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Telecommunications industry

U.S. Telephone Association Challenges Federal Cable TV Ban

Strategic Insights

— 1 min read

The U.S. Telephone Association (USTA) has embarked on a legal crusade to overturn the federal ban on telephone companies providing cable TV services, citing First Amendment rights and the need for competition. The association, along with several of its member companies, has filed complaints in federal court, arguing that the ban is unconstitutional and restricts consumer choice. Meanwhile, a General Accounting Office (GAO) report reveals that major telephone companies have significantly wider profit margins than cable TV companies, leading to concerns about the impact of potential deregulation.

Key Takeaways:

  • The USTA has filed a complaint in the U.S. District Court for the District of Columbia to declare the federal ban on telcos providing cable TV services unconstitutional.
  • Six major Regional Holding Companies (RHCs) have filed similar suits: Ameritech, Bell Atlantic, Nynex, Southwestern Bell, BellSouth, and US West.
  • USTA President Roy Neel argues that the ban violates First Amendment rights and restricts consumer choice.
  • Two courts have already deemed the ban unconstitutional, with one court ruling in Virginia and another in Washington state.
  • The USTA is hedging its bets by filing for a preliminary injunction against enforcement of the cross-ownership ban.
  • If successful, the suit could lead to all USTA member companies being grandfathered under any legislation passed by Congress, allowing them to offer video and cable TV services.
  • The association and other groups are calling for changes to the Hollings bill (S. 1822) before it passes out of committee.
  • A U.S. General Accounting Office (GAO) report shows that major telephone companies have significantly wider profit margins than cable TV companies.

Statistics:

  • AT&T had the largest cash flow from operations in 1993: $7.1 billion.
  • GTE reported $5.3 billion in cash flows from operations in 1993.
  • The two largest cable providers, TCI and Time Warner, had cash flows from operations of $1.3 billion and $1.5 billion, respectively.
  • RHCs such as Ameritech and Bell Atlantic have significantly wider profit margins than cable TV companies.

Sources:

  • LOCAL TELECOM COMPETITION NEWS
  • The Cable Communications Policy Act of 1984
  • U.S. General Accounting Office (GAO) report on telecommunications and five leading cable TV companies profitabilities

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