of the Federal Communications Commission, which lacks the resources and ability to address them. And, without providing for strong, enforceable prohibitions on broadband network discrimination (network neutrality), it simultaneously strips the FCC of its authority to establish network neutrality rules, leaving consumers exposed to anticompetitive tactics that will reduce competition and inflate consumer broadband prices.
We urge your support of amendments that will help reduce the risks the bill poses to consumers and improve the likelihood that the benefits of new video competition reach those who most need it, including amendments that will?
o Ensure that low- and middle-income consumers will benefit from new cable competition by requiring that new entrants comply with reasonable build-out requirements. (Dingell-Markey-Solis)
o Provide for meaningful and enforceable prohibitions on broadband network discrimination that impedes consumer access to lawful content; prevent their use of lawful devices; and restricts their ability to send, receive and use content, applications or services. Eliminates the roll-back of FCC’s authority to issue rules on network neutrality. (Markey-Boucher-Inslee-Eshoo)
o Provide for more effective enforcement of anti-redlining provisions.
o Ensure that states and localities retain the ability to establish consumer protection standards for video services. (Schakowsky)
o Provide for meaningful state, local and federal enforcement of the COPE Act and other consumer protection regulations. (Doyle)
o Eliminate retransmission consent abuse that drives up the costs of video services to consumers. (Deal)
We also urge you to oppose amendments that would further reduce consumer protections, including provisions that would:
o Block or impede the ability of communities to offer affordable broadband to their residents. (Buyer)
o Allow incumbent cable providers to secure a national franchise and negate existing local obligations regardless of whether a telephone company offers video service in that market. (Pickering-Pallone)
o Eliminate state authority to protect consumers from onerous terms and conditions of wireless telephone contracts. (Blackburn-Boucher)
A national franchise system with strong consumer protections and appropriate provisions to meet local needs could foster new video competition and discipline ever-rising cable rates. Unfortunately, the COPE Act not only fails to ensure that consumers will benefit from new video competition, it exposes them to the risk of higher cable and broadband rates, reduced service quality and reduced access to competitive choices offered via the Internet. Without improvement, the bill represents a significant step backward in consumer protection and competition.
Respectfully,
Jeannine Kenney Mark Cooper
Senior Policy Analyst Director, Consumer Research
Consumers Union Consumer Federation of America
Edmund Mierzwinski Ben Scott
Director, Consumer Program Director, Public Policy
U.S. Public Interest Research Group Free Press