December 17, 1998

            STATEMENT OF COMMISSIONER GLORIA TRISTANI

In the Matter of Annual Assessment of the Status of Competition in Markets for the Delivery of
Video Programming, CS Docket No. 98-102

     Debates about the status of cable competition often seem a rote exercise.  One side asserts
that competition has arrived and that market forces now can be relied upon to protect consumers;
the other side claims that cable's dominant market power remains intact.  One side argues that
DBS has emerged as a substitutable, if not superior, video product to cable; the other side
dismisses DBS as a high-end option.  One side states that consumers are receiving more value
(i.e., more and better programming services) for their money; the other side stresses the fact that
rates continue to rise at more than four times the rate of inflation.    

     If few minds are ever changed during these debates, it may be because both sides are
partly right.  They are just focused on different consumers.  Those who assert that competition
has arrived are focused on a particular category of video consumers:  those who want and can
afford large programming packages.  The cable industry has invested billions of dollars in
capacity upgrades -- and plans to invest billions more -- in order to keep these consumers from
defecting to DBS and, more importantly, to be able to exploit new revenue opportunitites like
high-speed Internet access.  As it happens, both reasons underlying cable's expanding capacity
(i.e., increased channels and new services) are aimed at similar consumers, who tend to be
younger and more well-off than the nation as a whole.  Although the cost of upgrades and new
services may have caused rates to climb four times faster than the rate of inflation, these
consumers may very well feel that the higher prices are justified by the increased value of the
delivered product. 

     These consumers can look forward to even better times ahead.  On the video side, if the
up front costs of DBS continue to decline (and especially if DBS providers are able to provide
local broadcast signals), an increasing number of consumers of large programming packages will
find DBS and cable to be complete substitutes for each other.  On the data side, several entities,
including telephone companies and wireless operators, are moving to enter the high-speed data
business.  It thus appears that these consumers can expect to have multiple service providers
competing to serve both their video and data needs.

     But there is another group of consumers who are not doing so well.  These consumers do
not want, cannot use or cannot afford large programming packages or high-speed data services. 
They are happy with plain-old cable service and would have kept a more modest level of service
if they had been given that option.  But by and large they were not.  Instead, they were
confronted with a take-it-or-leave-it proposition:  pay big rate increases for additional services
they do not want and did not ask for, or lose all the cable channels that they have come to rely
upon for news and entertainment.  And unlike consumers of large programming packages, there
was no DBS or DBS-equivalent giving them any real alternative.  Not surprisingly, these
consumers are unimpressed with the argument that they are actually better off with the additional
services because their per channel cost may have gone down.  That argument assumes that all
channels have equal value when, to these customers, the value added by the new channels is zero. 
 

     In a truly competitive market, things would be different.  In a competitive market,
different firms would vie for consumers with different mixes of price, quality and service.  The
market would sort out what particular combinations of those factors succeed.  Some consumers
would be willing to put up with poor service in exchange for bargain-basement prices; others
would opt for better service at higher prices.  Only consumer choice freely expressed -- and not
industry or government edict about what consumers "should" value -- can be counted on to reach
the right result.  It shows how starved we are for competition that anyone could look at the
competitive choice provided by DBS and declare victory.  

     I am aware of all the reasons why some say additional choice for consumers will not
work -- subscribers would need addressable set-top boxes, new channels would never survive in
an a la carte world, and so on.  I make just a few observations.  First, most of the technical and
other objections to more choice for consumers apply to a purely a la carte world.  But we should
not allow the perfect to become the enemy of the good.  Even some choice (e.g., two or three
tiers in place of the current take-it-or-leave approach) is better than none.  Second, I reject the
notion that consumers should be forced to buy additional services that they do not want until they
can be made to realize how valuable these services are.  We do not do that with magazines,
toothpaste or soda pop.  For other products, companies use marketing techniques find a way to
entice consumers to affirmatively select their product.  Cable programming services should be no
different.  In a market economy, consumers can and must be counted on to determine which
products should succeed and which should fail.  

     In the end, it all comes down to trusting the consumer.  I am constantly amazed in
Washington at the number of people who express complete faith in markets but little faith in
living, breathing consumers.  I trust consumers to make the right choices about the mix of price,
services and quality that is appropriate.  Whether or not those choices match the industry's
business plans or the expectations of Silicon Valley investors is secondary.  Only when all
consumers have the opportunity to meaningfully express their preferences in the marketplace can
we declare victory and go home.