Speech by Robert Sachs (NCTA President and CEO).
Re: Opposition to Government Regulation of Cable.
Date: December 15, 1999.
Source: National Cable Television Association.

Last summer, when I accepted the job of President of NCTA, a lot of people asked me the same question -- why? Why give up a successful consulting business and comfortable life in New England to relocate -- and they'd say this part with more than a bit of irony -- to Washington, DC?

Of course, what they meant was, why would I want to relocate to the political epicenter of our nation? For as those of you who live in California know, epicenters are not where one normally chooses to be.

My reason for taking on the challenge of leading NCTA during a period of industry consolidation and change was really quite simple: I cannot think of a more exciting time in the history of the cable business.

Our industry stands on the threshold of an explosive new era of growth. Technology and services are accelerating today at a faster pace than at any time in our relatively short history. And despite serious competitive challenges, I believe cable’s best years are yet to come.

That’s not to say that change doesn’t come without a price. Like many of you here, I’ve experienced first-hand the effects of consolidation. A merger or acquisition can entail a career change, a move to another community or a redefinition of your job responsibilities. And while I know the personal ramifications can be unsettling, I also know that in order to be competitive, both we and our companies have to adapt for the enormous opportunities that lie ahead.

Last August I had a chance to visit with John Rigas, Chairman of Adelphia Communications. John drove me around Coudersport, Pennsylvania, where he started Adelphia in 1952, and still maintains the headquarters of what is now a 5.3 million subscriber MSO. He described how he first brought three TV signals to this rural community of 2,700 people, and now, almost 50 years later, how his company provides the community with high speed Internet access. With characteristic modesty, John told me, “for years we talked about the promise of cable TV. Now we are on the verge of seeing that vision realized.”

Had I any doubts about my decision to jump back into the fray, that day in Coudersport reminded me of what has always been so special about this industry – its entrepreneurial spirit, its commitment to community, and its ever-evolving nature.

Thinking about the cable pioneers of the 1950's and 60's is very humbling, and, indeed, still makes me feel somewhat like a new kid on the block…. some gray hair notwithstanding.

I began my own career in cable in 1979, doing franchising for Continental Cablevision. Back then our industry had fewer than 15 million customers.

It was an exciting time, working in a business which didn’t have much of a balance sheet but held incredible promise. No longer was cable the community antenna of the 50’s, 60’s and early 70’s. By the late 70’s, we offered consumers a choice of bold new satellite services -- ESPN and Nickelodeon in 1979. CNN, USA, BET and Bravo in 1980. MTV in 81, and, a host of new services since.

Twenty years later, cable programming has not only reached parity with broadcast television -- it often exceeds it. This past fall, for the first time ever, a cable network -- HBO -- won more Emmys than any broadcast network.

We’ve also created new formats of local programming… half a million southern Californians today enjoy the benefits of Cox Communications’ 24-hour Orange County News Channel. And around the country, some 16 regional cable news channels daily illustrate how cable programming affects and assists people's lives.

Cable's extraordinary programming is continually breaking new ground.

But much more lies ahead -- especially with new opportunities in the huge local telephone and exploding Internet access markets. In a dot com world, cable modems provide the ability to navigate the internet at speeds 50 to a hundred times faster than conventional dial-up modems. With one and a half million high-speed customers, or only four percent of households accessing the Internet, we are on the threshold of a major new business.

Last week I attended a summit on the “Digital Divide” hosted by Commerce Secretary William Daley. Over 600 people from the telecommunications and computer industries; health, education and civil rights organizations; and private foundations participated. What struck me was not only the deep commitment of the participants to bringing the benefits of information technology to all Americans, but the opportunity that our industry has to play a lead role in this effort.

In 1996, before there was a government E-rate program, our industry launched “Cable’s High Speed Education Connection,” a national program to provide free high speed Internet connections to all public schools and libraries. And we can take pride in the fact that cable companies have already provided high speed connections to nearly 4,000 schools and libraries. But our industry’s real challenge is to bring broadband technology to every urban neighborhood and rural community that we serve. And so long as our progress is not impeded by government regulation, I am confident that we will do just that.

Here in Greater Los Angeles, for example, MediaOne is aggressively deploying two-way broadband facilities throughout its franchise areas. Its extensive rebuilds are providing both high-speed Internet and telephony services to a population that includes one of America's highest concentrations of Hispanic and African-American households.

