Leveling the Playing Field of the Broadband Internet Market

This partial transcript of Special Report with Brit Hume, February 27, 2002 was provided by the Federal Document Clearing House. Click here to order the complete transcript.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The Tauzin-Dingell bill will bring real competition and guarantee high-speed access to inner cities and small towns, because the last thing we need is cable companies controlling the Internet. Tell Congress to pass Tauzin-Dingell.

(END VIDEO CLIP)

BRIT HUME, HOST: For months, newspaper readers and TV viewers have been bombarded with ads for and against something called, as you saw there, the Tauzin-Dingell bill, which the ad suggests is the best and quickest way to get a speedy Internet connection into every home.

Today, the Tauzin-Dingell bill sailed through the House of Representatives on a vote of 273 to 157. But that margin does not seem to reflect the fate that faces the bill in the U.S. Senate. So, what's going on here? What would this bill actually do? Who would benefit from its passage or its failure?

For answers, we turn to Adam Thierer, director of communication studies at the libertarian Cato Institute. Welcome to you, sir.

ADAM THIERER, DIRECTOR OF COMMUNICATION STUDIES, CATO INSTITUTE: Thank you.

HUME: So, what does the Tauzin-Dingell bill actually do?

THIERER: Well, in a nutshell, it tries to level the playing field between various providers of broadband service.

HUME: Broadband, fast Internet connections?

THIERER: Yes. High-speed connections to your home. You can get at high-speed connection through your cable company, through your telephone company, through your satellite provider, and a couple of others. But those are the big three.

Really, cable is the big kid on the block. About 70 percent of the market is cable broadband.

The telephone companies have got about 30 percent. But here's the thing...

HUME: Telephone companies...

THIERER: Baby bells.

HUME: ... because they own cable properties or because they're providing...

THIERER: No, they're different. Different lines, different networks.

HUME: So AT&T is doing it mostly through...

THIERER: They're doing it through cable.

HUME: They're doing it through cable.

THIERER: Exactly.

HUME: But the other phone companies are doing it through, what...

THIERER: Through DSL lines, basically piggybacking on top of their old telephone networks. And so now we have a situation where you have telephone, cable, satellite, and all the others trying to provide broadband. And yet they're regulated a little bit differently, in some cases very different.

Cable and satellite for the most part are unregulated. But telephone companies face a number of strange rules because of the 1996 Telecommunications Act, which placed special rules on them about sharing their networks and having rates regulated and things like that.

The Tauzin-Dingell bill basically tries to level the playing field between these various providers of broadband by saying that the bells, the baby bells, the telephone companies who are the primary providers of DSL, will be regulated on the same terms as cable and satellite companies, who are already providing service. So think of it as a leveling the playing field.

HUME: That sounds to me ears like a good idea. It sounds fair. What's wrong with it?

THIERER: Well, what people think is wrong with this is that it would give the baby bells a chance to maybe get bigger. The baby bells are quite large. They already control a good portion of the telephone network.

HUME: Baby bells, you mean companies like Verizon...

THIERER: Verizon, SBC, Qwest, BellSouth, those are the big four.

HUME: OK.

THIERER: But the fact remains that cable companies are pretty big, too. And we only have really two big satellite companies. And that might soon be one when EchoStar and DirecTV merge, if the feds allow that to go forward.

So, bigger sometimes is bad, some people say. But sometimes it's good. Sometimes means better service, cheaper service, quicker service. And so there's this urge to merge going on. A lot of companies getting bigger, but they're all trying to provide customers cheaper broadband.

HUME: I live here in Washington. And I have DSL. And it's fast, and it's nice, and I like it. And it's provided by my phone company. And it didn't require much extra equipment.

THIERER: Right.

HUME: But it is expensive. It costs me close to $50 a month.

THIERER: That's right.

HUME: Which is a big bite out of people's budget. So, if I'm a local person somewhere and I might be able to get DSL for $50 a month, who should I be rooting for in the Tauzin-Dingell bill?

THIERER: Well, the first thing to say is broadband is not going to be cheap at first, even if we deregulate it. Broadband is going to be expensive. It is not cheap to roll a truck out and install a new service and get everything up to gear to provide the high-speed Internet access.

HUME: OK, well, which has the best -- would Tauzin-Dingell help that process, make it cheaper in the long run?

THIERER: I think it would help it in the long run. It's certainly going to help telephone companies provide it, in the short run at least, to a number of rural areas that currently don't have it. And then in the long run, it will bring down prices for everybody, hopefully through increased competition between networks, cable, telephony, and satellite.

HUME: Now, out in the rural areas that I'm familiar with, you don't get cable, and you don't get it through fiber-optic phone line, either. The only way you can get fast Internet connection out in that neck of the woods and many other places I'm sure around the country is through a dish.

THIERER: Right.

HUME: Are the dish operators affected by this legislation?

THIERER: They're not really affected by this at all. Some might say they don't wanted added competition from the baby bells. But I think most consumers would say it's a good thing to have more competition.

HUME: Now, the complaint I guess from the local telephone companies, the baby bells, about the passage of this is — or the complaint from, what, AT&T and others about this — is that the big players are what, that they...

THIERER: Well, they feel that the bells are going to crowd them out of the market, and that eventually they'll control the entire marketplace. The bells have been large monopolies for some time, and that they're going to extend that monopoly.

I don't necessarily think that's the case. I think cable right now, again, 70 percent of the market. They're very large. There's only a handful of them left, large cable firms, in America.

HUME: So you would get Internet service on the same wire that brings you your TV signal if you have cable, correct?

THIERER: That's correct. Or they might be adding new wires as time goes on. But right now, you're getting it through the same wire.

HUME: Now, I'm reading from the Center for Responsive Politics, which keeps track of campaign money, that almost $13 million was pitched by AT&T, Sprint, and WorldCom to defeat the bill, and that the baby bells kicked in close to $20 million. Who is winning this fight? We know the bill passed the House. So, so far, it appears that the Tauzin-Dingell forces are ahead. What's going to happen to the bill in the Senate?

THIERER: Well, unfortunately, it's probably not going to go anywhere in the Senate. There's too many opponents of it. Fritz Hollings, who is the head of the Senate Commerce Committee, is a mortal enemy of deregulation or anything that resembles it. So, the bill faces some pretty tough chances of passage in the Senate. So it may never...

HUME: So, in all likelihood, nothing is going to happen this term.

THIERER: Probably not.

HUME: All right. Nice to have you on. Thank you for coming.

THIERER: Nice to be here.

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