"A Consumers' Guide to Telecommunications Reform Legislation"

                     Remarks by Larry Irving
     Assistant Secretary for Communications and Information
   National Telecommunications and Information Administration
                     Department of Commerce

                          May 25, 1995
                        Washington, D.C.

                          [as prepared]


     At the conclusion of the American revolution, the world
watched eagerly as we fashioned a document that would provide a
framework for us to govern our nation.

     Today, as we enter what Vice President Gore calls the
digital revolution, the world is again watching to see how our
nation designs a framework to meet the challenges of the
Information Age.  

     The Clinton Administration believes that we must adopt a
framework for competition.  We want to stimulate competition in
the telecommunications marketplace to improve everyday life for
millions of Americans.  The Clinton Administration believes that
competition will provide consumers with lower prices, higher
quality, and greater choice for telecommunications goods and
services.  And it will provide businesses with new opportunities. 


     We believe that competition is the best way to accelerate
the buildout of an advanced telecommunications infrastructure. 
Telecommunications and information technologies and applications
can create new high-paying jobs; improve our nation's
competitiveness; enrich our children's educational experience;
enhance medical services, especially for Americans living in
isolated or rural communities; connect us to our government
officials; and facilitate communications with our family and
friends.

     We believe that the best way to achieve a competitive
telecommunications marketplace is to reform our 60-year-old
Communications Act.  The Administration supports
telecommunications reform legislation that will protect consumers
from monopolistic practices and promote real competition.

     The difference between the approach to telecommunications
reform being taken by Congress and the Administration's approach
is clear:  they want to deregulate companies, we want to ensure
that companies compete.  Deregulation is not synonymous with
competition.  We cannot move overnight from regulated monopolies
to a truly competitive market.  This takes time.

     We share common goals with the Members of Congress that are
crafting the legislation, including Senator Pressler, Congressman
Fields, Congressman Bliley, Senator Hollings, Congressman Markey,
Congressman Dingell, and other Members of the House and Senate
who have contributed to this legislative effort.  Yet, in key
areas we diverge.

     The Administration wants both consumers and industry to reap
the benefits of competition.

     Both the House and Senate have introduced telecom reform
legislation.  We've been reading the fine print of the bills, and
they fall short of our goal.

     Today, I want to present a consumers' guide to
telecommunications reform legislation.  This consumers' guide
will cover five key issues:  (1) cable rate regulation, (2)
concentration of mass media, (3) cable-telco buyouts, (4)
telephone rates, and (5) universal service.  Then, I want to
offer a "Consumers' Bill of Rights" that should guide our
policymaking in this area [with apologies to our Founding
Fathers.]

Cable Rates Will Rise

     First, let us take a look a cable rate regulation.

     Mark Twain once said, "Whenever you find that you are on the
side of the majority, it is time to reform."  The authors of the
House and Senate bills appear to be taking this advice literally
when it comes to telecommunications policy, in particular cable
regulation.  The vast majority of Americans are paying less for
cable and support the continued regulation of cable television
rates.

     The truth is that the 1992 Cable Act has brought substantial
savings to consumers.  The FCC estimates that as a result of the
'92 Act, consumers have saved $2.8 billion through rate
reductions, as of December 1994.  They have also saved because
the rate of increase has been brought down from three times the
rate of inflation to a more reasonable rate.

     Indeed, on April 3, 1995, this organization, the Consumer
Federation of America (CFA), released a national survey showing
that cable consumers believe their rates are too high.  And when
asked whether they support continued regulation of cable TV
rates, two-thirds of consumers said yes.

     In addition, consumers are no longer overcharged for
additional outlets or remote controls.  Before the '92 Act, cable
companies charged customers as much as $7 for an additional
outlet; today most customers pay nothing beyond the initial cost 
of the second wire for the ability to get cable on a second or
third television in their house.  Before the '92 Act, cable
companies charged their customers up to $5 for a remote control. 
Today, those customers pay less than a dollar for the ability to
channel surf. 

     And yet, the House and Senate committees, would deregulate
cable rates before consumers have a choice of providers, opening
the door for these abuses to return.

