Lies, Damn Lies, and Cable Rate Increases Posted by Bob at 12/07/06 12:02 PM

The Wall Street Journal is out with an interesting article today headlined “Cable Rate Increases Are Smallest in Years.”

No problem there. Cable companies are saying they plan to raise their rates at an ever-so-slight slower rate than they have in years past.

But we have some real problems with the story that follows – mainly that it is highly misleading, to put it charitably. And we have a bigger problem this same pretzel logic is now being used by the chairman of the Federal Communications Commission to justify a plan to neuter local authorities in cable franchise negotiations.

Here’s how the story written by WSJ reporter Sarmad Ali begins:

“For years consumers have enjoyed falling phone rates thanks to increasing competition in the telecommunications business. Now competition is beginning to have a similar effect on how much households pay for television service.”

With a beginning like that, one might reasonably expect a story on how new competition in the cable television business is driving down prices for consumers, right?

Not so much. Here’s the next paragraph, with the emphasis added by us.

“With telephone companies pushing into the TV business, rate increases planned by cable operators for 2007 are going to be the most moderate in years. Next year, for example, Comcast Corp., the country's largest cable operator by number of customers, will raise the cost of its most popular 75-channel analog package an average 4.5% – from about $41 a month to $43 – its lowest increase in more than a decade.”

Regular readers of Now Hear This will know that we have been blogging about the issue of spiraling cable rates quite a bit in recent days. Maybe we are being nitpickers, but we think a slightly smaller increase is still an increase – and a pretty big one at that.

Big phone companies such as Verizon and AT&T have been using this same tortured logic and fact-twisting to convince federal and state officials to allow them to begin offering cable television services in their communities without fundamental consumer protections that have applied to other subscription TV providers.

Ironically, Verizon just announced that it will be raising the rates for its recently-introduced FiOS cable television service by 7.6 percent.

Want to hear something even more ironic? The WSJ article mentions that fact, near the bottom of the piece.

Now the truly dangerous part of all this.

Federal Communications Commission Chairman Kevin Martin is using this same flawed argument to underpin a new push he is making to eliminate the ability of local governments to require basic consumer protections when phone companies ask to provide TV service. The proposal would handcuff local authorities in negotiating concessions by allowing phone companies to start offering TV service without those protections if they can't reach agreement with local communities within 90 days.

Broadcasting and Cable has the details of Martin’s plan in an article you can view here.

Martin outlined his plan in a speech at a telecom conference in Washington on Wednesday, which you can read here. Basically, Martin's plan is the same one the phone companies tried unsuccessfully to get through Congress this year.

We will leave it to you to read the speech and decide whether Chairman Martin thinks his job is about serving consumers and the public – or serving the phone companies.

comments (4)

1 Posted by June Harris at 12/08/06 07:18 PM

In California the cable companies have a total MONOPOLY. If I am unhappy with the company (and I am) I have no choice. It's either TIME WARNERS or nothing.

2 Posted by Rich at 12/08/06 08:10 PM

It's finally time for a really savvy entrepreneur to step forward and offer cable television to consumers with "a la carte" channel selection costing approximately .99 per channel. I really believe this would work.

3 Posted by Tom Allibone at 01/09/07 09:08 AM

New Jersey Governor Corzine just signed a new statewide TV franchise bill into law. The new law makes the NJBPU responsible for administering the new law and the state agency already approved Verizon's application before it even setup it's operating rules. The new law is nothing more than bait and switch because it is not a statewide franchise law but rather a systemwide franchise. At the legislative hearings and in the state press, everyone was talking about the cable TV rate hikes but noone talked about the Verizon phone service rate hikes. For those of you who think that rates went down, I have a bridge for sale. Since 2003, New Jersey basic phone rates went up over 32%. Basic business lines went up 101%. The most recent hikes went into effect on 11/1/06 with no press coverage. When I discovered that the price increases were never publicized, I discovered that Verizon does not have to publicly disclose rate increases. During the public hearings, many Legislators claimed that FCC studies show that cable rates go down when there is competition. While short term marketing gimmicks may produce a very short lived price reduction for some consumers, this should not be confused with longterm benefits. Again, if you look the FCC's "CALLS" order that was supposed to reduce long disatnce calling plans and eliminate plan fees and minimum usage fees, the consumer benefits only lasted about 12 months. A recent study of AT&T long distance rates shows the basic rate at 42 cents per minute. In the end the "CALLS" order was nothing more than the FCC acting as the ring leader for the telecommunications cartel. In the end, millions of seniors have been harmed and the creation of the latest cable TV duopoly will do nothing. Lastly, think about this. A few years back AT&T went out and bought up the cable TV industry for mega billions. Why did the company buy the industry and then sell it back for 50 cents on the dollar? I suspect if AT&T still owned the assets, the SBC/ATT merger would never have been approved. The latest ATT/Bell South merger revealed that AT&T was intentionally raising basic rates as part of a "harvesting" strategy to drive customers away. This strategy targeted millions of seniors who have been loyal customers for years and the FCC did nothing to protect the public interest after AT&T told the federal regulators about the carrier's policy.

4 Posted by DURWOOD at 01/18/07 11:33 AM

I TOO HAD AT LEAST 75 CHANNELS(WATCHED ONLY 17 OF THEM)SO I CUT THE SERVICE, BOUGHT RABBIT EARS(19.99)HAVE 7 CHANNELS FOR NEWS,INFO,& FAVORITE PROGRAMS...I FIGURED $60 A MONTH SAVINGS I COULD BUY ME A DVD OR ALBUM (6/MONTHLY) TO SHARE AND OR TRADE WITH FAMILY AND FRIENDS..CATCHING UP ON MY READING ALSO(BOOK STORES HAVE BARGAINS ($5 BOOKS)NOT TO MENTION THE LIBRARY!