[Congressional Record Volume 141, Number 126 (Tuesday, August 1, 1995)]
[Extensions of Remarks]
[Pages E1571-E1573]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page E1571]]


                            CABLE AMENDMENT

                                 ______


                         HON. EDWARD J. MARKEY

                            of massachusetts

                    in the house of representatives

                         Monday, July 31, 1995
  Mr. MARKEY. Mr. Speaker, the Nation's cable monopolies are trying to 
persuade the Congress to dismantle the rate regulation rules that have 
saved consumers over $3 billion since 1993.
  They are trying to break free from consumer protection rules before 
competition arrives to offer Americans an affordable marketplace 
choice.
  Cable consumers should be on red alert. What's in store for the 
American public if Congress goes along?
  What is the cable industry offering consumers? Free remotes? Special 
discounts? Unlimited channels?
  No. Although we might wish it were otherwise, without effective 
competition to give consumers a real choice, the cable industry is 
going to give us reruns.
  Reruns of the hyper-inflationary rate hikes that were the norm before 
Congress reined in the monopolies.
  Reruns of the exorbitant prices charged for equipment.
  A rerun of the same horror story for the American consumer.
  That's right. If cable consumers have a TV clicker in one hand, they 
better be holding onto their wallets with the other because the 
telecommunications bill moving through Congress is going to raise cable 
rates.
  The House bill would lift all rate regulation on cable programming, 
either immediately on small systems--representing about 30 percent of 
consumers--or 15 months after the date of enactment for the rest of the 
country.
  And when they're deregulated the cable monopolists will return to 
past practice and consumers will be forced to relive that past again.
  Many cable operators will use their newfound freedom to charge 
exorbitant rates.
  The new 18-inch Direct Broadcast Satellite dishes will not hold them 
back as long as it's a $700 alternative.
  And the telephone companies won't hold back cable rate hikes until 
they show up and start delivering the goods. And the cold reality is 
that no telephone company is currently offering cable service on a 
commercial basis in competition with a cable company.
  In fact, a recent front page story in the Wall Street Journal made it 
clear that the
 phone companies aren't coming soon. The article stated that the Bell 
companies are unlikely to reach 25 percent of the country with a 
competing video service until well after the year 2000. The chairman of 
one of the Bell company's multimedia group stated that simply aiming at 
the 25 percent mark in the next 7 years would be ``very optimistic.''

  The hooplah many of us heard as recently as a few months ago about a 
video world with over 500 channels being offered to millions of 
consumers by the end of the year is pure fantasy. The high tech hype 
has confronted engineering reality. The phone companies are still 
figuring out how to make the technology work.
  To pretend, as H.R. 1555 does, that 15 months from now, this world 
will have suddenly changed to one of widespread delivery of 
commercially competitive cable service from a telephone company, is 
sheer folly.
  As in any industry, the cable world has its share of bad actors. They 
will see their unregulated monopoly opportunities, and they will take 
them.
  The blindly deregulatory provisions in the pending telecommunications 
bills will take us back to the recent past where from 1986 to 1989 the 
U.S. General Accounting Office found that, on average, the price of 
basic cable services rose more than 40 percent--3 times the rate of 
inflation over that time.
  As most of you know, things got so bad that in 1992 Congress had to 
act. The current law already stipulates that when a cable company faces 
effective competition the cable company's rates are deregulated.
  I believe we should stick with a competition-based telecommunications 
policy. Competition offers consumers choice. Competition will bring 
lower prices. Competition will drive infrastructure development and 
innovation.
  The Markey-Shays amendment will correct many of the anticonsumer, 
anticompetitive cable provisions of H.R. 1555.
  The Markey-Shays amendment will allow cable operators flexibility in 
the rates they charge for cable programming services, but will restrain 
operators from engaging in rate gouging. The Markey-Shays amendment 
says that until a cable operator faces effective competition in the 
marketplace, that operator must charge reasonable rates.
  Rates will be deemed unreasonable if they exceed, on a per channel 
basis, the percentage annual increase in the Consumer Price Index.
  Again, these limitations on how high cable rates can go are temporary 
provisions. The Cable Act of 1992 already has put provisions in the law 
that state that when a competitor reaches 50 percent of the homes in a 
franchise area and 15 percent take that alternative, the incumbent 
cable operator's rates are deregulated.
  H.R. 1555 also modifies the complaint threshold that must be met to 
review cable rates charged to ascertain whether they exceed legal 
limitations. The legislation requires that 10 consumers or 5 percent of 
all subscribers of a cable system, whichever is greater, must complain 
to the FCC to induce a rate proceeding. In other words, H.R. 1555 would 
require that in a cable system of 200,000 subscribers, that 10,000 
consumers would have to complain.
  This is absurd. Moving the complaint level to 5 percent of 
subscribers is a clear attempt to create an impossibly high threshold 
in order to insulate cable companies from provisions originally 
designed in the Cable Act of 1992 for consumer protection and 
empowerment.
  Another anticompetitive provision in the bill is the repeal of 
prohibitions on predatory pricing.
  Not only does H.R. 1555 prematurely deregulate cable monopolies, it 
contains provisions that would snuff out fledging competitors before 
they can take wing in a community. It would allow cable monopolies to 
target unfairly a new competitor's customers for temporary lower prices 
and special offers. These lower prices and special offers to undercut a 
competitor would not be available to all subscribers in the cable 
systems' franchise areas. Rather, other subscribers would subsidize 
lower rates to undercut competitors. In this way, cable monopolies can 
crush competition in its cradle.
  Nascent competitors, such as wireless cable systems and direct 
broadcast satellite [DBS] systems, would suffer greatly from this 
anticompetitive provision. H.R. 1555 would significantly thwart the 
ability of consumers to reap the benefits of competition in the form of 
greater choice, higher quality, and lower price, if section 202(g) is 
retained in the bill.
  Not content simply to deregulate monopolies before competition 
arrives, H.R.
 1555 frustrates, rather than promotes, the emergence of a competitive 
market. The current cable provisions constitute a glaring flaw in a 
bill whose ostensible purpose is to promote competition in the 
telecommunications marketplace.