     The Administration is not arguing that we should regulate
cable forever.  We don't argue that rate controls could be less
administratively burdensome, especially for small operators.  We
do believe, however, that it is critical that we not deregulate
too soon, before competition exists.  Now is too soon.

     We've been down this road before.  In 1984, Congress
received assurances that competition to cable was at Americans'
doorstep.  The then-president of the National Cable Television
Association testified before Congress that "Comsat and the other
operators are going to be providing [direct broadcasting]
satellite service.  It will have a multiplicity of channels that
again will be movies, sporting events, news; same kind of things
as on cable television.  It will be offered this year.  It is not
a pipedream.  Comsat will be offering the service this year. 
Rupert Murdoch just announced he will offer it this year.  That
will be directly competitive with cable and it is totally
deregulated."  The same cable spokesman went on to promise that
"[t]here will be two cable wires running down the street."

     It was a pipedream.  Competition did not emerge in 1984, or
shortly thereafter.  What did emerge were tremendous price
increases for consumers as cable companies raised their rates
with impunity.  The General Accounting Office found that, on
average, the price of basic cable services rose more than 40
percent from 1986-1989 -- three times the rate of inflation
during that time.  And many individual communities saw their
cable rates skyrocket even more dramatically.  For instance,
residents of Newark, New Jersey had rate increases of more than
130 percent.  Cablevision of Connecticut raised its rates 222
percent.  
     Today, cable advocates are saying the same thing -- that
satellite and telephone competition is just around the corner.

     This Administration is committed to the proposition that
consumers deserve protection through either regulation or
competition.  And I should note that the '92 Act provides for
immediate deregulation of cable rates as soon as real competition
is established in a community.

     Unfortunately, just as in the '84 Act, both the House and
Senate bills will permit cable companies to increase rates before
the vast majority of cable operators face any actual competition. 
As George Santayana said, "We learn from history that we do not
learn from history."

     The House bill, for example, deregulates rates for almost 30
percent of cable subscribers immediately, and rates for cable
programming received by other subscribers fifteen months after
the bill's enactment, whether or not consumers have any choice of
an affordable alternative service.

     The legislation would ensure that consumers could buy their
cable boxes in a retail store.  We applaud this provision.  But
cable operators will be permitted to increase rates for such
equipment long before the first consumer can actually buy a cable
box in a store.  This is anti-consumer.

     The Senate also deregulates cable, but in a different way. 
Under the Senate bill, cable rates for popular programming such
as CNN, CSPAN, Discovery Channel, and ESPN would go up.  Under
the bill, rates for cable programming services (commonly known as
"expanded basic services") will be regulated only when rates
"substantially exceed the national average rate for comparable
cable programming services."  In most cases, rates would have to
rise substantially before any regulation occurred.  Even worse,
two cable companies, TCI and Time Warner control about 40 percent
of the market.  When they raise their rates, it will raises the
national average.  The end result -- cable rates skyrocket for
consumers.

     The Administration understands that some regulatory
flexibility for the cable industry may be appropriate,
particularly in pricing upper tier services and for smaller
operators.   But, again, we would retain essential protection for
consumers until they can actually choose an alternative video
provider.  

     Let's put this all in perspective.  Contrary to the cries of
the cable industry, current regulations are not crippling them. 
Electronic Media reported that in 1993, "cable TV companies'
operating income margins at 20.1 percent outperformed the rest of
the communications industry."

     In 1993, 14 new cable channels were launched; 1994, 25 new
channels were launched; and launch plans for 1995 include 63 new
channels.

     This winter, a consortium that includes TCI, Comcast, and
Cox spent more than $2 billion to acquire spectrum for the
delivery of personal communications services (PCS) -- an amount
that topped all other bids.  As CFA notes, since last summer,
major cable companies have invested over $15 billion in new
competitive ventures.

     In 1994, the FCC reported that the number of subscribers to
the top 100 MSOs grew by 5.4 percent -- almost 3 million
customers in one year.  In contrast to the over 60 million cable
subscribers, DBS has fewer 1 million total customers, wireless
cable has 600,000, and C band has about 4 million.  DBS is
unaffordable for many Americans -- dishes cost at least $700-$800
plus a monthly fee.

