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'TIS THE SEASON FOR HIGHER CABLE BILLS
WASHINGTON, DC -- As the holiday season approaches, cable TV companies are delivering an unwelcome "gift" to consumers: price increases.
In what has become a sort of annual holiday tradition, cable companies are announcing new rate hikes for the coming year. Here are just a few recent examples:
· AT&T Broadband announced that it will raise cable TV rates in Massachusetts by an average 7.8 percent for standard cable subscribers next year.
· Cablevision Systems Corp. will boost rates in the New York metropolitan area by an average of 5.26 percent next year.
· Comcast is raising cable rates for Washington, DC customers by 3.5 percent in December after a 5 percent increase last January. Nashville-area customers with Comcast's basic expanded cable service saw their bills go up 7 percent last month.
· Time Warner Cable will increase rates 7 percent for customers in Raleigh, Durham, Chapel Hill, and Charlotte, N.C. next year. Time Warner is expected to raise rates nationwide by an average of 6 percent in 2003.
· Cox Communications raised prices 7 percent this month for Baton Rouge, La., customers with basic expanded service.
The holiday round of cable rate hikes is part of a troubling trend that dates back to 1996 when Congress passed the Telecommunications Act to initiate deregulation of cable companies. Supporters of the law said that cable deregulation would benefit consumers by delivering lower prices and greater competition from market entrants challenging cable providers. But in the six years since the law was passed, cable rates nationwide have skyrocketed 45 percent, and 95 percent of American households still have only one cable company in their communities.
When a cable company raises prices, it often blames the costs of upgrading networks and paying for programming such as sports channels. But industry data show that the costs of upgrades and programming are more than covered by the increase in cable revenues from advertising, pay-per-view services, and cable modem services.
Another popular argument by cable companies is that, while rates have gone up, the price per channel has dropped. However, that argument raises the question of how many cable companies actually let consumers purchase only the cable channels they want on a per-channel basis. The answer is none.
Some cable companies dismiss complaints about the lack of competition by pointing to satellite television. But satellite has yet to pose a serious competitive threat to cable. Satellite companies are unable to provide local TV channels in many areas due to technical limits, and satellite tends to be more expensive than cable, especially when installation and equipment costs are included.
The proposed merger of satellite companies EchoStar and DirecTV understandably raised antitrust and competitive concerns, but under modifications proposed by the companies, the merger would have allowed them to offer local channels nationwide and present a real challenge to cable giants. Rather than work with the companies to restructure the deal, the Federal Communications Commission (FCC) simply rejected the merger. The FCC has also refused to grant licenses to companies seeking to compete with cable TV service, such as Broadwave USA and its Northpoint technology.
Clearly, cable deregulation is not benefiting consumers as promised. Congress deregulated cable monopolies before competitors entered the marketplace and demonstrated an ability to compete. Lawmakers routinely hear complaints from constituents about cable prices and less-than-stellar service, but they have failed to take steps to correct the problems. Meanwhile, the FCC is apparently unwilling to lift a finger to help consumers harmed by cable's monopolistic practices.
Congress and the FCC need to go back to the drawing board and fix the Telecommunications Act in order to promote competition so that consumers can see the increased choices and lower prices that they were promised six years ago.
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