oversight

Telecommunications: Data Gathering Weaknesses In FCC's Survey Of Information on Factors Underlying Cable Rate Changes

Published by the Government Accountability Office on 2003-05-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                            United States General Accounting Office

GAO                         Testimony
                            Before the Committee on Commerce,
                            Science, and Transportation, U.S. Senate


For Release on Delivery
Expected at 9:30 a.m. EDT
Tuesday, May 6, 2003        TELECOMMUNICATIONS
                            Data Gathering Weaknesses
                            In FCC’s Survey Of
                            Information on Factors
                            Underlying Cable Rate
                            Changes
                            Statement of William B. Shear, Acting Director
                            Physical Infrastructure




GAO-03-742T
                                                May 6, 2003


                                                TELECOMMUNICATIONS

                                                Data Gathering Weaknesses In FCC’s
Highlights of GAO-03-742T, testimony
before the Committee on Commerce,               Survey Of Information on Factors
Science, and Transportation, U.S. Senate.
                                                Underlying Cable Rate Changes


Over 65 percent of American                     Based on interviews with 100 randomly sampled cable franchises that
households currently subscribe to               completed FCC’s 2002 survey, GAO’s preliminary analysis indicates that
cable television service. There has             FCC’s survey may not be a reliable source of information on the cost factors
been increasing concern that cable              underlying cable rate increases. Because of the following problems, GAO
television rates have been rising               found that there are inconsistencies in how companies completed the
faster than the rate of inflation for
the last few years.
                                                survey.

As required, on a yearly basis, FCC                 •   FCC provided minimal instructions or examples on how the portion
prepares a report on cable rates in                     of the survey covering the cost factors underlying rate increases
areas that face and those that do                       should be completed. It appears that cable companies made varying
not face effective competition—a                        assumptions on how to complete the survey.
term defined by statute. For
information used in this report,                    •   FCC’s survey required that cable companies fully allocate their
FCC maintains information on the                        reported annual rate increase to various cost and non-cost factors.
competitive status of cable
                                                        Our preliminary findings indicate that there was inadequate guidance
franchises and annually surveys a
sample of cable franchises.                             on how to achieve this requisite balance, and cable companies
                                                        approached the question in varying ways.
At the request of this committee,
GAO examined (1) the reliability of             Based on preliminary work, GAO found that FCC’s classification of cable
information that cable companies                franchises as to whether they face effective competition might not
provided to FCC in its annual                   accurately reflect current conditions. GAO found instances where
survey regarding cost factors                   information in the survey responses of some franchises would suggest that
underlying cable rate increases and             the criteria for an effective competition finding that was made in the past
(2) FCC’s process for updating and              might no longer be present. However, a finding of effective competition is
revising cable franchise                        only changed if a formal process is instituted. GAO found only two
classifications as to whether they
                                                instances where a petition was filed that resulted in a reversal of an effective
face effective competition.
                                                competition finding.


What GAO Recommends
GAO is continuing to evaluate
these and other issues and may
include recommendations in a final
report to be issued in October 2003.




 www.gao.gov/cgi-bin/getrpt?GAO-03-742T.

 To view the full report, including the scope
 and methodology, click on the link above.
 For more information, contact William B.
 Shear at (202) 512-4325 or shearw@gao.gov.
    Mr. Chairman and Members of the Committee:

    I am pleased to be here today to provide preliminary observations from
    our ongoing work on cable television rates. Over 65 percent of American
    households are currently cable television subscribers. As you have noted,
    Mr. Chairman, cable television rates have been rising faster than the rate
    of general inflation for many years. At the request of this Committee, we
    are providing preliminary observations today on two issues: (1) the
    reliability of the information that cable companies have provided to the
    Federal Communications Commission (FCC) in 2002 regarding the costs
    factors underlying their recent cable rate increases, and (2) FCC’s process
    for updating and revising the classification of cable franchises as to
    whether they are facing effective competition—a statutorily-defined term.
    We plan to issue a report with our final analysis of these and other issues
    in October 2003.

    To address the reliability of information that FCC collected, we randomly
    sampled 100 of approximately 700 cable franchises that responded to
    FCC’s 2002 cable rate survey.1 We selected a random sample of 100 cable
    franchises so that we could make estimates about the entire population of
    about 700 cable franchises that responded to the FCC. We asked these
    franchises a series of questions about how they completed a portion of
    FCC’s survey that asks about the cost factors underlying annual cable rate
    changes. To examine FCC’s process for classifying cable franchises as to
    whether they face effective competition, we reviewed how various
    franchises were classified according to FCC’s information and whether
    these classifications continue to accurately reflect current circumstances.