     And, as CFA has noted, under current law, when any
combination of these competitors penetrates a market to the level
of serving 15 percent of the homes, cable regulation immediately
disappears under existing law.

     Consumers should also be aware of what I call the "predatory
pricing provision."  The House bill allows a company to drop its
rates for a small, select group of customers simply to drive out
competitors.  For instance, a cable provider in New York City
could drop its rates for two apartment buildings in order to
drive out of business a competitor that is servicing those
buildings.

Diversity and Localism in Mass Media Will Decrease

     Consumers must also be made aware of the danger of
concentration in mass media.  Under an amendment to the current
House bill expected to be offered today, the same individual or
company can own two television stations, an unlimited number of
radio stations, the local newspaper, and the cable system in an
area.  Now, it is fair to say that if one person controls all of
these media sources, that person will have a strong influence on
news reporting, editorializing and thus public opinion in that
community.  As Congressman Ed Markey has stated, "this provision
will make Citizen Kane look like an underachiever."

     This should concern each of us.  News and information is
essential to our system of democracy which relies on an informed
citizenry.  As John Stuart Mill wrote in On Liberty, "only
through diversity of opinion is there . . .  a chance of fair
play to all sides of the truth."  Broadcasting and newspapers are
still the major sources of news, information, and entertainment
in this country.  Two thirds of Americans get their news from
television.  Concentration of mass media will bring a loss of
diversity and localism.  What is on the front page will also be
the lead story on radio and television.  An advertiser or a
political candidate seeking to reach an audience would face a
bottleneck -- the local media mogul -- with a strangle hold over
a community.  And perhaps worst of all, fewer media outlets will
be in the hands of people who live and work in the communities
they serve.

Cable-Telco Buyouts Will Reduce Competition

     Let us now take a look at the cable-telco crossownership
issue.  The Administration supports a repeal of the current
cross-ownership ban for telephone and cable companies.  If we
want to encourage competition in today's market, we must
eliminate outmoded rules that prevent telephone companies from
offering video services to consumers, as well as restrictions on
cable companies offering local telephone services.

     However, competition will be thwarted and consumers will be
hurt if we simply allow the two most likely competitors to buy
each other out in region.  We want to encourage two wires to the
home, not one, as well as additional wireless options.  And we
want to encourage more choices for consumers, not less
competition among companies in any local market. 

     The Administration believes that an anti-buyout provision is
crucial for competition.  Right now, cable companies are the
dominant providers of subscription-based video programming in
communities across the United States.  The whole purpose of
allowing telephone companies into the video programming market is
to provide a competitor to the cable monopoly.  The effect of two
companies competing to provide video programming services in a
particular community will be lower costs, greater choice, and
higher quality for consumers.  

     If, however, telephone companies are allowed to enter the
video programming market by buying out the local cable company,
the result is the same as if the telephone company had never
entered in the first place -- one dominant provider of video
programming services.  The American people do not want one
monopoly to be  replaced with another -- they want and deserve
competition.
     
     In addition, cable companies are particularly well situated
to compete head on with telephone companies in the local exchange
market as they are the only other industry that has a wire into
most peoples' homes.  Local cable companies' networks pass 96
percent of U.S. homes.  Mergers will eliminate local phone
competition from cable.

     Thus, we are opposed to the bills' buyout provisions.  The
Senate bill allows telephone and cable companies to merge in
every community in the United States.  Potential competitors will
be swept away.  For example, NYNEX and Time Warner could merge in
the New York City area . . . who would possibly have a chance of
competing with that combination?  In an era when we are trying to
move away from regulation towards competition, this is a major
step backwards.

     The Administration commends the House Telecommunications
Subcommittee for recognizing that limits must be imposed on the
ability of a telephone company to buy out a cable company in the
telco's local service area.  They have included a ban on buyouts
in areas greater than 35,000 people, and have limited the buyouts
to 10 percent of the telephone company's region.  The
Administration is, however, concerned by a provision of the House
anti-buyout rule as currently drafted.  

