Hearing of the Senate Antitrust Subcommittee on "Video Competition in 2005 -- More Consolidation or New Choices for Consumers?"

Hearing of the Senate Antitrust Subcommittee on "Video Competition in 2005 -- More Consolidation or New Choices for Consumers?"

OPENING STATEMENT [AS PREPARED]: ANTITRUST SUBCOMMITTEE HEARING

Good afternoon, and welcome to the Antitrust Subcommittee's hearing entitled "Video Competition in 2005 -- More Consolidation or New Choices for Consumers?" Today, we will examine two important current issues: first, the purchase of Adelphia by Comcast and Time Warner Cable, and second, entry into the video marketplace by the Bell companies.

These two events push the industry in different directions. There is a consolidation with the loss of Adelphia, but an increase in choices for consumers as overbuilders, Internet companies, and the telephone companies roll out video services. These differing market dynamics are representative of the tremendous changes occurring more generally in the entire telecommunications and video marketplace, and these changes have broad competitive implications which must be explored.

Individually, each event is worth some attention and accordingly, we will examine them today. To begin, Comcast and Time Warner Cable propose to divide up Adelphia's cable operations in various markets around the country. This will make the two largest cable operators in the United States even larger. Many have concerns about this small, but potentially significant increase in concentration.

For example, what effect, if any, will this change have on the ability of independent programmers to break into the marketplace? Will the deal give Time Warner and Comcast a greater ability to strike exclusive deals with other programmers, or a greater incentive to utilize the so-called "terrestrial exemption" to prevent competitors from gaining access to their programming? These are issues which we will explore.

While the Adelphia deal gives us some cause for inquiry, there is certainly a significant counterbalance to the questions it raises. As part of this deal, Comcast is giving up its 17% stake in Time Warner Cable and its 4% stake in Time Warner Entertainment, which will remove a large financial connection between the two competitors. Additionally, this consolidation also likely will lead to efficiencies and a greater ability for these cable companies to improve and expand their competitive offerings. We look forward today to hearing about how Time Warner plans to use this deal to enhance the experience of its consumers.

Unlike the Adelphia deal, which is in its final stages, the entry of the phone companies into the video business is just in its infancy. But, in the long run, this entry likely will foretell a much more significant change in the marketplace. While the phone companies are upgrading their networks and gearing up to enter video, overbuilders like RCN are offering much needed competition in a number of communities, which is bringing prices down and providing valuable new services for consumers. We will hear today from RCN, as well as the U.S. Telecom Association, to examine how they view the marketplace.

More generally, we will discuss with all of our witnesses what steps are needed to ensure a competitive future for the rapidly changing world of video and telephone service. As we all know, this marketplace is evolving at an extraordinary pace -- the phone companies are beginning to offer video, the cable companies are getting into phone service, and the Internet continues to expand as a medium for all sorts of content. In just a few short years, all of these industries may be completely transformed in ways we can only begin to imagine here today.

But, vibrant competition is not a sure thing. We need to take active steps to make sure that these markets welcome competition and innovation and that new entry is encouraged. Franchising regulations, access to content, and regulatory parity are important issues among many that must be addressed. We have to get it right if we want the market to thrive and provide the maximum choice and value for consumers.

For those reasons, as we reconsider the cable and telecommunications laws in the upcoming months, we need to understand whether current regulations are getting in the way of a more competitive market, and if so, then we need to figure out what different rules will help the marketplace create better products for consumers. This is a task that the Antitrust Subcommittee intends to undertake, and our hearing today is a first step toward learning what we need to do that. So, I hope that all of our witnesses can testify not just about the specifics of the Adelphia deal and of new entry, but also more broadly about how we can help promote competition in these markets.

This Subcommittee has an obligation to examine current laws and regulations to make sure that new entrants into video services have a real opportunity to get into these markets and compete. At the same time, of course, we must respect and understand the regulatory burden already placed on incumbent cable providers and take care to ensure that their long-term efforts and network investments are not unfairly diminished by any changes we make in the legal structure. In the last 10 years, the cable operators collectively have spent approximately $100 billion upgrading their systems and improving their offerings to consumers -- all based on the current laws and regulations. We must keep that in mind as we consider modifying the competitive framework that guides the industry.

This is a difficult balance to strike, but we must strike it correctly, because the reward will be a vigorously competitive marketplace that will ensure the economic vitality of this important sector. Most importantly, it will help consumers, and aid in the creation and deployment of new and better products and services for individuals and businesses. Those, of course, are very worthy goals, and merit our strongest efforts.

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