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Media
Center > Press Releases
For Immediate Release June 29,
2001
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Competition and Innovation Benefit
Consumers
Washington recently marked
the fifth anniversary of the Telecommunications Act of 1996.
Some have argued that the Act is not working – especially when
one considers the lack of local residential phone competition.
But when it comes to encouraging video competition and
broadband deployment, it’s an entirely different story. And as
cable companies complete system upgrades, consumers are
realizing benefits in the form of digital cable, high speed
Internet and cable telephone service.
By deregulating
cable program service tier rates in 1999, the Act spurred
unprecedented investment -- more than $45 billion so far -- to
upgrade cable’s plant. In the process, cable operators are
replacing hundreds of thousands of miles of coaxial cable with
fiber optics to make the plant highly reliable and fully
two-way. As a direct result of this investment, cable has
added 10 million digital customers, four million cable modem
users and one million residential cable telephony customers.
The industry has completed the upgrade of more than 750,000
miles of plant. And as further upgrades are finished over the
next two years, we will see these numbers grow
considerably.
Looking at cable in the year 2001, it’s
hard to recognize the business that pioneers like the late
Bill Daniels built in the 1950’s. Back then, cable operators
provided only a handful of analog broadcast channels over a
one-way delivery system. Our tree and branch architecture
involved a cascade of amplifiers and coaxial cable that was
prone to service interruptions. There were no cable networks
like HBO, CNN, Discovery, ESPN, or MTV. Indeed, three
commercial broadcast networks – ABC, NBC, and CBS – defined
American television and captured virtually all of the viewing
audience.
Fast forward to 2001. Cable operators use a
combination of fiber and coaxial cable to deliver several
hundred channels of TV and a wide array of two-way services.
Reliability and customer satisfaction has improved
dramatically. Once just an extension of broadcast television,
cable now leads the way in deploying advanced broadband
services to consumers.
Last fall I visited Rockford,
Illinois, where Insight Communications offers an array of
digital cable services that includes movies on demand; a
Rockford-specific interactive information and entertainment
guide; an on-screen program guide, with parental controls;
multi-channel premium movie packages; and dozens of digital
music channels.
The movies-on-demand package includes
some 400 titles and gives Insight customers full VCR-like
functionality including pause, fast-forward, and rewind
capability. Not surprisingly, in less than a year’s time, over
20 percent of Insight’s customers have signed up for digital
packages. And cable operators nationwide are launching similar
services.
But by no means do we have the field to
ourselves. Cable is competing head-to-head with satellite,
telephone, broadcast, and wireless companies.
Competition in the video market is flourishing. From
near zero five years ago, DBS now serves 15 percent of
American homes today. And most Americans have a choice of not
one but two DBS providers in addition to cable. DirecTV and
Dish network together count more than 15 million customers. In
its most recent report on competition in the video
marketplace, the FCC found that one out of five multichannel
video subscribers get service today from some company other
than their local cable operator. Consumers have real choices
when it comes to video.
For those interested in how
deregulation can benefit consumers, the growth of affordable
Internet access in the aftermath of the ’96 Act provides an
excellent case study. In 1996, the 15 million U.S. homes
accessing the Internet had only two real choices – a
relatively slow dial-up modem (and a second phone line) or a
prohibitively expensive T-1 or ISDN line.
Cable
recognized an opportunity. Ignoring skeptics, the industry
developed and began deploying DOCSIS modems, with no guarantee
of success. As cable operators upgraded systems across the
country, they created the market for affordable high speed
Internet services. Regional Bell operating companies suddenly
rushed to deploy DSL technology, which they had warehoused for
a decade.
The clear winners have been American
consumers, who now are using more than four million cable
modems with high satisfaction rates. For its part, the DOCSIS
modem was recently voted the second most important consumer
product of the last 15 years by Network World magazine (only
the Mac computer topped it). Demand for cable modem service
continues unabated; MSOs are currently installing more than
50,000 new high-speed customers a week. Without the investment
made possible by the ’96 Act, none of this would have
occurred. Meanwhile, competitors are rolling out DSL, fixed
wireless and satellite delivered high-speed data services as
quickly as possible. Has the 1996 Telecommunications Act
spurred broadband competition? The indisputable answer is
"yes!"
Cable operators are also beginning to offer
feature-rich local telephone service at prices substantially
lower than those charged by incumbent phone companies. At the
end of the first quarter 2001, cable operators served more
than one million residential cable phone customers and
provided an additional two million business access
lines.
In places where AT&T, Cox and Cablevision
are offering switched circuit telephony over cable, consumers
are truly enjoying the benefits of local phone competition.
They are receiving 10 to 15% savings on primary lines and up
to 50% discounts on multiple lines and advanced features.
Still there needs to be a lot more competition in
place before the Bells’ local markets can be deemed
competitive. The notion of CLEC’s purchasing unbundled network
elements and reselling local loops has not led to widespread
residential phone competition. But true facilities based
competition, like cable operators have begun to provide, will
change that.
Internet protocol ("IP") telephony over
broadband cable networks is "next up." Charter, Comcast, AOL
Time Warner and others are already field-testing IP telephony.
And just as the first five years of the Act have seen video,
wireless and Internet competition flourish, I believe the next
five will see Congress’ vision of local phone competition
finally realized.
Although, I don’t have a crystal
ball, we do know two things about the future: no one can
predict it exactly, and it will likely come in fits and
starts, through an evolutionary process that weeds out some
technologies while rewarding others. As AOL Time Warner CEO
Jerry Levin told members of Congress during a hearing on
Interactive TV:
"The Internet has already taught us
that it’s the consumer who’s in charge, and a lot of money has
been lost by those who’ve either failed or refused to learn
that basic lesson and tried to impose their own notions of how
interactivity should work."
Even though some of the
technology involved in interactive TV may be revolutionary,
the process of its deployment is likely to be evolutionary.
That is because we are dealing here with cultural norms,
long-established viewing habits, and personal choice – things
that drive the use of technology, not the other way
around.
And when it comes to broadband Internet
service, it’s sometimes necessary to remind ourselves that we
are still talking about something so new that most consumers
have yet to experience it. What I do know is that all these
service enhancements and technological innovations are
occurring in a fiercely competitive marketplace – one where I
believe the federal government should exercise regulatory
restraint. The result of this competition and innovation is
that consumers already face an array of choices that could not
have been imagined only a few years ago. And the 1996
Telecommunications Act is only five years
old.
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