Telcom legislation

[James Love <love@essential.org>]

from TAP-INFO Internet Distribution List

Taxpayer Assets Project
Information Policy Note
November 10, 1993

Representative Markey is expected to soon introduce legislation dealing 
with telco entry into cable, and cable entry into telco markets.  The 
attached letter expresses our interest in common carrier regulation to 
protect competition in "content" markets.
    jamie love
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                              Taxpayer Assets Project
                              P.O. Box 19367, Washington, DC  20036

November 10, 1993

Representative Edward Markey
Chair, House Subcommittee on 
Telecommunications and Finance
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC  20515

RE:  Telecommunications legislation

Dear Representative Markey:

We are writing to urge you to use your influence as chair of the
House Subcommittee on Telecommunications and Finance to protect
competition in markets for information content and value added
information services.  As you know, the Congressional debate over
the new National Information Infrastructure (NII) has become
largely a discussion over what type of competition will be
allowed between telecommunications carriers.  Thus, we hear
plenty about whether or not telcos will be allowed to provide
video programming to compete against cable franchises, if cable
franchises will be allowed to provide switched voice and data
services in competition with telcos, if RBOCs will be allowed to
enter long lines markets, or who will be allowed to own PCS
licenses.

Much of this debate assumes a much greater role for vertically
integrated services, with telephone, cable, and wireless carriers
being allowed to own significant amounts of the programming
content which travels over their facilities.  We believe that
such vertical integration raises grave problems, as firms will
use their control over carrier markets to exercise monopoly power
in content markets.  The most relevant example of this is the
long and well documented history of anticompetitive problems in
cable television markets, where large cable franchise companies
have used their control over carrier facilities to benefit
programming services in which they are investors, at the expense
of rival services.  This has reduced competition in content
markets, and raised important questions about who controls the
availability of information services.  It is simply outrageous,
for example, that TCI and Time-Warner were able to prevent
General Electric from offering CNBC as a news format channel,
because they were investors in CNN, the dominate incumbent source
of cable news.  If carriers can push around a firm as large as
GE, they can crush much smaller enterprises with ease.

Vertical integration also raises profoundly difficult problems
for the regulation of carrier rates.  In cable, much of the
revenues are derived from pay-for-view services or advertising. 
Because cable operators are allowed to own or control programming
services and sell advertising, it has become extremely difficult
for regulators to determine if consumers are paying excessive
fees for the carrier services.

Competition among carriers can be an important mechanisms to
benefit consumers, but even more important are the goals of
promoting competition in content markets, and providing a
regulatory structure that makes it possible to protect consumers
from excessive rates for carrier services.  These goals can best
be achieved by no-nonsense common carrier regulation in carrier
markets, combined with rules that bar vertical integration into
programming services.

At a minimum, Congress must require that telephone, cable, and
wireless telecommunications carriers act as common carriers,
giving all content providers equal opportunities to compete
against each other.  However, it is important to note that in the
absence of rules against vertical integration, regulators will be
faced with the arduous task of reviewing tariff classes,
encryption mechanisms, promotional efforts, and endless
contractual terms to guard against anticompetitive behavior, and
it will be extremely difficult to regulate carrier rates to
consumers when much of the company's revenues are "off the books"
for purposes of determining company revenue requirements.

Any legislation that Congress considers this year should provide
the strongest possible common carrier protections, and promote
the most open systems of telecommunications.  Companies should
not have the incentives or power to extend their control over
carrier markets to control over content markets.

Access to information and the ability to provide information
services over the telecommunications infrastructure are the key
issues in the development of the new NII.  Congress needs to
shift its attention from competition among large carriers to the
more important and critical problems of making the NII promote a
new era of freedom in the exchange of information.


Sincerely,



James Love
Director 
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