Editor’s note: Robert Johnson is president, Consumers for Cable Choice, national alliance of public interest groups dedicated to bringing competition to cable television consumers.
WASHINGTON,When prices are rising and services are declining, there is usually a monopoly lurking somewhere close.
This is the case for millions of cable subscribers across America whose bills are going up while they get less and less in return for their money. Now the cable companies are working frantically to block companies who want to compete and offer better service. For customers, it’s like trying to leave early during a bad movie, only to find the theater doors are locked.
Good news could be on the way from federal bills introduced in the House by Representatives Marsha Blackburn of Tennessee and Albert Wynn of Maryland, and in the U.S. Senate by Senators John Rockefeller of West Virginia and Gordon Smith of Oregon.
The Video Choice Act of 2005 would put video competition on a fast track by streamlining the franchising process required when competitors enter local cable markets. This measure is not popular with cable companies, but it will be very popular with cable customers if it is enacted.
(For more about the bill, see: http://www.natoa.org/public/articles/S1349_Smith-Rockefeller.pdf )
A case in point is Montgomery County, which includes part of Rep. Wynn’s district. With no competitive pressures in sight, Comcast has been hiking rates for years at nearly three times the annual inflation rate. Comcast consumers this year are paying nearly 10 percent more than last year for basic service. Just across the state line — where Comcast has to compete for business — Washington DC Comcast customers typically pay $5.50 less per month than their neighbors across the state line
According to the Consumer Federation of America, average cable rates have risen by nearly 60 percent since 1996, far greater than the rate of increase for the average American’s paycheck. Every year that passes without competition enables the cable industry to take a bigger bite from consumers’ wallets. All this as the costs of other technologies — from cell phones to Internet access — have been falling, while the quality of services has uniformly improved.
We might judge the cable industry more leniently if, in exchange for these higher prices, it were offering something resembling better service. But that is far from the case. A survey by J.D. Power & Associates confirms our own everyday experience. It found that customer satisfaction rates for cable consistently lag behind those of other technology-based services.
More Choices, More Quality?
The Wynn bill is not based on a complicated economic theory. It simply assumes that where consumers have more choices, competition will multiply and services will improve.
The Government Accounting Office has put a hard number on this commonsense view. In a study conducted last year, it found that in markets where consumers had choice, average prices were 15 percent lower than in markets where one cable company had a monopoly. The downside: Out of 33,760 municipalities where cable service is offered, fewer than 4 percent have any real competition. That means the cable industry’s monopoly now extends over 96 percent of American markets.
But some telecommunications companies want to change that by offering video services over state-of-the art, high-speed networks. For the first time ever, cable would face real competition from rivals offering an alternative pipe into homes. Consumers could expect lower prices and improved services, just as they experience in other competitive markets.
Cable companies are pulling out all the stops to block competition and protect their monopolies. For one thing, they accuse competitors of trying to avoid local fees. But this is a diversion. The Video Choice Act requires competitors to pay fees equivalent to those paid by cable companies — and carry the same public, government and educational channels as well. Local governments would also have the authority to enforce consumer protection laws.
In short, consumers will be better off with cable competition by any measure. But it won’t happen by sitting still. Other Congressional voices must share in Rep. Wynn’s foresight and concern for cable consumers.
Unless Congress gives rival networks a real chance to compete, cable’s history of price hikes and poor service will play over again and again, just like a bad movie. And consumers will continue to be trapped by poor service and rising prices — leaving only cable monopolies to reap the benefits.
Beyond the Video Choice Act of 2005, other federal legislators are contemplating telecommunications reform. I wholeheartedly encourage them to do so, but hope they approach this much needed action thoughtfully, and with consumers in mind.
Robert Johnson is president, Consumers for Cable Choice, national alliance of public interest groups dedicated to bringing competition to cable television consumers For more information, see: www.consumers4choice.org