Statement of Administration Policy: H.R. 4850 - Cable Television Consumer Protection and Competition Act of 1992

(House)
(Markey (D) Massachusetts)

The Administration strongly opposes sweeping reregulation of the cable television industry. If H.R. 4850, as reported by the House Energy and Commerce Committee, were presented to the President, his senior advisers would recommend a veto.

The Administration supports House passage of the amendment sponsored by Rep. Lent as an alternative to the reported version of H.R. 4850. The Lent amendment would eliminate or significantly modify many of the excessively regulatory provisions of H.R. 4850. It would also reduce one impediment to competition in the cable industry — the exclusive local franchise.

The Administration opposes the amendment to be offered by Rep. Tauzin concerning access to cable programs. It would restrict the discretion of cable programmers in distributing their product. Exclusive distribution arrangements are common in the entertainment industry and encourage the risk-taking needed to develop new programming. Requiring programming networks that are commonly owned with cable systems to make their product available to competing distributors could undermine the incentives of cable operators to invest in developing new programming. This would be to the long-term detriment of the American public. If competitive problems emerge in this area, they can and should be addressed under the existing antitrust laws.

The Administration opposes H.R. 4850 because:

-- It is anticonsumer. It would raise cable operating costs by $760 million to $1 billion annually. Rates would rise In many communities, and consumers additionally would be denied the benefits of improved service quality, new products and services, and expansion of cable to areas not now served.

-- It is reregulatory. It establishes a broad, intrusive regulatory structure that fails to provide incentives for cable systems to respond to consumer needs. The regulatory costs of the bill to Federal, State, and local governments would be $22 million to $60 million annually. These costs would be paid by taxpayers or consumers. The Administration believes that competition, rather than reregulation, creates the most substantial benefits for consumers and the greatest opportunities for American industry. Competition would drive down rates and improve service quality for consumers, while promoting industry development.

-- It would restrict foreign ownership of U.S. cable systems and other multichannel video delivery and programming-related services. Such a restriction invites retaliation by other countries and violates existing international obligations. It could stifle the growing investment of U.S. firms in foreign cable systems. It also threatens negotiations to: (1) eliminate the use of trade restrictions by other countries, and (2) open foreign government procurement to U.S. telecommunications products and services, an area in which the U.S. is in an increasingly strong position.

-- It would require cable operators and, perhaps, some direct broadcast satellite (DBS) operators to carry the signals of virtually all television stations. The signals would have to be carried regardless of whether those providers believe that the programming reflects the desires and tastes of their subscribers. The Administration believes that such "must carry" requirements would raise serious First Amendment questions by infringing upon the editorial discretion exercised by cable and DBS operators in their selection of programming.

-- It would interfere unnecessarily with business investment decisions made bv cable operators. For example, the bill would apparently require the Federal Communications Commission (FCC) to adopt rules limiting the number of subscribers a multichannel video operator may serve nationwide. This would be done despite the lack of evidence of anticompetitive behavior by cable operators and the existence of antitrust laws to remedy such conduct should it occur. H.R. 4850 would also generally bar the sale of a cable system within three years after its purchase or construction. Such a provision would unnecessarily intrude into ordinary business decisions made by cable operators and prospective purchasers.

-- It would require that the FCC promulgate rules limiting the ability of multichannel video distributors to acquire ownership interests in video programming. Such vertical integration both increases the supply and quality of programming and permits operational efficiencies that ultimately benefit subscribers. If individual abuses occur, they can and should be dealt with under the antitrust laws.

The Administration is well aware of the widespread consumer concern about the structure and performance of the cable television industry. The task is to address these concerns in a way that benefits consumers and does not jeopardize the substantial benefits that the cable industry has produced for consumers since passage of the 1984 Cable Act. The Administration is convinced that this can best be accomplished by removing barriers to increased competition in the video services marketplace. The Administration, therefore, would support legislation to remove, subject to adequate safeguards, current prohibitions against telephone company provision of video programming and eliminate other barriers to competition in the video marketplace. The action of the FCC on July 16, 1992, in adopting a "video dialtone" framework for telephone company participation in video markets is an important step toward competition. Increased competition is the only way to ensure that cable legislation will benefit, rather than harm, American consumers.