    Our work has focused on examining whether FCC’s annual report on cable
    rates is providing reliable information on the causes of rate increases and
    the competitive status in video markets. In summary, our preliminary
    analysis suggests that some of FCC’s information on cable companies is
    inconsistent and potentially misleading. In particular:

•   Our preliminary analysis of the responses provided by 100 cable franchises
    indicates that FCC’s 2002 survey does not provide a reliable source of
    information on the cost factors underlying cable rate increases. We found
    two key causes of variation in how companies completed the survey. First,


    1
     FCC samples between 700 and 800 of the universe of roughly 10,000 cable systems using a
    stratified sampling approach based on the status of effective competition and the size of
    the cable operator.



    Page 1                                                                     GAO-03-742T
                 FCC provided minimal instructions or examples on how the portion of the
                 survey covering the cost factors underlying rate increases should be
                 completed. As a result, we found that cable companies made varying
                 assumptions about how to complete the survey. Second, the FCC survey
                 form requires that the reported dollar amounts reported for factors that
                 might underlie rate changes—5 cost factors and a non-cost factor are
                 included on the form—sum to the reported rate increase for the year. In
                 the absence of guidance on how to achieve this requisite balance, cable
                 companies approached the question in varying ways. In particular, most of
                 the companies told us that they adjusted one of the 5 cost factors for the
                 purpose of the required balancing, thereby misreporting actual cost
                 changes that had occurred.

             •   Our preliminary findings show possible inaccuracies in FCC’s current
                 classification of cable franchises regarding their effective competition
                 status. We found indications that there are cases in which a finding of
                 effective competition in a particular franchise area that might have existed
                 in the past no longer seemed accurate. Nevertheless, the determination of
                 effective competition remained in effect because the franchising authority
                 had not filed a petition that would challenge that finding. In fact, we found
                 that such petitions are rare.


                 Cable television emerged in the late 1940s to fill a need for television
Background       service in areas with poor over-the-air reception, such as in mountainous
                 or remote areas. By the late 1970s, cable began to compete more directly
                 with free over-the-air television by providing new networks—available
                 only on cable systems—such as HBO (introduced in 1972), Showtime
                 (introduced in 1976), and ESPN (introduced in 1979). According to FCC,
                 cable’s penetration rate—as a percent of television households—increased
                 from 14 percent in 1975 to 24 percent in 1980 and to 65 percent by 2002.
                 Cable television is by far the largest segment of the subscription video
                 market, a market that includes cable television, satellite service (direct
                 broadcast satellite (DBS) providers such as DirecTV), and other
                 technologies that deliver video services to customers’ homes.

                 Cable companies deliver video programming to customers through cable
                 systems. These systems consist of headends—facilities where
                 programming from broadcast and cable networks is aggregated—and
                 distribution facilities—the wires that carry the programming from the
                 headend to customers’ homes. Depending on the size of the community, a
                 single headend can serve multiple communities or several headends may
                 be required to serve a single large community. At the community level,


                 Page 2                                                           GAO-03-742T
cable companies obtain a franchise license under agreed-upon terms and
conditions from a franchising authority, such as a township or county. In
some cases, state public service commissions are also involved in cable
regulation.

During cable’s early years, franchising authorities regulated many aspects
of cable television service, including franchise terms and conditions and
subscriber rates. In 1984, the Congress passed The Cable Communications
Policy Act, which imposed some limitations on franchising authorities’
regulation of rates.2 However, 8 years later, in response to increasing rates,
the Congress passed The Cable Television Consumer Protection and
Competition Act of 1992. The 1992 act required FCC to establish
regulations ensuring reasonable rates for basic service—the lowest level
of cable service that includes the broadcast networks—unless a cable
system has been found to be subject to effective competition, which the
act defined. The act also gave FCC authority to regulate any unreasonable
rates for upper tiers (often referred to as expanded-basic service), which
includes cable programming provided over and above that provided on the
basic tier.3 Expanded-basic service typically includes such popular cable
networks as USA Network, ESPN, CNN, and so forth. In anticipation of
growing competition from satellite and wire-based providers, the
Telecommunications Act of 1996 phased out all regulation of expanded-
basic service rates by March 31, 1999. However, franchising authorities
retain the right to regulate basic cable rates in cases where no effective
competition has been found to exist.

