|
by Gene Kimmelman
Consumers Union Washington, D.C. Office
Consumers Union encourages reprints of all advocacy office op/eds. Please contact the Washington D.C. office for copyright release. |
Consumers who want to know why their cable TV bills are so high need only turn to Wall Street. Merrill Lynch recently reported, "The vast majority of cable systems hold monopoly franchises resulting in no competition." Another brokerage house concludes, "The market decided that government policies were a failure and competition presents no risk to cable now, or in the foreseeable future."
Consumers Union thinks these Wall Street analysts are right on the money.
The competition and lower prices promised in the much ballyhooed 1996 telecommunications law have vaporized. The average cable television bill jumped about four times the rate of inflation in the last two years and shows no sign of ebbing. Today only 81 communities in the country have direct cable competition, which drives prices ten to twenty percent lower. The rest of us are at the mercy of a powerful cable monopoly, and the federal agency charged with policing the industry is asleep at the switch.
Unfortunately, satellite television has yet to emerge as a true competitor to cable. Equipment costs, on top of the monthly service charges, push the price for satellite beyond the cost of staying with cable. After getting a satellite dish, consumers also grumble they cannot get local broadcast stations unless they continue to subscribe to cable or put up a costly antenna.
The mirage of "commercial free" television that lured us at the dawn of cable television has also disappeared. The cable industry raked in more than $7 billion in ad revenue last year. First they make you pay astronomical prices for the service, and then they pour on the commercials that bring higher profits.
Although the cable industry blames programming costs for skyrocketing prices, this excuse is deceptive. While programming costs are going up, cable rates are climbing twice as fast. Moreover, eight of the 13 most popular cable networks are substantially owned by cable operators.
As cable industry watcher Bruce Leichtman, has noted, "It's kind of a shifting from one pocket to the next." These cable operators make more money by inflating the cost of programming or making consumers pay for channels they do not want.
Cartoonist John McPherson took aim at this practice in the funny pages with a comic featuring a woman holding her latest cable bill. She tells her mate, "The cable company added 'The Croquet Channel,' 'The Hygiene Channel' and 'The Potato Network.' They raised their rates $15.00."
While the industry barrels out of control, the Federal Communications Commission has abandoned virtually all efforts to police market abuses or challenge inflated prices. As cable rates spike to record heights and big cable monopolies block competition, consumers are seeking action and leadership. Five years ago the agency froze rates for several months at a time when prices rose less rapidly, using its legal responsibility to ensure "reasonable" rates. Why is the FCC silent today?
Consumers Union hopes the agency stands up to the cable industry's abusive behavior and promotes the competition that Congress and consumers were promised. By taking aggressive action to put a lid on cable rates and attack the root cause of the monopolistic excess, the FCC can protect consumers and open the door to competition.
Gene Kimmelman is the co-director of the Washington Office of Consumers Union, publisher of Consumer Reports magazine.
