Competition and Consumer Protection Issues in the Digital Economy

Luncheon Address to Wireless Communications Association

Date:
By: 
Mozelle W. Thompson, Former Commissioner

Thank you for inviting me to speak to your conference today. I am happy to be here because it is an important and exciting time for media and entertainment; a time marked by change and promise for your industry. In fact, the recent change of your association's name from the Wireless Cable to Wireless Communications Association reflects not only the development of your industry but the new ways in which you will interact with consumers, and how agencies like the FTC will interact with you.

As you know, the Federal Trade Commission is a small independent agency with a broad mandate over both anti-trust and consumer protection issues. Our work is based on the belief that competition among producers and information in the hands of consumers bring the best products at the lowest prices, spur innovation and strengthen the economy.

Among our roles, historically, has been the examination of competition in the cable and entertainment industries. For example, our consent order on the merger between Time Warner and Turner several years ago was instrumental in guaranteeing that alternative distributors of multichannel video like yourselves have access to the programming you need to secure a spot in the market for these services.

While wireless video technology has been a reality for quite some time, it wasn't until the passage of the Cable Act in 1992 that companies like yours had the tools to compete with traditional cable operators. And if, as expected, the FCC grants permission for wireless cable spectrum to be used for two-way digital services later this year, your will have an opportunity to develop into full-service communications companies.

One need only to look at the evening paper to see evidence of the convergence of video, telephony, and interactive delivery systems to a digital format. And consumers are already faced with increasing choices in a deregulated telecommunications world. The FTC will help shape this marketplace by creating and supporting a climate for innovation and competition.

As technological improvements continue to break down traditional barriers between media, information services, telephony and wirless cable, there will be new opportunities for growth and development. Just yesterday, a new investment banking report predicted that the number of merger transactions in the media and communications industries is likely to double in the next year.

For the Commission, however, the critical questions in the area of changing technology are the same as for all industries...Namely...

1) What kind of market do we have? Industry based? Product based?

Our traditional concern with this industry was the domination of markets by a single cable provider, i.e., horizontal relationships. We're placing a renewed emphasis on examining vertical market structures...in other words...are consumers getting all their communications services from one source and what is the implication of that type of control?

2) Is there a climate for innovation and competition?

Innovation has been the driving force of the communications industry. The experience of your own industry, however, shows that new technologies can lay dormant unnecessarily if market barriers are not addressed.

3) What is the benefit for consumers?

This is our bottom line. And we'll have to evaluate it more rapidly and effectively than ever before because of the pace with which this industry is growing and changing.

At the same time, we're just as concerned with consumer protection as with consumer choice. In recent years, one of our major roles has been to monitor and evaluate both fraud and privacy on the Internet. Those WCA members involved in interactive data services are likely already aware of the myriad of issues we're dealing with.

On June 4, for example, the Federal Trade Commission sent Congress a comprehensive study of on-line privacy, concluding that industry progress on protecting Internet users has been disappointing--especially at sites directed at children. We were surprised at the detailed and personal nature of family information some sites collect from children without any parental consent. As a result, the Commission has proposed that Congress take legislative action to require parental permission before identifiable information is collected online from children 12 and under. We believe that this recommendation is modest, well-reasoned and sensible.

The collection of personal information from children online is not the only threat to privacy on the Internet. We know that consumers generally are deeply concerned about the security of personal information collected on line. Our study confirms that the vast majority of commercial Web sites are collecting enormous amounts of information without telling consumers how it will be used or allowing them to limit its use. The FTC will continue to work on this important issue and will provide Congress with further recommendations this summer.

The Commission is also actively monitoring on-line services and vigorously prosecuting fraud. Since 1994, the FTC has brought over 30 federal actions against Internet-related fraud and deception, making the Commission one of the most active law enforcement agencies in cyberspace. We expect our role in this area to expand rapidly.

The Internet and interactive data transfer systems in general will be the backbone of the growth of commerce in the next century. The Commission believes that growth will be stunted if consumers don't feel secure using these services.

The membership of the WCA will be challenged by all these issues as your role in the electronic marketplace grows and changes. Although building markets for these products/services will be difficult, we welcome WCA members into these fields. FTC's key issue is choice...choice for consumers to pick among service providers...and choice for consumers to deal with providers on their terms with full knowledge of implications.