The Case for Competition and Effective Rate Regulation

Testimony
of the
Honorable Marilyn Praisner

On behalf of

NATIONAL ASSOCIATION OF COUNTIES
AND TELECOMMUNITY
Before the
Committee on Commerce, Science and Transportation
United States Senate
March 25, 2004
Washington, D.C.

download as PDF

INTRODUCTION

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." [1]

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.

next >

1. Frank Ahrens, "GAO Suggests Competition Good for Cable" Washington Post, October 25, 2003