  The Markey-Shays amendment will retain the uniform pricing rules on 
cable operators.
  Finally, the Markey-Shays amendment will scale back the sweeping 
definition of small cable system contained in the bill.
  As I have mentioned before, the bill deregulates rates for cable 
programming services for so-called ``small cable systems'' immediately 
upon enactment. These are systems which largely serve rural America.
  As a result, it will be consumers in rural America who see their 
cable rates rise first. H.R. 1555 deregulates any cable system which 
has less than 1 percent of all cable subscribers (approximately 600,000 
subscribers) and is not affiliated with an entity that earns in excess 
of $250 million in gross annual revenues.
  According to the FCC, this provision would deregulate cable systems 
affecting 28.8 percent of all cable subscribers.
  The Markey-Shays amendment would define small cable systems as those 
that directly serve fewer than 10,000 cable subscribers in its 
franchise area and have in aggregate less than 250,000 subscribers.
  I believe that the cable provision of H.R. 1555 go far astray of a 
competition-based telecommunications policy. They are opposed by the 
administration. They are opposed by consumer groups. They should be 
amended to protect consumers until competition arrives to offer an 
affordable marketplace choice.


                       markey broadcast amendment

  The drastic and indiscriminate elimination of mass media ownership 
rules proposed by this bill would eviscerate the public interest 
principles of diversity and localism. Instead, H.R. 

[[Page E1572]]
1555 will concentrate great wealth and media power in the hands of a 
few. It allows for the concentration of television, radio, cable and 
newspaper properties in a way that will make Citizen Kane look like an 
underachiever.
  The mass media provisions of H.R. 1555, which were adopted in the 
form of an amendment offered by Mr. Stearns (R-FL), are sweeping in 
scope. The network duopoly rule is repealed. The broadcast-cable 
crossownership rule is repealed. The network-cable crossownership rule 
is repealed. The broadcast rule is repealed. The broadcast-newspaper 
crossownership rule is repealed. National limits on radio station 
ownership are repealed. Limits on local ownership of radio stations are 
also eliminated. The one-to-a-market rule is repealed, allowing for the 
creation of television duopolies in local markets. Finally, the 
national audience reach
 limitation for television networks is allowed to double from 25 
percent of the country to 50 percent.