And America’s other major cities are being upgraded to broadband….be it by Time Warner and Cablevision in New York; Comcast in Philadelphia; MediaOne in Atlanta; Cox in New Orleans; Charter in St. Louis or AT&T in Chicago, San Francisco and Seattle. The same is happening in rural America where cable companies are deploying broadband in places like the Upper Peninsula of Michigan; Elk Mound, Wisconsin; Ridgecrest, California; and Bismark, North Dakota.

In quite a few markets, cable operators are also offering consumers something they've never had before -- a choice in local telephone providers. Admittedly new, more than a quarter of a million households have already found cable telephony a feature-rich and cost-savings alternative to their local phone monopoly.

But the best is yet to come…… a recent study by the Arthur D. Little Company reports that as many as a third of U.S. households could make the switch to cable telephony. According to the study, this represents potential new revenues of nearly 15 billion dollars a year.

And, of course, cable is offering consumers an impressive array of new digital video channels with sharper pictures and crystal clear sound.

Digital cable programming coupled with savvy marketing is producing extraordinary success in digital roll-outs. As of the end of this year, cable operators will have installed some 5 million digital set top boxes. Comcast and Cox are each adding digital subs at the rate of 10,000 per week. In Dallas and Denver, 25% of AT&T’s cable customers have opted for digital video tiers. And in Tacoma, that number now stands at 33%.

Yes, the cable industry today is literally bursting with opportunity. We're transforming from a business that provided one-way video to one that delivers interactive, integrated digital video, voice and information services.

But technological advances, and our own success, have also spawned competition.

From practically nowhere 5 years ago, DBS now serves more than 11 million multi-channel video subscribers. In size, DirecTV and Echostar rival the 3rd and 7th largest MSO's, and they're each adding new customers at the rate of over 100,000 per month. The ability to offer local broadcast stations will make DBS an even tougher competitor.

Cable also competes with some of the world's best financed and well entrenched telecom giants like SBC, the parent company of PacBell and Ameritech. SBC today controls telephone access lines serving more than a third of the U.S. and recently announced plans to spend six billion dollars to provide digital subscriber lines.

But DSL is not the only form of high speed Internet competition that cable faces. MCI-WorldCom and Sprint have invested several billion dollars in fixed wireless systems and DirecTV, Teligent and Lockheed Martin plan to offer high speed Internet via satellite. Make no mistake -- cable is facing formidable competitors on many fronts.

I hope it will not surprise many of you to hear me say that such marketplace competition is good not only for consumers but also for our business. As we learned the hard way in the aftermath of the 1992 Cable Act, government regulation is usually a poor substitute for competition.

Unfortunately, some of our competitors are trying to use government regulation and litigation to forestall cable’s deployment of high speed Internet and local phone services.

The good news is that their efforts have failed to gain much traction. Most public officials recognize that the Internet has developed as rapidly as it has—precisely because of freedom from any kind of government regulation. And as companies like AT&T and Mindspring show that the marketplace will drive commercial arrangements which serve consumer needs, advocates of government regulation will find themselves increasingly isolated.

So, to our Internet and telephony competitors, I say take a page from cable's playbook. Marketplace competition, not government regulation, should determine a company's success or failure.

To AOL, with your substantial market share and sizeable portfolio of exclusive on-line content agreements, I say be careful what you wish for, you may just get it—in the form of regulation of your business.

And to GTE, our most litigious competitor, I say before filing antitrust suits, look at your own California cable systems where cable modem services are provided in the same manner that you have alleged is unlawful.

Competition, not government regulation, is a much better way to achieve your goals – which, as you know, is why cable supported DBS in its recent bid to obtain the right to retransmit local broadcast signals.

With modern networks, increased channel capacity, new services and strong customer care, there is no reason why cable operators should not be able to compete successfully and win consumer loyalty.

But I must offer a word of caution. While cable programming and operating costs may be rising, we must be disciplined about rate increases -- even when there's ample cost justification. We must moderate such increases in order to ensure that the progress we've made on price deregulation is never reversed.

Cable today is poised on the cutting edge. Simply put, cable is ready to deliver the next generation of interactive entertainment, digital video, Internet and telephone services. And, I assure you, the best is truly yet to come.

As I mentioned at the outset, I began my career in cable twenty years ago. I hope there's a young man or woman sitting here today -- someone just beginning his or her career -- who in twenty years will be standing where I am. Sharing a vision of cable in twenty twenty. Just imagine the incredible story they’ll be able to tell.

Thank you, and I wish all of you a successful Wired 2K.