Administration Favors Phone Firms’ Entry Into Cable, No Re-Regulation

The Bush Administration said Tuesday that it favors allowing telephone companies into the cable-television business but opposes even modest re-regulation of the cable industry.

In fact, Thomas J. Sugrue, deputy assistant secretary of commerce, said President Bush may veto legislation to regulate the industry, even if it includes a provision that would permit phone companies to enter the cable business.

Sugrue’s testimony before a congressional subcommittee broke two years of virtual silence by the Administration on the subject. Critics charge that permitting the phone companies into the business could lead to a massive monopoly over the communications field.

“The Administration believes pro-consumer objectives can best be accomplished in the long run, not by re-regulating the cable industry, but by expanding competition,” Sugrue said.

The Administration is so opposed to regulation that it also cautioned against Congress “attempting to specify detailed safeguards” against the phone companies if they are allowed entry into cable.

Such safeguards would be designed to prevent phone companies from using telephone rates to subsidize their cable-television business or from engaging in discriminatory practices against cable competitors that use their telephone lines.

Sugrue’s staunch free market approach came in a Senate Commerce, Science and Transportation subcommittee hearing on the provision relating to the phone companies. It marked the first time that a Bush Administration official had agreed to discuss its ideas about cable before a Senate panel, even though a bill that would re-regulate the industry already is on the Senate floor and near passage.

Despite Sugrue’s testimony, many in Congress said they still doubt that the Administration in an election year would veto legislation designed to help consumers angry with price gouging and poor service in the cable industry.

The only check on free market competition that Sugrue said the Administration would want to toughen is a provision to forbid phone companies from entering the cable-television business by acquiring existing cable-TV companies. The current bill, sponsored by Sen. Conrad Burns (R-Mont.), would allow phone companies to acquire minority interests in existing cable companies and in some cases controlling interests.

The Administration’s rigid free-market approach offered so late in the process clearly annoyed members of the Senate and provoked several sarcastic exchanges.

Sen. Daniel K. Inouye (D-Hawaii), chairman of the subcommittee, wanted to know why the Administration offered its views only after 10 hearings involving 80 witnesses, and just as the re-regulation legislation is ready for Senate action.

The only other contact from the Administration was a three-paragraph letter sent the day the Commerce Committee took final action on re-regulation. The letter said without explanation that the Administration opposes the bill.

Sen. John Danforth (R-Mo.) asked if the Administration’s stance against regulation means that it does not see the cable industry as a monopoly. Most cable operators have exclusive franchises in their communities.

“I would say it is not fully competitive and not fully a monopoly,” Sugrue answered.

Danforth continued to probe, asking what constitutes competition for cable companies and whether the Administration considers over-the-air broadcasters to constitute effective competition. Sugrue said the Administration is split over what constitutes effective competition.

The White House said Tuesday night that the Administration will announce whether it intends to veto the measure when the legislation is passed by Congress. Most experts believe that it would prefer to see the Senate and House bills die rather than having to face the politically difficult option of vetoing a bill favored by many consumers.