Fwd: PR: Digital Divide Splits Consumers in Today's Telecom

Gary Handman (ghandman@library.berkeley.edu)
Wed, 3 Feb 1999 15:16:13 -0800 (PST)

>9:30 am February 3, 1999
>Gene Kimmelman <kimmge@consumer.org>
>Kathleen McShea <mcshka@consumer.org>
>Mark Cooper <markcooper@aol.com>
>Digital Divide Splits Consumers in Today's Telecom Marketplace
>Competition and Lower Prices for Vast Majority is "Virtually Non-existent"
>WASHINGTON - A new study conducted by the nation's leading consumer groups
>finds less than one in four Americans is positioned to receive the lower
>prices or expanded choice in telecommunications and TV services that the
>Telecommunications Act of 1996 framers promised from "increased competition".
> The Digital Divide, a report released five days before the third
>anniversary of the 1996 Telecommunications Act, shows that fundamental
>assumptions applied to the industry by the architects of the law have proven
>incorrect. Industry concentration and the "digital divide" are frustrating
>the growth of competition.
> Instead of a single, increasingly competitive market where everyone
>gets better and better deals, distinct consumer sub-markets, separated
>predominantly by income, divide consumers into winners and losers. The
>hoped for explosion of competition is also virtually non-existent because
>the "urge to merge" has been triumphant.
> "The sad, unintended consequence of the Telecom Act is that growth
>of a
>costly division between telecommunications 'haves' and 'have nots'. Those
>market developments threaten to destroy the very goal many of the Act's
>supporters claimed to embrace: the opportunity to harness enormous
>technological advancements for the social and economic benefit of all
>citizens," said the report, written jointly by Consumers Union and the
>Consumer Federation of America.
> The report examines new data from the State of Florida and other
>public and
>private sources to construct a first-of-its-kind profile of usage patterns
>for telecommunications and TV services.
> The pattern shows that "premier" households which spend about $200 a
>month on telecommunication services -- including cable TV, multiple phone
>lines, cellular service, faxes, satellite services, Internet access, etc. --
>are receiving the lion's share of the price breaks. Firms are likely to
>compete aggressively for this small attractive segment of the marketplace,
>which comprises about 24 percent of all consumers, by offering discounts and
>other sweet deals.
> Major industry players who push policymakers to promote massive
>in infrastructure misunderstand the "digital divide," the consumer groups
>say. The drive to expand infrastructure serves the needs of only this small
>upscale group at the top of the food chain, and leaves the rest behind,
>footing the bill for services they do not want or need.
>Consumers spending less than this "premier" group seldom if ever get price
>breaks, and bear the brunt of price hikes. Since the 1996 law was signed
>three-years ago on February 8, consumers have watched cable rates soar 21
>percent and long distance rates rise 10 percent for in-state calls. These
>price hikes are more than a short term set back, say the consumer groups,
>who forecast core telecom and TV services, which are consumed in modest
>quantities by about one-half of households, will be provided by monopolies
>for the foreseeable future.
> Policy based on unrealistic promises that compounds its error by
>powerful market forces is hopelessly out of step, according to the consumer
>groups. The remedy, they say, is for policymakers to take a new direction to
>close the digital divide:
>* Impose responsible public constraint on cable's monopoly pricing and
>anti-competitive practices;
>* In markets with no competition, ensure continued price regulation of local
>phone services; and,
>* Protect low-volume long distance users against discrimination and price
>increases that don't reflect costs.
>"Public policy must be refocused on protecting the needs of the average
>consumer, rather than allowing telecom monopolies to subsidize high-end
>services," said Mark Cooper, Research Director for the Consumer Federation
>of America and co-author of the study.
>"Policy makers should quit pretending competition is around the bend and
>instead do something to block inappropriate price hikes," said Gene
>Kimmelman, co-director of the DC office of Consumers Union and co-author of
>the study.
>TO LEARN MORE: A PDF file of the full report can be found by clicking on
><http://www.stateandlocal.org/telecom.pdf>; the executive summary is
>available on faxback, by dialing 202/238-9258, and requesting document no.
>3305; several telecommunication hardship stories from consumers are on
>document no. 3306.
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Gary Handman
Media Resources Center
Moffitt Library
UC Berkeley, CA 94720-6000

"You are looking into the mind of home video. It is innocent, it is aimless,
it is determined, it is real" --Don DeLillo, Underworld