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JULY 14, 1999, WEDNESDAY

SECTION: IN THE NEWS

LENGTH: 966 words

HEADLINE: PREPARED TESTIMONY OF
U.S. SENATOR MIKE DEWINE
(R-OH)
BEFORE THE SENATE JUDICIARY COMMITTEE
ANTITRUST, BUSINESS RIGHTS AND COMPETITION SUBCOMMITTEE
SUBJECT - BROADBAND: COMPETITION AND CONSUMER CHOICE IN HIGH-SPEED
INTERNET SERVICES AND TECHNOLOGIES

BODY:

Good morning, and welcome to the joint hearing of the Full Judiciary Committee and Antitrust, Business Rights and Competition Subcommittee. I have chaired a number of Antitrust Subcommittee hearings on telecommunications issues, and I am glad to have the opportunity today to hold a joint hearing with the Chairman of the Full Judiciary Committee, Senator Hatch.
We will focus our attention today on the changing market dynamics of the telecommunications industry. It has almost become a cliche to say that the Internet is changing commerce in America; at times, in fact, it appears to be revolutionizing commerce. The AT&T/MediaOne deal is the latest example of how the Internet is changing the face of business. As the demand for high-speed data services has skyrocketed, more and more telecommunications providers have decided they need to provide broadband access, so that consumers can choose from a bundle of different services, quickly and easily. AT&T believes that its deal with MediaOne will help it to do that, and many of AT&Ts competitors are worried about the exact same thing. I am sure that we will have a great deal of discussion on this topic during today's hearing, and I am looking forward to that.
For the moment, however, I would like to focus on the specific areas of local phone service, and video service. Since Congress passed the Telecommunications Act of 1996 we have all seen a great deal of change in the industry; unfortunately, not all of that change has been what we expected when we crafted the law. Instead of vigorous competition, too often we have seen mergers among industry participants. Litigation has slowed the advent of telephone competition in local markets, and the Federal Communications Commission has often been slow to resolve disputes between competitors.
As a result of the logjam, competition has developed more slowly than we had hoped. There are some indications that the pace of competition is picking up.
Much of the litigation has been decided, and some of the Regional Bell Operating Companies appear to be close to achieving compliance with Section 271 of the Telecom Act, which will allow the RBOCs to offer long distance service within their own regions. Still, even where competition is thriving, it is mostly for business customers; competition in local residential service remains very limited.
This lack of competition for local residential service is one of the things that makes the proposed merger between AT&T and MediaOne so intriguing; AT&T intends to use the cable wires to provide facilities- based local phone service to residential customers. If this plan works, it will help fulfill one of the fundamental goals of the Telecom Act, and provide significant competitive benefits to consumers all throughout the country.
However, the AT&T/MediaOne deal does pose some serious policy concerns. If approved, AT&T would become the largest cable operation in the country, with an ownership stake in facilities that reach approximately 60% of the nation's cable subscribers. In fact, some have asked the question, does the deal reassemble the old Ma Bell monopoly under the new name of Ma Cable? Beyond the obvious concentration concerns raised by such a large market share, we need to look closely at the level of cross-ownership in the industry. Many of the cable systems have a share in each other, and are vertically integrated to include programming holdings. We will explore today what, if any, impact is created by that industry structure. For example, it seems possible that AT&T might be able to skew the market if it decided to favor programming in which it had an ownership interest. This is a troubling notion, which needs to be explored. It may be necessary for AT&T to divest itself of some systems, or to find some other way to gain access to cable wires, other than buying them. As policy makers, we must be wary of creating one monopoly in order to dismantle another. This is an especially difficult area to examine because the FCC does not currently have any regulations in effect describing how much national market share a cable company may have, or how exactly to determine when a stake in another company rises to a level of ownership for purposes of attribution. The FCC has been dragging its feet on resolving these issues, and it is crucial that they quickly finalize their regulations so that the companies involved in this industry are able to move forward with certainty.
Beyond the FCC regulations, we need to keep a close eye on the competitive structure of the video industry in general. Although cable rates were deregulated recently, the industry still has a way to go before it is fully competitive. To make sure that we were kept informed about events in the industry, last year Senator Kohl and I commissioned a study, by the Government Accounting Office, to examine the state of competition in the Telecommunications Industry. The study is being conducted in three parts, and we are releasing the first part, focusing on cable competition, today. The study confirms what we have learned in our hearings and meetings on this issue over the past two years -- video competition is on the way, but we are not there yet.
We will keep working to make sure cable rates do not skyrocket, and competition to cable is enhanced. Along those lines, we are currently holding Conference meetings on the Satellite Home Viewer Improvements Act, which will provide increased opportunities for satellite providers to compete with cable television. Senator Kohl and I have worked closely with Chairman Hatch and Ranking Minority member Senator Leahy on that legislation, and with their continued leadership I am hopeful we will have legislation finalized in the next month or two.
END

LOAD-DATE: August 25, 1999

Document 249 of 383.


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