As required by the 1992 act, FCC annually reports on cable rates for
systems found to have effective competition compared to systems without
effective competition. To fulfill this mandate, FCC annually surveys cable
franchises regarding their cable rates. In 2002, the survey included
questions about a range of cable issues including the percentage of
subscribers purchasing non-video services and the specifics of the



2
 The 1984 Act restricted regulation to only basic services for cable systems not subject to
effective competition. In its rulemaking, FCC initially said that effective competition
existed if three or more over-the-air broadcast signals existed in a given market. Under this
narrow definition, over 90 percent of all cable systems would be subject to effective
competition and therefore not subject to rate regulation.
3
 Basic and expanded-basic are the most commonly subscribed to service tiers—bundles of
networks grouped into a package—offered by cable companies. In addition, customers in
some areas can purchase digital tiers and also premium pay channels, such as HBO and
Showtime.



Page 3                                                                        GAO-03-742T
programming channels offered on each tier to better understand the cable
industry.

Until recently, cable companies usually encountered limited competition
in their franchise areas. Some franchise agreements were initially
established on an exclusive basis, thereby preventing wire-based
competition to the incumbent cable provider. In 1992, the Congress
prohibited the awarding of exclusive franchises, and in 1996, the Congress
took steps to allow telephone companies and electric companies to enter
the video market. Still, only limited wire-based competition has emerged,
in part because it takes large capital expenditures to construct a cable
system. However, competition from DBS has grown rapidly in recent
years. Initially unveiled in 1994, DBS served over 18 million American
households by June 2002. Today, two of the five largest subscription video
service providers are DirecTV and EchoStar, the two primary DBS
companies.

In a recently released report, we found that competition in the
subscription video market can have a significant impact on cable rates.4
Using an econometric model, we found that franchise areas with a second
wire-based video provider had rates approximately 17 percent lower than
similar franchise areas without such a competitor.5 We did not, however,
find that competition from DBS providers is associated with lower cable
prices, although we did find that where DBS companies provide local
broadcast networks to their customers, cable companies provide more
channels than in areas where DBS companies do not provide local
broadcast channels. Moreover, we also found that DBS providers obtain a
substantially higher level of subscribers in areas where they are providing
local broadcast channels.




4
 See, U.S. General Accounting Office, Telecommunications: Issues in Providing Cable
and Satellite Services, GAO-03-130 (Washington, D.C.: Oct. 15, 2002).
5
 In a similar analysis, FCC found that cable rates in franchise areas with a wireline
competitor were nearly 7 percent lower than in franchise areas without such as competitor.
See, Federal Communications Commission, Report on Cable Industry Prices, FCC 02-107
(Washington, D.C.: April 4, 2002).



Page 4                                                                     GAO-03-742T
                      FCC’s annual cable rate survey seeks information on cable franchises’ cost
FCC’s Cable Rate      changes that may underlie changes in cable rates during the preceding
Survey Does Not       year. To evaluate the reliability of these statistics, we asked 100 of the
                      approximately 700 franchises that FCC surveyed in 2002 to describe how
Appear to Provide a   cost change information that they provided to FCC was calculated. Figure
Reliable Source of    1 shows the actual portion of the FCC survey which franchises completed
                      to provide their cost change information.
Information on the
Cost Factors
Underlying Cable
Rate Increases




                      Page 5                                                        GAO-03-742T
Figure 1: Section of FCC’s 2002 Rate Survey Covering Rate and Cost Changes




                                         E. Programming Service Charges in Community
          In the following, the "basic cable service tier" or BST is the service tier that includes the retransmission of
          over-the-air broadcast signals and may include a few satellite or regional channels. A "cable programming
          service tier" or CPST is any other tier containing programming other than that on the BST, pay-per-channel,
          or pay-per-view. CPST1 refers to the major CPST and typically meets two criteria: It has the most channels
          and most subscribers among the CPST tiers (if more than one CPST is offered). Sometimes a "mini-tier"
          with considerably fewer channels has the most subscribers among the CPSTs. This mini-tier is considered
          CPST2 , whether or not it has the most subscribers.

          Monthly Charges for Programming Services                         July 1, 2000         July 1, 2001          July 1, 2002
   48     Monthly charge for BST
   49     Monthly charge for CPST1
   50     Monthly charge for BST plus CPST1 (rows 48 + 49)
   51     Year-to-date change in monthly charge on row 50                       -----

          For July 1, 2001 and July 1, 2002, allocate the change shown on row 51 by estimating the dollars and cents
          that each factor, below, contributed. The total of these factors (row 58) should equal the change on row 51.