  The aggregate effect of these changes are to move telecommunications 
policy back to the 1930's. They will encourage the rapid consolidation 
of mass media ownership in this country and the elimination of diverse 
sources of opinion and expression. They are a powerful toxin to 
democracy and a death knell for community control of its own media.
  H.R. 1555 will ensure that mass media outlets increasingly became 
beholden to policies and programming originating in New York and 
Hollywood.
  The bill encourages the hoarding of media power to truly nightmarish 
proportions; in a particular town one large company could control 2 TV 
stations, an unlimited number of radio stations, the only newspaper in 
town, the town's only cable system, and in small towns the local phone 
company. Such control over the local media marketplace would give the 
owner a huge advantage in dictating the terms for advertising. More 
importantly, it also furnishes this local media potentate with dramatic 
power to influence coverage and public opinion on hundreds of issues of 
concern to the citizens of that local community.
  The bill repeals local media cross-ownership rules between television 
stations, cable systems and newspapers, allows for unlimited AM and FM 
radio ownership on both the national and local levels, allows the 
national television networks to consolidate and to double their 
audience reach, and permits people to own 2 television stations within 
a community. Rather than promoting a forward-looking media policy for a 
21st century economy, these provisions return us to the 1930's-era when 
there were very few media owners in most communities.
  The current rules, which have successfully created a level of media 
diversity in this country that is the envy of the world, were not the 
sole creation of liberals. They were implemented on a bipartisan basis 
by both liberals and conservatives, Democrats and Republicans, to 
mitigate against media concentration and to promote competition and 
diversity.
  Such media concentration was not a theoretical possibility. During 
the 1930's, NBC had a Red and a Blue television network. In 1941, the 
FDR administration barred dual network ownership and required NBC to 
divest itself of its Blue network. That network became the American 
Broadcasting Co. After waiting decades for the emergence of a fourth 
competing network (FOX), the House bill would allow FOX to buy CBS and 
permit NBC and ABC to merge back together again after a 50-year hiatus. 
This ill-advised proposal will lead to less choice, less diversity, 
less competition.
  On the local level, powerful conglomerates in the 1960's and 1970's 
were amassing multiple ownership of media outlets. At the time, in the 
top 50 television markets (comprising 75 percent of the Nation's 
television homes), 30 markets had one of the local TV stations owned by 
a major newspaper in the same market. By 1967, some 76 communities had 
only one AM radio station and only one daily newspaper, with cross-
ownership interests
 between the two. Fourteen communities had one AM radio station, one 
television station, and only one daily newspaper, all commonly owned. 
Moreover, in 1968 it was reported that the infant cable industry was 
already seeing a trend toward media concentration, with 30 percent of 
cable systems controlled by broadcasters.

  Across the country, media moguls were assembling what was called a 
Royal Flush: one person or company would own a local television 
station, an FM station, an AM station, the daily newspaper and the 
cable system.
  And who stepped in to implement rules to prevent the unhealthy 
accumulation of media power? Why, it was the Nixon and Ford 
Administrations that found the trend so disturbing they decided to take 
action. The Republican-led FCC in that era, reflecting main street, 
small town sensibility on media concentration issues, adopted 
restrictions on mass media ownership to further the twin goals of 
diversity and competition.
  Now who is threatened by the communications cannibalism in media 
properties that would be unleashed by the current House proposal? Local 
television affiliates and independent TV stations, small radio stations 
with innovative but niche programming formats, family-run newspapers 
struggling to remain independent are endangered species in a new 
digital Darwinism where only the communications colossi can survive.
  Every local town and hamlet runs the risk of becoming real life 
Pottersville, the mythical town that Jimmy Stewart prevented from 
existing in the 1946 classic ``It's a Wonderful Life.''
  The House bill would allow for the aggregation of mass media power 
that far exceeds the Royal Flush in local markets. Such a historic 
public policy reversal poses grave repercussions for democratic 
government. Since the time of Jefferson, access to a diversity of 
information and opinions on the important issues of the day was 
considered essential to the workings of democracy.
  In an era when we are searching for ways to break down monopolies and 
provide consumers with greater choice, the telecommunications bill 
returns us to a bygone era and resurrects the possibility that the 
emerging multimedia milieu will be dominated by a few communications 
cartels.
  My amendment addresses two key issues in the bill.


