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Testimony on the
Implementation of the
Cable Communications Policy Act
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Before the
Federal Communications Commission
Washington, DC 20554
In the Matter of )
Implementation of Section 621(a)(1) of )
The Cable Communications Policy Act ) MB Docket No. 05-311
Of 1984 as Amended by the Cable )
Television Consumer Protection and )
Competition Act of 1992 )
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COMMENTS OF AMERICAN HOMEOWNERS GRASSROOTS ALLIANCE
I. Introduction
The American Homeowners Grassroots Alliance (AHGA) is a national
consumer advocacy organization serving the nation’s 75 million U.S.
homeowners. Television services are of growing importance to American
homeowners, and not just for their educational and entertainment
potential, but because those services are becoming a more integral part
of the larger landscape of broadband services that collectively and
increasingly impact how we learn, how we work, how we deliver health
care and related services, and much more. Sadly, the provisioning of
these services has been restricted to a single cable monopolist in most
communities, and in the last five years alone they have raised prices by
more than 86 percent.
American homeowners do not want to be left behind in the broadband
revolution, and according to a recent UN Report, that is exactly what is
happening. We are ranked 17th in the world, below many developing
countries in broadband penetration, and what broadband we do have is
woefully inadequate by international standards. However, this is more
than just a statistical embarrassment; it also has a direct impact on
the wallets and quality of life of virtually every American homeowner.
II. The Need and Authority for Action
While pricing for other telecommunications goods and services have been
declining, cable television rates have been increasing at more than 3
times the rate of inflation.
Fortunately, this trend is reversed in areas where cable providers are
subject to competition from another TV services provider. In those
areas, rates FALL by an average of 15%, and advanced services available
TV service providers proliferate. Indeed, more recent data suggests that
these numbers may significantly understate the potential consumer
savings from competition. In Keller, Texas the incumbent cable provider
dropped their premium service package rates by 50% when a telephone
company announced plans to enter their market late last year, a price
cut of $50 a month or $600 a year. A recent Bank of America study found
that in three different markets the average annual TV services
subscription price reduction upon telephone company entry into cable TV
markets was $242.23, or 36%.
That is a very substantial savings for the average homeowner. Even more
impressive were the total price reductions found by the Bank of America
study in premium service packages, including video, Internet, and
telephone, in those three markets. The average annual savings on all
three was $390.56 when a new competitor to the incumbent cable TV
company entered the market. To the best of our knowledge the magnitude
of potential annual savings to homeowners from increasing video services
competition in the U.S. would benefit homeowners more significantly than
any other action to promote consumer cost savings that the government
might realistically take. Clearly that economic impact argues strongly
for the removal of barriers to the market entrance of cable TV
competitors.
Sadly, less than 3 percent of Americans live in an area with effective
competing cable providers. The downsides of satellite technology remain
pervasive to the point that it is not very competitive against any other
source of video services, and it generally prospers only in rural areas
where there is no other choice. As a result most of us are effectively
stuck with a single cable monopolist who raises prices faster and more
consistently than the oil companies. The franchising process is one of
the largest barriers to new competitors in the video marketplace. Cable
monopolists pull out every trick in their arsenal to delay or subvert
the franchise process, which can take months or even years to negotiate
(and may not succeed anyway) even without their interference.
For homeowners, time is of the essence. In the six to eighteen months
that it takes to negotiate an average competitive cable franchise, a
typical American cable TV subscriber will continue to pay $242 - $390
annually to the entrenched monopolist cable providers who will capture
between $4 and $12 billion dollars in excess subscription fees from
these captive American homeowners. With this level of immediate
potential savings possible we believe that such a lengthy franchise
process is clearly unreasonable, and we urge the Commission to use its
authority under Section 621 of the Communications Act to prevent such
unreasonable delaying tactics.
III. How will the evolving American homeowner benefit from Cable
Competition?
