Statement of Brian Dietz , Senior Director Communications ,
National Cable & Telecommunications Association (NCTA)
Regarding GAO Case Study on Wire-Based Competition
It isn’t surprising that new entrants seeking to obtain market share in an already competitive market have set prices below economically sustainable levels. This is all the GAO case study reflects.
As GAO makes clear in its report, direct broadcast satellite (DBS) service represents a “formidable competitor” in the multichannel video marketplace and is the principal source of video competition to cable in the U.S. Wireline overbuilders account for less than 1.5 percent of all multichannel video subscribers while DBS providers serve 22 percent of the video market. Of the more than 33,000 cable-franchised communities in the U.S. , only 433 reportedly have overbuilds.
The GAO case study of six overbuild communities is based on a tiny subset of this already small number of overbuild communities. If anything, the GAO report reinforces the fact that overbuild prices are either not economically sustainable or are sustainable only because of artificial cost advantages and subsidies that are not available to incumbent cable operators. As GAO explains, “the [overbuilders] we interviewed have had difficulties securing continued access to adequate financial resources that are needed to rapidly construct their networks and market their services.” GAO further acknowledges, “We did not evaluate the long-term sustainability of the [overbuilders] in the markets we reviewed.”
In nearly all cases, overbuilders exist in financial distress or as the aftermath of financial distress – unless they are tied to an established utility or not-for-profit entity. According to GAO, all six overbuilders it interviewed “are currently experiencing some level of financial problems.” Whether or not they ever develop sustainable businesses, it is inappropriate to look to the prices offered by a handful of unprofitable overbuild systems as a benchmark for evaluating competitive cable prices in 33,000 communities. As GAO states, “We agree that our approach in this report – case study analysis – is not generalizable to the universe of cable systems.”
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NCTA is the principal trade association of the cable television industry in the United States . NCTA represents cable operators serving more than 90 percent of the nation's cable television households and more than 200 cable program networks, as well as equipment suppliers and providers of other services to the cable industry.