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Free Press / Consumers Union / Consumer Federation of America

JUNE 13, 2006
11:01 AM

CONTACT: Free Press / Consumers Union / Consumer Federation of America
Craig Aaron, (202) 265-1490, x 25

Free Press asks Senate to Save Net Neutrality, Ensure Universal Access to New Networks
Policy Director Ben Scott testifies on behalf of consumer groups at Senate hearing on major telecom legislation

WASHINGTON - June 13 - Free Press Policy Director Ben Scott will testify today on behalf of Free Press, Consumers Union and the Consumer Federation of America before the Senate Committee on Commerce, Science and Transportation at a hearing on the Communications, Consumer's Choice, and Broadband Deployment Act of 2006 (S. 2686).

The full text of Scott's prepared testimony is available here.

The hearing will be
webcast live
beginning at 10 a.m. EDT.

A summary of the prepared testimony follows:

"Free Press, Consumers Union, and Consumer Federation of America appreciate this opportunity to testify on the revised draft of the Communications, Consumer's Choice, and Broadband Deployment Act of 2006 (S. 2686). We strongly support the goal of this legislation: to expand consumer choice and access to competitive video and broadband services.

"American consumers currently face high prices and very little competition in both the video and broadband Internet markets. Monopoly and duopoly provision of these essential communications services limits innovation, widens the digital divide, and permits rates to rise beyond the reach of many households. As the United States falls further behind in the global race to lead the world in broadband, action must be taken to remedy the failures of the 1996 Telecommunications Act and bring vigorous competition to video and broadband that will enhance the diversity of media choices for consumers. This is a window of opportunity to make broadband and video services available and affordable with robust content choices for all Americans.

"However, our haste to bring competition must not result in a blind giveaway to one industry or another. Such action would simply yield anti-competitive activity in another direction and leave our problems unresolved. S. 2686 takes many positive steps but leaves much undone. Without substantial changes to the bill, the benefits of video and broadband competition will not reach many American households — particularly in the low-income and rural areas which need those benefits the most. The bill opens the door to competition, but doesn't ensure that new networks will be built universally. Key public interest protections and services have been abandoned, the most important of which is Network Neutrality — the foundation of the free and open Internet.

"Any franchising framework without reasonable build-out requirements cements the digital divide into statute. On the one hand, it allows telephone companies to cherry-pick the most profitable franchise areas in the country and ignore all the others. On the other, it gives the incumbent cable operators an incentive to lower prices in competitive areas and raise them in non-competitive ones. Without regard to conditions of effective competition, the bill would eliminate prohibitions against discriminatory cable pricing. The end result will be that the most lucrative markets in the country will have video competition, new technologies and lower prices. But less prosperous and rural areas will be left out of the new networks and may well experience higher prices for the monopoly service still available. The unintended consequence will be systematic redlining on a national scale — leaving millions of consumers with empty promises.

"On the question of Network Neutrality, this bill applies the most important principle in communications law — nondiscrimination — indiscriminately, leaving out its most important application. The firewall of Network Neutrality, which protects competition, maximizes consumer choice, and guarantees fair market practices, has been abandoned on the Internet — endangering the most important engine for economic growth and democratic communication in modern society.

"Nondiscrimination made possible the grand successes of the Internet. Its removal can take them away. This will not happen immediately, of course. But once the practice of network discrimination begins, it will be virtually impossible to reverse. The loss of Network Neutrality will be a perpetual regret to all consumers and producers of Internet content and services, as well as to this Congress. Yet S. 2686 merely instructs the FCC to study the process that will destroy the Internet as we know it.

"Notably, nondiscrimination is applied throughout this bill as a critical protection against abuses in the marketplace and a promoter of competition. The bill has it right in each case, but fails to bring the same logic to the Internet. For example, local franchising authorities must treat competitive video providers in a nondiscriminatory manner in the use of the public rights-of-way. Local governments that propose to build broadband networks must not use local ordinances to discriminate. Under the program access rules in S. 2686, cable operators may not use their market power to make exclusive or discriminatory deals with programmers that are denied other operators. Telecommunications providers must treat facilities-based VOIP providers in a nondiscriminatory manner. USF support must be distributed according to principles of competitive neutrality.

"The only sector that does not enjoy this protection against discrimination is Internet content, applications and service providers — the most dynamic marketplace in our economy. We should apply the principles of nondiscrimination everywhere in an even-handed fashion. We must protect Internet freedom by preventing the telephone companies and cable operators from putting toll booths on the information superhighway.

"It is both just and reasonable to apply nondiscrimination protections across the communications sector. Everyone loves nondiscrimination until it is applied to their own properties. The same telephone and cable companies that demand nondiscrimination in program access and interconnection hypocritically deny its importance in the broadband market. This duplicity must not be codified into law. The move toward discrimination and exclusivity for Internet content spells disaster for consumers — meaning higher prices, fewer choices, and a gatekeeper standing astride what was heretofore been a truly free market.

"This legislation also takes some positive and welcome steps. First, we applaud S. 2686 for opening up more unlicensed spectrum for innovative wireless broadband applications. The empty broadcast channels represent a massive public asset for next-generation communications that is ready for immediate use. This type of spectrum reform contained in this bill is much needed and overdue.

"Second, we also strongly support the protections against pre-emption given to municipalities that would offer broadband to their constituents, either via public networks or the public-private partnerships already enjoying success in hundreds of communities. It is critical to remove all barriers to the development of broadband services.

"Third, we believe that the reforms of the Universal Service Fund proposed in this bill are steps in the right direction. The expansion of the base of contributions and insertion of stringent accountability and audit measures will help stabilize a critical public-service program. We also support the application of USF funds to broadband in underserved areas. However, we are disappointed to note that the requirement for USF-supported networks to become broadband compatible has been removed from the bill. The USF programs must evolve to bring the dominant communications technology to all American households.

"Fourth, we support the establishment of mandatory channel allocations and funding for public, educational, and government access television. This bill will bring online thousands of new channels that will provide an important public service and dedicate funding to support them. We must ensure that our most successful access channels — those currently operating at budgets above the 1 percent franchise fee allocation — are not harmed by this bill.

"Finally, we support a rigorous application of non-exclusivity and nondiscrimination requirements to MVPD programming. Consumers have long been denied choices in video programming because of the anti-competitive activities of the system operators. This bill recognizes that the program access rules must be strictly applied and expanded to prevent MVPDs from using market power to execute anti-competitive practices. The terrestrial loophole certainly should be eliminated, but Congress should also move toward expanding diversity of programming through an a la carte pricing system and reform of the retransmission consent rules.

"The Communications, Consumers' Choice, and Broadband Deployment Act of 2006 presents Congress with a great opportunity to make broadband and video services competitive, affordable, and open to all content, applications and services that flow over the networks to consumers. In many ways, this bill is a step in the right direction. However, the lack of build-out requirements and the failure to protect Network Neutrality are severe flaws. If left unaddressed, they will undermine the positive outcomes of this bill and leave consumers worse off than they were before. No reform of communications law that solidifies a duopoly of wireline triple-play providers can be pro-consumer without Network Neutrality and system-wide build-out requirements."


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