Lower TV service prices are only a small part of the benefits from
adopting policies which speed the convergence of voice, data, and video
services. Vibrant competition to build the best pipe to customer’s homes
offers the greatest potential to help American homeowners realize all
the potential benefits of broadband and help America become a leader in
the next broadband revolution. It is impossible to imagine the full
potential of a nationwide next-generation broadband network, but some of
the applications are coming into focus and their potential to improve
the quality of life for every category of homeowners is tremendous.
The dual-income family. This will be the first generation where
a majority of American homeowners are dual-income households. With both
homeowners working, the remaining time available for other activities is
severely constrained. There is less time to shop, pay bills, maintain
the home, and to the myriad of other responsibilities that we face in a
modern society. Parents are even more challenged to find time with their
children, and nonparents have less time available for social
opportunities. Fortunately the technological sophistication of the
average homeowner is growing rapidly, and technology is playing a
critical role in enabling these families to cope with the work-life
balance. The ever expanding array of TV services is bringing more
entertainment and education services into their home. The broadband
delivery of Internet services, which can accompany TV services, brings
the same kinds of economies and an even more vast range of educational,
entertainment, and commerce opportunities. All of these services are
saving homeowners a tremendous amount of time and reducing traffic and
pollution from trips to libraries, government offices, malls, and video
rental stores.
Home based businesses and teleworkers. Home based businesses and
teleworkers are a rapidly growing segment of the American workforce.
Approximately 100,000 home-based businesses are established each month
according to the Community Associations Institute. By some estimates, as
many as 40 million people work out of their homes. As more powerful
broadband becomes more available, the number and technological
sophistication of home-based businesses will grow even more
dramatically. Women-owned home-based businesses number 3.5 million in
the US, and provide employment for another 14 million other people. The
number of teleworkers, freelancers, independent contractors, and
consultants working from home is increasing dramatically, as are the
number of employers who are realizing the benefits of starting a
teleworking program. More than 720,000 people earn their living on eBay
– either full or part-time. Currently, there are over 30,000 eBay "Power
Sellers", most of them home-based businesses who sell between $2,000 and
$25,000 per month on eBay.
Employers are increasingly supporting the migration of workers to
telecommuting. This year, 82.5 million workers world-wide have done
their jobs at home one day a month, more than double the figure from
2000, according to Gartner Inc., a technology research firm. It predicts
the figure will grow to more than 100 million workers by 2008.
"Broadband technology has made all of this a lot more feasible than five
or six years ago," says Brett Caine, group vice president of Citrix
Online, which makes software for teleworkers. Congressman Frank Wolf’s
federal teleworking legislation is increasing the number of federal
employees who work from home and teleworking is growing rapidly in
popularity in the private sector. According to a compensation survey of
1,400 CFOs conducted by Robert Half International, 46% said
telecommuting is second only to salary as the best way to attract top
talent. However, 33% said telecommuting was the top draw.
It is no wonder that employers are seeing the value both in terms of
reduced overhead costs and employee satisfaction in supporting
teleworking, and employees are seeing the advantages of saving energy
and commuting time and a much enhanced quality of life. The productivity
of these workers will be enhanced, and we believe that more U.S. jobs
will find themselves "insourced" to the same workers in their suburban
or rural homes rather than outsourced to India or China. Technology is
fostering a return to a more home centric work-life balance, and it
enables a parent to stay home with a child while still providing or
contributing to the household income. Many families have two generations
in the workforce and two generations in need of care (children and
grandparents), and a home-based business is a viable way for families to
address this need. Many of these entrepreneurs and teleworkers require
faster upload speeds, and more reliable connections than are currently
available. Just as eBay and other community oriented internet
sites created an entirely new genre of online entrepreneur, two-way
interactive video will enable a plethora of new opportunities for the
home-based businessperson. The mushrooming demand for broadband home
access has impacted the homebuilding sector, and new homes are
increasingly preconfigured for broadband optimization.