   52     License or copyright fees, existing programs                          -----
   53     License or copyright fees, new programs                               -----
   54     Headend or distribution facility investment                           -----
   55     General inflation, not included elsewhere                             -----
   56     Other cost changes (positive or negative)                             -----
   57     Non-cost-related factors (positive or negative)                       -----
   58     Total of rows 52-57 (must equal row 51)                               -----

Source: 2002 FCC Rates Survey

                                                Our discussions with cable franchises indicated considerable variation in
                                                how franchises completed this section of the 2002 FCC cable rates survey.
                                                Our preliminary observations indicate that there are two causes for the
                                                resulting variation: (1) there were insufficient instructions or examples on
                                                how the form was supposed to be completed, leading to confusion among
                                                cable operators regarding what to include for the different cost factors and
                                                how to calculate each of them; and (2) the requirement that the cost and
                                                non-cost factors sum to the reported annual rate increase caused many
                                                cable operators to adjust one or more of the cost factors, thereby resulting
                                                in data that might not provide an accurate assessment of the cost factors
                                                underlying cable rate increases.


                                                Page 6                                                                       GAO-03-742T
                                                           Lack of adequate instructions. Our interviews with 100 cable franchises
                                                           indicate that the lack of specific guidance regarding the cost change
                                                           section of the survey caused considerable confusion about how to fill out
                                                           the form. Every franchise that we spoke with said it was unclear what FCC
                                                           expected for at least one of the six factors (5 cost factors as well as a non-
                                                           cost factor); 73 of the 100 franchises said that the instructions were
                                                           insufficient. In particular, several cable representatives we interviewed
                                                           noted that there were no instructions or examples to show how to
                                                           calculate investment, what types of cost elements should go into the other
                                                           costs category, and what FCC meant by non-cost factors. This lack of
                                                           guidance created considerable variation in the approaches taken to
                                                           develop the cost factors. Table 1 provides information on the approaches
                                                           cable franchises used to complete the portion of the survey pertaining to
                                                           cost and non-cost factors underlying rate changes.

Table 1:Summary of Approaches Used by Cable Franchises to Calculate Cost and Non-Cost Factors

 Type of cost/non-cost
 factor (line of FCC
 survey)                                     Discussion of how franchises approached this factor
 License or copyright                        • Most of the cable companies told us they used specific cost data on existing programming costs to
 fees, existing and new                        develop the cost changes associated with increases in existing programming.
 programs (lines 52 and                      • Thirty-nine of the 47 franchises that reported an increase in new programming costs said they used
 53)                                           actual information to calculate these cost changes.
                                             • Some companies took a standard company-wide approach to estimating programming costs as
                                               opposed to estimating the costs for each individual franchise.
                                             • Some companies combined cost changes for all programming without separating existing from new
                                               programs.
 Head-end or distribution                    • Eighty-three of the 100 franchises we surveyed entered zero for these infrastructure investments. Of
 facility investment (line                     these, 33 told us that there had, in fact, been additional costs for such upgrades that year. The
 54)                                           reasons provided to us for leaving it blank included concern that it would be too difficult to determine
                                               how much of these costs would be appropriately allocated to a certain video service or franchise.
                                             • Some cable companies performed significant calculations to estimate how much should be allocated
                                               to the support of video services, while other estimates did not include detailed cost calculations.
 General inflation (line 55)                 • Fifty-seven of the 100 franchises estimated inflation by using either FCC or Bureau of Labor
                                               Statistics’ inflation factors.
                                             • Other companies left the inflation factor blank because they assumed that most inflation would be
                                               captured in the other cost factors.
 Other cost changes (line                    • Sixty-four of the 100 franchises filled in a zero for the other cost factor. Of these 64 franchises:
 56)                                           • Thirty-two told us that there were, in fact, cost changes that would have appropriately been
                                                   captured in the other category;
                                               • Seventeen told us that they did not understand what items should be included in other costs; and
                                               • Fifteen told us that by the time they got to this line on the form, they had already accounted for
                                                   enough costs to offset the reported rate increase and thus, they did not evaluate whether there
                                                   were any costs that should be included as other costs.
 Non-cost-related factors                    • Eighty-seven of the 100 respondents said they did not understand what non-cost factors would
 (line 57)                                     cover, and as a result, 76 of the respondents left the non-cost factor blank.
                                             • Those that did enter a number for this factor cited such items as a change in profit margin or the
                                               need to establish uniform rates across franchises.
Source: GAO Survey of 100 Cable Franchises




