Thursday, June 29, 2006

Consumer advocates raise alarms on Senate bill

It's hard to dispute the value to consumers of getting some competition for their cable companies. Senate Bill 2686, sponsored by Commerce Committee Chairman Ted Stevens of Alaska and co-sponsored by his Democratic counterpart, Daniel Inouye of Hawaii, was intended to make that possible more quickly, by making it easier for the Baby Bells to enter the TV business.

But consumer advocates are warning - as loudly as they can without big bucks to advertise - that the phone and cable companies are overreaching big-time on the version of S. 2686 that's headed to the Senate floor without rules for Internet neutrality but with other goodies sought by telecom lobbyists.

Just a few of the flaws that Consumers Union, Free Press and others have identified:

* The bill would eliminate the requirement that pay-TV companies offer service to all residents in a community they serve. Though promoted as a policy that would allow the Bells to build-out their systems gradually, CU says, the provision would also allow allow them "to redline low-income or minority neighborhoods," and at the same time "permit cable companies to withdraw or degrade service."

* It would end prohibitions on rate discrimination, which would allow cable companies o discount rates for well-off customers in areas first targeted by the Bells and make up the difference by raising rates in less-affluent sections of the same communities that don't yet have - and may never get - competitive service.

* It would bar states from enforcing laws governing the terms and conditions of wireless-phone service. Though they are already barred from regulating wireless rates, and the wireless market remains reasonably competitive in most places, state regulators and attorneys general argue that they have an important role in policing the market against abusive practices.

* The legislation also eliminates local authority to regulate prices for entry-level "basic" cable service, which typically includes just broadcast channels, public- and community-access stations, and a handful of other offerings such as C-SPAN. Cable companies won't say how many customers opt for this service, which also allows customers to buy premium channels such as HBO without having the buy the 50- to 80-channel "standard" or "expanded" tier in between. In 1996, the last time Congress addressed such a broad swath of telecom issues, it deregulated all cable prices except for basic service and the equipment necessary to receive it.

"The only winners today are big money, special interest industry groups," CU's Jeannine Kenney said yesterday after a series of consumer-oriented amendments were defeated and the bill was sent to the Senate floor on a 15-7 vote. "The result is that consumers, especially middle and low-income families, can expect higher prices and worse service from their current cable provider when they have no other competitor to turn to."

One key issue ended in an 11-11 draw: "network neutrality," or as some prefer to call it, "Internet neutrality." (Read the Center for Democracy and Technology's thoughtful new proposal here.)

Carefully crafted neutrality rules would prevent the cable and phone companies that CU says control 98 percent of today's broadband market from distorting the free and open nature of the Internet by blocking or degrading some sites, or favoring others, for financial or even political reasons.

"Nearly a million Americans have weighed in with their support for network neutrality," Ben Scott of Free Press, an open-media advocacy group, said in a statement. "The public outcry over today's action will be loud and vast. Consumers know what happens when just one or two telecommunications companies are allowed to shut out competitors - higher prices, fewer choices and bad service. They see it in cable and in local phone service. They won't stand for it on the Internet." (Click here for the Save the Internet Coalition's Web site, and a link to Sen. Ron Wyden's plan to block legislation that lacks a neutrality requirement. Click here to see my latest Philadelphia Inquirer piece on network neutrality, which explains how network owners could behave without it.)

I have great confidence in the market's ability to sort out winning technologies and strategies from losing ones. But when a particular market is dominated by two industries nurtured through government-granted monopolies, much more than Adam Smith's "invisible hand" is at work.

As consumers, entrepreneurs, and especially as citizens, we all have gained tremendously from the Internet revolution. We need Congress to act so that it doesn't get derailed.


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