[Congressional Record Volume 144, Number 78 (Tuesday, June 16, 1998)]
[Senate]
[Page S6428]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            CONSUMERS REAP THE BENEFITS OF OPEN COMPETITION

 Mr. ASHCROFT. Mr. President, the economist Milton Friedman 
once wrote: `Underlying most arguments against a free market is a lack 
of belief in freedom itself.' Demonstrating its belief in freedom the 
104th Congress passed the pro-competition Telecommunications Act of 
1996. The Hudson Institute has recently released a study of the cable 
industry since the new law has taken effect. The study has found what 
those of us that believe in a free market have always known: consumers 
reap the benefits of open competition. I submit it for the Record a 
copy of the executive summary for review. It is a pleasure to deliver 
further affirmation of the free market system.
  The material follows:

 Executive Summary--The Role of Competition and Regulation in Today's 
                            Cable TV Market

       In late 1997 and early 1998, concerns have been raised 
     among regulators, members of Congress, and consumer groups 
     regarding cable television rates. This study analyzes the 
     rationale for new efforts by the FCC to limit rates or impose 
     other regulations on the cable television industry in 
     response to such concerns. It examines the historical record 
     of cable regulation, takes a new look at the state of 
     competition for multichannel video programming, reviews the 
     important capital investment in new digital services by the 
     industry, and assesses the possible impact of new price 
     controls on competition in the wider telecommunications 
     market, including Internet access, telephony, and video 
     programming.
       The study finds that, despite current market share of 
     around 85.6 percent (falling to around 75 percent by 2002); 
     dynamic services offered by Direct Broadcast Satellite (DBS), 
     broadcast television, and other multichannel video delivery 
     systems provide substantial and growing competition for cable 
     television. More than 65 percent of households can receive 
     six or more broadcast channels with a suitable antenna. For 
     many households, DBS offers greater levels of service at 
     prices comparable to, or lower than, cable's. DBS appears to 
     provide a good substitute for cable even after accounting for 
     up-front equipment costs. Competing cable systems (overbuilds 
     and Satellite Master Antenna TV) have become cost-effective 
     and are growing rapidly, especially in the Midwest and 
     Northeast.
       The study also finds that past cable regulation, especially 
     rate controls, provided little or no benefit to consumers, 
     and in fact harmed consumers by inducing lower quality of 
     service. On the other hand, periods of less regulation, such 
     as the years between 1984 and 1990, stimulated production of 
     greater quality and wider choice of programming for 
     consumers, produced steady increases in demand for cable, and 
     produced net consumer welfare gains of $3 billion to $6.5 
     billion per year.
       Finally, the evidence shows that the cable industry is in 
     the midst of investing up to $28 billion to improve its 
     infrastructure, including over $1 billion per year to convert 
     to interactive digital services. The entry of cable firms 
     into new businesses such as telephony, Internet, and digital 
     video is improving consumer choice and reducing prices for 
     these services, especially to residential customers; spurring 
     a competitive response from the telephone industry to upgrade 
     its data transmission capabilities; and giving a boost to the 
     introduction of digital television and to competition in the 
     Internet business. An imposition of rate controls similar to 
     those of 1993 and 1994 would undermine the financial basis 
     for the cable industry to enter these new businesses in the 
     near term, and hence weaken competition in the wider 
     telecommunications market place.

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