                                                           Page 7                                                                         GAO-03-742T
Requirement that factors sum to the reported annual rate change. Our
survey of 100 cable franchises that responded to FCC’s 2002 cable rates
survey indicated that a second source of confusion relates to the
requirement that the sum of the underlying cost and non-cost factors (see
fig. 1 lines 52-57) equal the change in the franchise’s cable rates (see fig. 1
line 51). This portion of FCC’s survey was originally designed during the
1990s when both basic and expanded-basic services were regulated. At
that time, cable companies were required to justify any rate increases the
cable company implemented based on cost increases that it had incurred
during the year. An FCC official told us that the rate/cost factor portion of
the form was designed to mirror a regulatory form that was used at that
time to justify rate changes. When expanded-basic services were
deregulated in March 31, 1999, FCC realized that cost factors would no
longer necessarily equal the yearly rate change because companies were
no longer required to tie rate changes to explicit cost factors for regulatory
purposes.6 In the 1999 cable rates survey, FCC added the non-cost line in
this section of the survey and continued to require that the cost factors
and the non-cost factor sum to the reported annual rate change.

FCC officials told us that cable operators could use the non-cost factor
element to make up any difference (positive or negative) between their
changes in costs and rates. However, based on our findings, it appears that
this may not have been clearly communicated to cable franchises. We
found that only 10 franchises took this approach and instead, most
franchises told us that they chose to change their estimate of one or more
of the cost factors. In most cases, cable representatives told us that this
meant reducing other cost factors because most franchises told us that
their actual annual cost increases for the year covered by the 2002 survey
exceeded their rate change for expanded-basic service.7 In other words,
most franchises—84 of the 100 franchises we spoke with—did not provide
a complete or accurate accounting of their costs changes for the year. The
following are some examples of how the franchises we surveyed chose to
equalize the cost factors with the rate change.



6
 In unregulated markets, for example, costs are an important factor in price setting by
companies, but several other key factors, such as consumer demand and the
competitiveness of the market also influence market price.
7
 Many franchises said that their profit margins for basic and expanded cable services
decreased in 2002, but many said that those decreases were offset by increased profits
from other services, such as cable Internet and digital cable. The 3 franchises that said that
their rate increase exceeded their cost increases made the two balance by entering a
positive number in non-cost-related factors.


Page 8                                                                         GAO-03-742T
                        •   Fifteen franchises said they entered dollar values in the factors until the
                            entire rate increase was justified and did not consider the remaining cost
                            factors;

                        •   Twenty franchises said they chose to adjust the dollar estimates in existing
                            and/or new programming in order to balance costs and rates;

                        •   Seven franchises said they chose to adjust the costs included for
                            investment in order to balance costs and rates;

                        •   Twenty-seven franchises said they chose to adjust the amount of their
                            inflation estimate to ensure that costs and rates were in balance;

                        •   Twenty-six franchises said they chose to adjust the other costs factor to
                            ensure that costs and rate changes were in balance; and

                        •   Four franchises said they adjusted more than one of the cost factors in
                            order to balance costs and rates. For example, one franchise chose to
                            adjust all of the factors by a uniform percentage in order to retain a
                            constant ratio of cost increases.


                            The 1992 Cable Act established three conditions for a finding of effective
FCC’s Process for           competition, and a fourth was added in the 1996 Act. Specifically, a finding
Updating and                of effective competition in a franchise area requires that FCC has found
                            one of the following conditions to exist:
Revising its
Classification of the   •   Fewer than 30 percent of the households in the franchise area subscribe to
                            cable service (low-penetration test).
Competitive Status
of Cable Franchises     •   At least two companies unaffiliated with each other offer comparable
                            video programming service (through a wire or wireless—e.g., DBS—
May Lead to                 service) to 50 percent or more of the households in the franchise area and
Classifications that        at least 15 percent of the households take service other than from the
                            largest company (competitive provider test).
are No Longer
Accurate                •   The franchising authority offers video programming service to at least 50
                            percent of the households in the franchise area (municipal test).

