The Case for Competition and
Effective Rate Regulation
Honorable Marilyn Praisner
On behalf of
NATIONAL ASSOCIATION OF COUNTIES
Committee on Commerce, Science and Transportation
United States Senate
March 25, 2004
Good Morning Mr. Chairman, Senator Hollings and Members of the Committee.
My name is Marilyn Praisner. I am a member of the County Council
of Montgomery County, Maryland. I am testifying today as the Chair
of TeleCommUnity and the Chair of the National Association of Counties’
Telecommunications & Technology Committee. TeleCommUnity is
an alliance of individual local governments and their associations,
which seeks to refocus attention in Washington on the principles
of federalism and comity for local governments’ interests
in telecommunications. NACo is the national association of the nation's
3,066 counties and seeks to ensure county officials’ voices
are heard and understood in the White House and the halls of Congress.
I. ONLY REAL COMPETITION RESULTS IN LOWER RATES.
Mr. Chairman, in response to the GAO’s cable rate report,
you are quoted as stating:
"Consumers in the few markets with a choice of a second
cable company pay 15 percent less for cable. The apparent implication
for all other consumers is that they continue to be fleeced by
their cable operators." 
We agree with your conclusion and thank you for the invitation
to testify this morning.
In my testimony I seek to impart four thoughts:
- Local governments agree with you that only real competition
creates downward pressure on rates –and real competition
for cable exists only when a second wireline provider is present.
- Local rate regulation was thought to be a substitute rate restraint
in the absence of competition, but FCC actions have frustrated
rate regulation efforts by local franchising authorities. In addition,
there are real limitations found in the Telecommunications Act
which limits regulation to the basic programming tier. For example,
were a local government to determine that an operator’s
basic rate was above that set by a competitive market, operators
can limit choices on the regulated tier and move attractive programming
to an unregulated tier. The result being that subscribers pay
the higher rate selected by the operator.
- A la carte pricing could be a definite improvement over the
current tier pricing system if it provides consumers direct control
and choice over the channels they buy and the content that is
coming into their homes while avoiding price manipulations by
the cable operator.
- A la carte pricing is not, however, a solution to the real problem
with cable--the lack of effective competition in the transmission
platform. This monopoly transmission ownership gives the cable
operator monopoly pricing power over the consumers and monopsony
pricing power over the programmer.
1. Frank Ahrens, "GAO
Suggests Competition Good for Cable" Washington Post,
October 25, 2003