Originally created 02/07/99

1996 law didn't drive price down



WASHINGTON -- The lower cable and telephone prices promised by a 1996 law haven't materialized for many customers, consumer groups reported Wednesday.

Widespread competition the telecommunications law was supposed to have unleashed hasn't happened, and as a result prices have not gone down as Congress and the administration envisioned, the report contended.

The Consumers Union and the Consumer Federation of America, both of which lobbied against the law, said cable television prices have jumped 21 percent and prices for instate long-distance calls 10 percent since the law's enactment Feb. 8, 1996. Local and long-distance rates have remained about steady, the report concluded.

"This law has been an abysmal failure to date," said Gene Kimmelman, co-director of the Consumers Union's Washington office.

Decker Anstrom, president of the National Cable Television Association, disagreed with the report's findings. "Consumers have more choices every day. The last thing we need is a return to massive, sweeping federal regulation that would stifle investment and innovation," he said.

Federal Communications Commission Chairman Bill Kennard believes that "generally, for consumers, we're on the right track," said FCC spokeswoman Liz Rose.

Cable and telephone companies, the report found, tend to have pricing strategies that give price breaks to "high-volume" customers -- people who buy lots of cable channels, make many phone calls, have two phone lines and buy Internet and cellular services.

These heavy users spend an estimated $200 a month on cable, phone and other communications services, have a median annual income of about $54,000 and account for 24 percent of U.S. households, the report said.

On the other hand, low-volume or, as the report calls them, "modest" users of cable and telephone service aren't offered the same price breaks, which have the potential to offset increasing prices, the report said.

These modest users spend an estimated $60 a month on cable and phone services. They don't have second phone lines and don't buy Internet and cellular services. They have a median annual income of about $23,000 and account for 45 percent of U.S. households, the report said.

The consumer groups want federal regulators and Congress to take steps to spur more competition among phone companies and cable systems. They also renewed recommendations that Congress keep cable TV rates regulated. Price controls are to be lifted March 31.

The groups also want federal policy makers to adopt pricing protections for consumers who make few long-distance calls.

The report said one of the unintended consequences of the 1996 telecommunications law is the growth of "a costly division" between heavy-volume and low-volume customers.

Rep. Thomas Bliley, R-Va., a primary architect of the law, believes it is working, competition is developing and that consumers are benefiting, said spokesman Eric Wohlschlegel.

BellSouth spokesman Bill McCloskey said the competitive situation will improve once the regional Bell telephone companies win federal permission to provide long-distance service to local customers.

"Only a small group of premier, intensive telecom users enjoy price breaks and competitive options," the report added.

The report is based on information from sources including the Labor Department's Consumer Price Index, FCC reports and a 1998 survey of 1,600 Florida consumers commissioned by that state's telecommunications regulators.