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The Future of the Interactive Television Services Marketplace: What Should Con- Sumers Expect?

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The Future of the Interactive Television Services Marketplace: What Should Con- Sumers Expect? THE FUTURE OF THE INTERACTIVE TELEVISION SERVICES MARKETPLACE: WHAT SHOULD CON- SUMERS EXPECT? HEARINGS BEFORE THE SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE, AND CONSUMER PROTECTION OF THE COMMITTEE ON COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTH CONGRESS SECOND SESSION SEPTEMBER 27 and OCTOBER 6, 2000 Serial No. 106–166 Printed for the use of the Committee on Commerce ( U.S. GOVERNMENT PRINTING OFFICE 67–119CC WASHINGTON : 2001 VerDate 11-MAY-2000 10:42 Mar 22, 2001 Jkt 010199 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 E:\HEARINGS\67119 pfrm11 PsN: 67119 VerDate 11-MAY-2000 10:42 Mar 22, 2001 Jkt 010199 PO 00000 Frm 00002 Fmt 5011 Sfmt 5011 E:\HEARINGS\67119 pfrm11 PsN: 67119 COMMITTEE ON COMMERCE TOM BLILEY, Virginia, Chairman W.J. ‘‘BILLY’’ TAUZIN, Louisiana JOHN D. DINGELL, Michigan MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts JOE BARTON, Texas RALPH M. HALL, Texas FRED UPTON, Michigan RICK BOUCHER, Virginia CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey Vice Chairman SHERROD BROWN, Ohio JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee CHRISTOPHER COX, California PETER DEUTSCH, Florida NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois STEVE LARGENT, Oklahoma ANNA G. ESHOO, California RICHARD BURR, North Carolina RON KLINK, Pennsylvania BRIAN P. BILBRAY, California BART STUPAK, Michigan ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York GREG GANSKE, Iowa TOM SAWYER, Ohio CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland TOM A. COBURN, Oklahoma GENE GREEN, Texas RICK LAZIO, New York KAREN MCCARTHY, Missouri BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio JAMES E. ROGAN, California DIANA DEGETTE, Colorado JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin HEATHER WILSON, New Mexico BILL LUTHER, Minnesota JOHN B. SHADEGG, Arizona LOIS CAPPS, California CHARLES W. ‘‘CHIP’’ PICKERING, Mississippi VITO FOSSELLA, New York ROY BLUNT, Missouri ED BRYANT, Tennessee ROBERT L. EHRLICH, Jr., Maryland JAMES E. DERDERIAN, Chief of Staff JAMES D. BARNETTE, General Counsel REID P.F. STUNTZ, Minority Staff Director and Chief Counsel SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE, AND CONSUMER PROTECTION W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman MICHAEL G. OXLEY, Ohio, EDWARD J. MARKEY, Massachusetts Vice Chairman RICK BOUCHER, Virginia CLIFF STEARNS, Florida BART GORDON, Tennessee PAUL E. GILLMOR, Ohio BOBBY L. RUSH, Illinois CHRISTOPHER COX, California ANNA G. ESHOO, California NATHAN DEAL, Georgia ELIOT L. ENGEL, New York STEVE LARGENT, Oklahoma ALBERT R. WYNN, Maryland BARBARA CUBIN, Wyoming BILL LUTHER, Minnesota JAMES E. ROGAN, California RON KLINK, Pennsylvania JOHN SHIMKUS, Illinois TOM SAWYER, Ohio HEATHER WILSON, New Mexico GENE GREEN, Texas CHARLES W. ‘‘CHIP’’ PICKERING, KAREN MCCARTHY, Missouri Mississippi JOHN D. DINGELL, Michigan, VITO FOSSELLA, New York (Ex Officio) ROY BLUNT, Missouri ROBERT L. EHRLICH, Jr., Maryland TOM BLILEY, Virginia, (Ex Officio) (II) VerDate 11-MAY-2000 10:42 Mar 22, 2001 Jkt 010199 PO 00000 Frm 00003 Fmt 6011 Sfmt 0486 E:\HEARINGS\67119 pfrm11 PsN: 67119 C O N T E N T S Page Hearings held: September 27, 2000 .......................................................................................... 1 October 6, 2000 ................................................................................................. 59 Testimony of: Case, Steve, Chairman and CEO, America Online, Incorporated ................ 17 Froman, John W., Executive Vice President, Circuit City Stores ................ 72 Gray, Lowell J., General Manager, Shore.Net ............................................... 82 Heffernan, Margaret, President and Ceo, iCast ............................................ 76 Levin, Gerald M., Chairman and CEO, Time Warner, Incorporated ........... 21 Meisinger, Louis M., Executive Vice President and General Counsel, The Walt Disney Company .................................................................................. 68 Wilderotter, Maggie, President and Ceo, Wink ............................................. 64 Material submitted for the record by: Pickering, Hon. Chip, a Representative in Congress from the State of Mississippi, letter dated October 27, 2000, enclosing material for the record ............................................................................................................. 106 Tauzin, Hon. W.J. ‘‘Billy’’, Chairman, Subcommittee on Telecommuni- cations, Trade, and Consumer Protection: Letter dated November 6, 2000, to Lowell Gray, General Manager, Shore.Net, enclosing question for the record, and response to same 99 Letter dated November 6, 2000, to Maggie Wilderotter, President and CEO, Wink, enclosing question for the record, and response to same ................................................................................................... 