                        •   A local telephone company or its affiliate (or any other company using the
                            facilities of such carrier or its affiliate) offers video programming, by




                            Page 9                                                           GAO-03-742T
    means other than direct broadcast satellite, that is comparable to that
    offered by the cable provider in the franchise area (LEC test).8

    Franchising authorities have primary authority to regulate basic cable
    rates. However, these rates may only be regulated if the cable system is
    not facing effective competition. Under FCC rules, in the absence of a
    demonstration to the contrary, cable systems are presumed not to face
    effective competition. The cable operator bears the burden of
    demonstrating that it is facing effective competition.9 Once the presence of
    effective competition has been established, the franchising authority is no
    longer authorized to regulate basic cable rates. FCC does not
    independently update or revise an effective competition finding once it is
    made. An effective competition finding may be reversed if a franchising
    authority petitions to be recertified to regulate basic rates by
    demonstrating that effective competition no longer exists. However, such
    petitions are rare.

    Our preliminary review of the approximately 700 cable franchises that
    responded to FCC’s 2002 cable rates survey suggests that the agency’s lack
    of any updates or reexamination of the status of competition in franchise
    areas may lead to some classifications of the competitive status of
    franchises that do not reflect current conditions. For example:

•   Forty-eight of the 86 franchises in the sample that FCC had classified as
    satisfying the low-penetration test for effective competition actually
    reported current information to FCC on their operations that appeared,
    based on our preliminary calculations, to indicate that current penetration
    rates are greater than the 30 percent threshold.10 Ten cable franchises
    appeared to have a penetration rate exceeding 70 percent—a full 40
    percentage points above the legislated low-penetration threshold.

•   Forty of the 262 franchises in the FCC survey that had been classified as
    having effective competition by FCC also reported that the franchising



    8
     For this test to be applicable, the telephone company and the cable provider must be
    unaffiliated.
    9
    In some cases, franchise authorities do not wish to regulate rates and cable companies
    may choose not to file for a determination of effective competition, even if conditions
    warrant.
    10
     We calculated the penetration rate by dividing the number of franchise subscribers by the
    number of households in the franchise area, as reported by the cable company to FCC.



    Page 10                                                                     GAO-03-742T
                          authority was currently regulating basic service rates. This would not be in
                          accord with the statutory requirement. It is possible that such an
                          inconsistency could occur because cable companies incorrectly completed
                          FCC’s survey in some fashion.

                      •   Although the survey form asks the cable franchise whether they face
                          effective competition in the franchise area, those responses are not always
                          consistent with information maintained by FCC regarding whether there
                          has been an official finding of effective competition. When FCC’s
                          information conflicts with the survey response, FCC overrides the answer
                          provided by the cable franchise. We found that FCC staff overrode the
                          survey responses on effective competition for 24 percent of all franchises
                          in its 2002 survey.

                          Also, we have searched for instances in which franchising authorities
                          sought to have a finding of effective competition reversed. We found two
                          instances in which FCC reversed a finding of effective competition.
                          However, in one of these instances involving ten franchises in Delaware,
                          some of the franchises appear to remain classified as having effective
                          competition even though FCC reversed the position in 1999.

                          In its 2002 Report on Cable Industry Prices, FCC acknowledges that the
                          classification of the competitive status of some franchises may not reflect
                          current conditions. Some franchises that face competition may not have
                          filed a petition, and therefore are not classified as facing effective
                          competition. Also, some franchises may have previously met the criteria
                          for a finding of effective competition, but because of changing
                          circumstances may not currently meet the criteria and remain classified as
                          facing effective competition.


                          We are conducting additional work on the issues discussed today and a
Additional GAO Work       more complete analysis will be included in our final report, which we plan
on Cable Rate and         to issue in October 2003. In addition to the topics discussed today, we will
                          be providing a more comprehensive analysis of the factors underlying
Competition Issues        recent cable rate increases, the impact of competition on cable rates and
                          service, and cable tiering issues.


                          Mr. Chairman, this concludes my prepared remarks. We would be pleased
                          to answer any questions you or other members of the Committee may
                          have.



                          Page 11                                                         GAO-03-742T
                  For questions regarding this testimony, please contact William B. Shear on
Contact and       (202) 512-4325 or at shearw@gao.gov. Individuals making key
Acknowledgments   contributions to this testimony included Amy Abramowitz, Mike Clements,
                  Keith Cunningham, Michele Fejfar, Wendy Turenne, Mindi Weisenbloom,
                  and Carrie Wilks.




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                  Page 12                                                       GAO-03-742T
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