           repeal of the broadcast-cable crossownership rule

  This rule prevents TV-cable combinations within local markets. 
Adopted by the FCC during the Nixon administration, this rule helps to 
protect fair competition in the local media marketplace and safeguards 
diversity in mass media outlets within local communities. Simply put, 
this rule prevents a cable system from acquiring a local TV station in 
the same city.
  Television broadcasters today rely upon so-called must carry rules to 
ensure their carriage on local cable systems. These rules are currently 
subject to litigation in the courts.
  If the court invalidates these rules, the broadcast-cable 
crossownership repeal contained in H.R. 1555 could have adverse 
consequences. For example, if a cable company has a financial interest 
in one of the TV stations within the local market (or 2 TV stations if 
it is one of the new local duopolies permitted by H.R. 1555), some or 
all of the remaining broadcasters may be refused carriage or 
discriminated against in such carriage. Without safeguards, repeal of 
this rule would allow a local cable system-local television combination 
to utilize the bottleneck of cable system access to stifle media voices 
and distort the advertising market.
  Yet even without any judicial decision with respect to the status of 
must carry obligations, repeal of this rule will have anticompetitive 
consequences. H.R. 1555 does not extend must carry rights to any new 
channels offered by broadcasters. In developing new section 336 of the 
Communication Act of 1934, the authors of H.R. 1555 stipulate that if 
the Commission decides to award additional licenses for advanced 
television services, the supplementary services or channels that a 
broadcaster may develop utilizing digital compression are not granted 
must carry rights on cable systems.
  Although numerous broadcasters in a locality might be using digital 
compression technology to create 3, 4, or 5 additional TV channels 
each, the cable system is not obligated to carry these additional 
channels. This is a competitively neutral provision only if all the 
local television stations are treated by the cable system in similar 
fashion.
  With repeal of the broadcast-cable crossownership rule, however, the 
local cable system could immediately favor the television station in 
which it had a financial interest. The cable system could do this 
simply by carrying the additional or supplementary channels and 
services of that TV station and denying such opportunity to the other 
broadcasters within the same community.
       deregulation of the national tv audience reach limitation

  The bill would lift the current cap limiting television networks to 
25-percent coverage of the Nation to 35 percent immediately. It would 
then be lift the cap to 50 percent 1 year later.
  I believe that the relationship between networks and television 
affiliates has served our country well. H.R. 1555 does more than tip 
the balance between TV networks and their affiliates toward the 
networks. It completely disrupts that balance.
  Local broadcasters in communities across the country are fighting to 
remain local broadcasters in this legislation. Increasing the national 
audience caps to 50 percent puts localism in jeopardy. The doubling of 
the audience cap will hurt diversity.
  The nature of the network-affiliate relationship today is that 
networks must count on their affiliates to air national programming 
while affiliates count on the networks to provide national news, sports 
and entertainment to add to a mix of local news and independently-
produced programming. tilting the balance too much toward the networks 
will create a concentration of nationally-produced programming and a 
corresponding loss of locally-oriented programming.

[[Page E1573]]

  If networks can own stations that cover the largest markets in the 
country, we lose the tradition--and the capability--of having local 
affiliates pre-empt network programming to bring viewers important 
local news, public interest programming, and local sports. As Ed 
Reilly, president of McGraw Hill Broadcasting Co. said in testimony 
before the Committee: A network-owned station almost never pre-empts a 
network program to cover a local sports event or to air a local charity 
telethon.
  Because American society is built upon local community expression, 
the policy favoring localism is fundamental to the licensing of 
broadcast stations. Localism permits broadcasters to tailor their 
programming to the needs and interests of their communities. Moreover, 
as trends toward national homogenization of the media grow--for 
example, cable channels and direct broadcast satellite service--
localism increases in importance. Expansion of national media outlets 
increases the need for local media outlets with the locally ubiquitous 
reach of broadcast television stations.
  In short, relaxation of the national audience caps is an anti-
competitive proposal. Deregulation of the audience cap will intensify 
concentration in the hands of the vertically-integrated, national 
television networks. Once they are permitted to gobble up additional 
local stations, these mega-networks will have an increased ability to 
sell national advertising by controlling local distribution.
  No one will argue that, in general, it is not more efficient to 
simply make local broadcast stations passive conduits for network 
transmissions from New York. Localism is an expensive value. We believe 
it is a vitally important value, however, and like universal service, 
it is a principle of communications policy rooted in the Communications 
Act of 1934. It should be preserved and enhanced as we reform our laws 
for the next century.


                          ____________________