Cable TV companies, satellite broadcasters and the Baby Bells are locked in a bitter struggle for control of the high-speed Internet access market in the United States.
A battle is raging just outside American homes to satisfy growing appetites for telecommunications. The adversaries are coming by land and by airwaves. From the land, cable TV companies hope to use their wiring to TV sets to connect households to the Internet for high-speed broadband services. From the airwaves, satellite television is encroaching into cable's market in multichannel video services. And, even as cable loses ground on the TV front, it now faces a new challenge from the Baby Bells -- the four regional giant telephone companies -- in high-speed Internet service. In a deregulated state, cable is fighting a two-front war, say Wall Street analysts.
Mirroring this trench warfare for each household, factions and alliances are forming on Capitol Hill to protect territory and advance their views of how deregulation should proceed. In the House, the Energy and Commerce Committee is in a turf war with the Judiciary Committee as both claim jurisdiction over the Tauzin-Dingell broadband bill. On the other side of the Capitol, Sen. John McCain, R-Ariz., is making noise about Rupert Murdoch's bid to buy DirecTV. While some members of Congress argue that Murdoch's prickly personality would further invigorate the satellite-TV industry, McCain is concerned that the media mogul is scheming to create a new monopoly. Some Hill sources suggest that McCain is punishing Murdoch for not supporting his failed presidential bid.
And while Murdoch is bogged down in negotiations to buy DirecTV, some congressmen want to reregulate the cable industry until satellite television or direct broadcast satellite (DBS) is strong enough to compete with cable in every market nationwide. As for Internet subscriptions, cable is using its established network to offer broadband services while satellite companies work to upgrade their Internet technologies. Meanwhile, House Energy and Commerce Committee Chairman W.J. "Billy" Tauzin, R-La., wants to make it easier for the Baby Bells -- BellSouth Corp., Qwest Communications International Inc., SBC Communications Inc. and Verizon Communications Inc. -- to enter the broadband market by waiving barriers that prevent them from transmitting interLATA (or interstate) data.
Will all this competition lead to lower prices for consumers? Or will they just be confused, as the proponents of reregulation argue? While video services certainly have improved -- digital cable and DBS offer as many as 200 channels -- prices have not declined. According to Rep. Barney Frank, D-Mass., cable prices have increased "three times the rate of inflation" since Congress passed the 1996 Telecommunications Act. So, in late May, Frank introduced legislation to reregulate the cable industry. He argues that "after five years of deregulation we have learned that the problem was not too much FCC [Federal Communications Commission] action, but too little."
Marc Smith of the National Cable and Telecommunications Association (NCTA) says Frank is mistaken to claim that the cable industry has been deregulated for five years. Yes, the act was passed five years ago, says Smith, but the FCC only stopped regulating cable rates in March 1999. As for Frank's assertion that cable rates have increased three times faster than inflation, Smith says, "it's bogus." According to Smith's figures (drawn from the Bureau of Labor Statistics), cable prices have increased by less than 10 percent in the last two years. These increases, argues Smith, reflect cable's increased investment in Internet capabilities. "Since 1996 we have invested $45 billion in our infrastructure" for broadband upgrades, explains Smith.
"Of course that's what they are going to say," counters Rep. Rick Boucher, D-Va., a longtime cable critic. Until cable and satellite can compete on a level playing field, Boucher contends, cable should be reregulated. …