101 Letter dated November 6, 2000, to Louis M. Meisinger, Executive Vice President and General Counsel, The Walt Disney Company, enclosing question for the record, and response to same ................... 104 (III) 2 VerDate 11-MAY-2000 10:42 Mar 22, 2001 Jkt 010199 PO 00000 Frm 00004 Fmt 0486 Sfmt 0486 E:\HEARINGS\67119 pfrm11 PsN: 67119 THE FUTURE OF THE INTERACTIVE TELE- VISION SERVICES MARKETPLACE: WHAT SHOULD CONSUMERS EXPECT? WEDNESDAY, SEPTEMBER 27, 2000 HOUSE OF REPRESENTATIVES, COMMITTEE ON COMMERCE, SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE, AND CONSUMER PROTECTION, Washington, DC. The subcommittee met, pursuant to notice, at 9:10 a.m., in room 2322, Rayburn House Office Building, Hon. W.J. ‘‘Billy’’ Tauzin (chairman) presiding. Members present: Representatives Tauzin, Oxley, Stearns, Cox, Deal, Largent, Cubin, Shimkus, Pickering, Markey, Boucher, Gor- don, Rush, Eshoo, Engel, Luther, Sawyer, Green, McCarthy, and Dingell (ex officio). Staff present: Linda Bloss-Baum, majority counsel; Kelly Zerzan, majority counsel; Cliff Riccio, research analyst; and Andrew Levin, minority counsel. Mr. TAUZIN. The subcommittee will please come to order. This morning we are pleased to welcome both Mr. Case and Mr. Levin, who will give us an understanding of the implications of this historic merger that their two companies have now pending before the regulatory authorities here in Washington. When Congress passed the Telecommunications Act in 1996, we fully expected that its impact would be nothing short of revolu- tionary. We knew it would dramatically transform the telecom marketplace by providing the requisite incentives to foster pretty bold thinking among companies with regard to technology innova- tion. Clearly we anticipated the convergence of television and com- puters and telephony, but while we had a glimpse of that future, we had no specifics in terms of the technology or the players. For years we had spoken about technological convergence, but at to- day’s hearing we herald its arrival de novo in the form of inter- active television services, a concept that embodies the convergence of television and the computer. Moreover, we anticipated that some of the Nation’s largest com- panies would seek to offer exciting and newly integrated service packages to their consumers. We had a sense consumers would like that, they would like to receive more and more services and pack- ages from different providers, and that in receiving these inte- grated packages, they might get added value and more exciting of- (1) VerDate 11-MAY-2000 10:42 Mar 22, 2001 Jkt 010199 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HEARINGS\67119 pfrm11 PsN: 67119 2 fers. We specifically encouraged traditional telephone and cable companies to penetrate each other’s markets, and, in the context of doing so, to offer a full suite of services to their consumers. Clearly the overarching goal of the Telecom Act of 1996 was to bring about real consumer benefits in the form of more choices, lower prices, and improved product offerings. Mr. Markey and I as early as 1992 joined forces on the floor of the House in the cable act of that year with that specific goal in mind, because Mr. Markey and I, I believe, share a common vision that when you have got one store in town, you generally have bad prices, bad products, bad attitudes; but when you have two stores in town, prices get better, products improve, and certainly attitudes improve. When three stores come to town, all hell breaks loose, and consumers generally are in charge of the marketplace. We also knew that a by-product of the 1996 act’s passage would be that some companies would likely merge. Earlier this year the country’s No. 2 cable company, Time Warner, and the dominant provider of online services in the world, America Online, an- nounced their intention to do just that. It is against that backdrop that today this subcommittee holds its first oversight hearing entitled The Future of the Interactive Television Services Marketplace: What Can the Consumer Expect? I think we are very eager to examine what impact this new enti- ty, if it gains the requisite regulatory approvals to merge, will have on consumer choice in the fast-arriving and much anticipated inter- active television services marketplace.Will consumers have a gen- uine choice among a panoply of competitors in this emerging mar- ket, or will they be left with a Hobson’s choice, electing to enjoy products offered by AOL or Time Warner, or from no one at all? We are particularly interested in learning from our two distin- guished witnesses about what new and exciting services a com- bined AOL-Time Warner intends to offer consumers, and in
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