     The Administration is troubled that the House bill assumes
that two-wire based competition is impossible in communities with
fewer than 35,000 people.  In fact, the opposite may be true. 
Competition might be possible in many of these smaller towns. 
NYNEX is building an advanced video network in southeastern
Massachusetts and Rhode Island.  This network would provide
service to Marblehead (population 20,000) and Winthrop
(population 21,000) among other towns.  The fact that NYNEX is
planning to provide service to these two towns shows that
competition is not only possible but may soon be a reality -- if
we permit it.

     The Administration has consistently recommended that
Congress adopt a strong in-region anti-buyout restriction on
acquisitions and joint ventures between telephone companies and
cable systems, with a limited exception for rural areas of, for
example, 10,000 inhabitants or less, because such areas truly may
not be able to support two-wire based competitors (out of region
is ok).  In addition, the FCC should be granted authority to
review the ban after a certain number of years.  Broad exceptions
to the anti-buyout rule, however, invite consolidation of power
by multimedia monopolies and discourage critical competition in
the video services and local telephone markets. 
     Rural areas will receive a double whammy, as cable rates for
small systems are deregulated immediately and buyout provisions
reduce the likelihood of competition.  To paraphrase Glen
Campbell, "Thank God I'm a City Boy."

Telephone Rates Could Rise

     Fourth, consumers must understand that the current bills
could result in higher telephone bills if the Bell Operating
Companies are allowed to use their monopoly power to weaken their
competitors.

     The bills under consideration in the House and Senate
Commerce Committees lift restrictions on Bell Operating Company
entry into long distance and other markets without first allowing
the Department of Justice to determine whether real competition
is developing in local telephone markets.  The checklist included
in the bills covers many of the steps for interconnection and
unbundling that most analysts believe are necessary for opening
local markets to competition.  Unfortunately, however, we do not
know whether these steps alone will be sufficient to allow local
competition to evolve.  A simple checklist may not ensure that
competition will occur . . . and it most certainly cannot replace
the need for the expert analysis of the market that the DOJ would
bring to the process.

     William Baxter, the former Assistant Attorney General -- and
my former law professor -- who presided over the break-up of the
Bell System, strongly supports a role for DOJ to ensure that
local telephone companies who hold a monopoly over essential
local facilities do not use their entry into the long distance
market to diminish competition and hurt consumers.  As Mr. Baxter
states in a letter to Congress: "We should not fall into the trap
of thinking that just because local competition is imaginable, it
is already here.  It is not here.  It is not even close."  The
Clinton Administration agrees.

     The bills in both Houses weaken the ability of state PUCs to
protect consumers by preempting state regulation of rate of
return regulation.  The bills assume that we in Washington can
best determine how telephone rates should be regulated in the
various states.

Universal Service Is Under Siege 

     Fifth, consumers need to be alerted to the fact that
universal service is under siege.  President Clinton, Vice
President Gore, and Secretary Brown are all committed to ensuring
that all Americans have affordable access to telecommunications
and information services.

     The House bill may include a provision to weaken universal
service by essentially freezing the definition of universal
service at basic telephone service.  If we are to move our
country forward, into the 21st Century -- the Information Age,
then we cannot afford to freeze the technology that we make
accessible and affordable at yesterday's level.  We will stunt
our growth as individuals and as a nation with a static
definition of universal service.  Imagine if thirty years ago we
had frozen the definition of universal service nationally -- we
would be limited to party-line service outside our major cities!

     The Administration supports language in the Senate bill that
promotes affordable access for schools, libraries, and hospitals. 
Yet, this language is being attacked as well.  The Administration
supports the Snowe-Rockefeller Amendment that would advance this
issue.  The President and Vice President have repeatedly
emphasized the need to ensure that every child in this nation be
able to hook up to the information superhighway.

A Consumer's Nightmare

     If a telecommunications reform bill passes without changes
to these provisions, it will be a consumer's nightmare. 
Consumers will dig deep into their pockets to pay cable bills
that will likely rise faster than the rockets carrying direct
broadcast satellites and telephone bills that will increase
faster than George Foreman's weight after a Memorial Day picnic .
. . .