Senior citizens. Perhaps the most important way in which broadband may
be used is in the area of health care. Health care costs are ballooning
out of control and consuming more and more of the federal budget as well
as homeowner’s budgets. The biggest consumers of health care are
seniors. There are tremendous opportunities to save substantial amounts
on medical costs through integrated home based monitoring and
intervention systems for patients with chronic illnesses. Today’s
technology enables a patient at home to wear a monitor that continuously
transmits relevant medical data over wireless broadband networks to
health care providers. Approximately 8 million Medicare beneficiaries
have five or more chronic conditions, and account for over 2/3 of the
program’s spending, according to Partnership for Solutions. Chronic
illness care accounts for at least 78 percent of all health care
spending, which works out to $1 trillion+ annually. Broadband could
bring savings to the 35 million U.S. seniors total senior through
integrated systems of home monitors. Since Medicare Covers all items and
services that are “reasonable and necessary for the diagnosis or
treatment of injury” the broadband component of integrated home network
systems might also be eligible for Medicare coverage. Those systems
reduce senior’s needs to go out to see their doctors or go to the
hospital. This in turn will reduce the growing pressure on hospitals and
reduce the demand for a very expensive form of health care. Some of the
potential savings have already been documented - the Veterans
Administration’s integrated chronic disease monitoring program has cut
hospital admissions by up to 60 percent, not only saving money, but also
saving lives by helping identify and deal with problems before they
require emergency room attention.
Wider use of telemedicine (two-way video communication between patients
and health care providers) will eliminate the need for many in-person
visits to health care providers. Home based monitoring and telemedicine
can make it possible for seniors to remain in their homes, saving the
cost of nursing home, or institutionalized, care (which averaged about
$78,000 annually in 2004). With these broadband-based tools many seniors
will be able instead to receive sufficient attention through home health
care. Delivered three hours a day for five days a week it costs an
average of about $14,000 annually, or $50,000 or more savings per
person.
Broadband will also enable some seniors and disabled individuals to
continue work remotely. This is a growing trend as more seniors are
working longer either by preference or, unfortunately because cuts in
pension benefits and escalated health care costs require them to.
Lastly, the benefits of broadband are social as well. Many in the baby
boom generation now entering retirement are sufficiently knowledgeable
of technology that broadband and its ever growing applications such as
two way video can create new social opportunities for those less able or
less inclined to leave their homes with the same frequency as when they
were younger.
IV. Conclusion.
It is clear that the issue of TV services competition has extremely
broad implications. A typical American homeowner can save hundreds of
dollars every year just on their TV services expenses if the Commission
can do its part to facilitate the rapid deployment of TV and other
broadband services. This is a substantial amount of a typical
homeowner’s remaining disposable annual income after they pay their
mortgage and other necessary living costs. The contribution of increased
TV services competition to the expansion of broadband will help home
based businesses and teleworkers now, and will facilitate the delivery
of new cost saving health care options that will allow seniors and the
disabled to live longer in their homes while saving them and the federal
government billions of dollars in health care costs.
To be sure there is still and should always be an important role for
local governments in exercising their police powers over the public
rights-of-way, and ensuring that cable television remains a vehicle for
local programming, but it is time to make the tremendous potential
savings through TV services competition a reality.
Even more importantly TV services are only one broadband application,
albeit an important one. As we foster more competition in TV services we
simultaneously foster more competition, faster deployment, more
applications – and commensurate savings – in other broadband
applications.
We believe that the franchise negotiation could be shortened to a few
days by adopting standard terms with regards to Public, Education, and
Government (PEG) channels, franchise fees, and anti-redlining. Any
company wishing to provide cable service could then simply agree to the
terms and apply for building permits to start constructing their
network. This would save homeowners billions of dollars, and would not
impact local control over the rights-of-way – a true win-win!
We urge the commission to develop standard franchise terms, and to
determine that any franchise which attempts to go beyond those terms or
take more than 15 days to negotiate is unreasonable. In taking this
action, the commission the Commission can save consumers billions of
dollars on their TV service bills, and speed the rollout of advanced
broadband services.
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