     Many consumers will have only one provider to turn to for
their telephone and cable services.  Deregulated monopolies will
be in the position to keep start-ups and entrepreneurs out of the
business.  For equipment, consumers will have the choice of the
deregulated monopoly provider or . . . the deregulated monopoly
provider.  There will be no choice.

     Higher rates, no choice, no pressure for high quality or
innovation.  Isn't the whole idea of reform to improve our lives?

A Consumers' Bill of Rights

     What consumers need is a bill of rights that is reflected in
the telecom reform legislation.  Let me suggest some
possibilities:

     o    The right to reasonable cable and telephone rates.
     o    The right to a choice of providers of cable and
          telephone services.
     o    The right to buy converter boxes, telephones, remote
          controls, and other telecom equipment at competitive
          prices.
     o    The right to diversity and localism in ownership of
          community media.
     o    The right to privacy.
     o    The right to be protected from fraud over telephone,
          cellular, and computer networks.
     o    The right to fair compensation for use of spectrum.
     o    The right to affordable access to basic telecom and
          information services.

     These rights will not just appear.  You need to fight for
them on behalf of consumers.  You need to educate consumers as to
their importance.  Consumers need to voice their concerns.  And
you also need to look beyond the current telecom environment to
the information superhighway of the future and the emerging
consumer issues that are arising.  For example, a 1993 Harris
Poll found that 83 percent of Americans are concerned about
threats to personal privacy.  How will consumers' privacy rights
be protected in an era of increased electronic dissemination of
information?  NTIA released its Notice of Inquiry on privacy in
February 1994 and plans to issue a Privacy White Paper next
month.  We hope that you work with us to develop solutions to
this issue.

From Sound Bites to Sound Policy

     Let us our recognize that what makes for good sound bites,
does not make for good policy.  Eliminating NTIA and the
Department of Commerce may sound good in a press release, but
what does it mean?

     It means that as we enter the 21st Century -- the
Information Age -- and encounter critical issues such as privacy
rights and copyright protections in cyberspace or universal
service or electronic commerce, the President will not have the
benefit of a telecommunications policy shop to advise him on how
to resolve these issues.  Without protections or rules of the
road, no one will want to travel the information superhighway. 
Moreover, without the NII grants program, the public broadcasting
grants, and the children's television grants dispersed by NTIA,
new technologies will not reach traditionally underserved
communities.  Each of us will suffer, and our country as a whole
will suffer, for the opportunities lost. 

     The Clinton Administration is fighting to avoid this result. 
We will all pay a costly price if we lose.

     Let me take a moment to emphasis that industry has valid
concerns.  The telephone and cable companies are unnecessarily
shackled from entering into each others' businesses. 
Broadcasters have valid concerns about being able to compete in
an increasingly multichanneled and digital environment.  The
Regional Bell Operating Companies should be permitted into long
distance, manufacturing, and other areas once they face
competition in their local markets.  The Administration has long
advocated reform to the 60-year-old Communications Act to enable
our telecommunications and information industries to retain their
leadership in the global economy.

     And the Administration will continue to fight on behalf of
the consumer.  We recognize the problems for consumers in the
current telecom reform legislation.  But as American
industrialist Henry Kaiser said, "Problems are only opportunities
in work clothes."

Conclusion

     We're not the only country working to meet the challenges of
the digital revolution.  Around the world, other countries are
facing similar issues and are looking to us for a model of
reform.  The G-7 Ministerial Conference on the Information
Society held in Brussels in February underscored the importance
of what we are doing in our country for the rest of the world as
well.  And my participation in the Latin American
Telecommunications Summit in March reinforced this point.

     The rest of the world is watching us.  Countries that are in
the midst of reform right now -- such as Germany -- are calling
us daily for weekly reports on our legislative efforts.  We need
to get telecom reform right.  The bottom line is that we need
competition as fast as possible, reaching as broadly as possible. 
Please join us in working towards reform that will benefit
everyone.