REPORT SAYS 1996 TELECOM ACT FAILED TO DISCIPLINE CABLE INDUSTRY
The U.S. Public Interest Research Group (PIRG) and other consumer advocates warned Tues. that the cable industry had such a lock on video programming that not having cable was like “opting out of democracy.” In a report Tues. titled “The Failure of Cable Deregulation,” U.S. PIRG said cable rates had risen at 3 times the rate of inflation since the 1996 Telecom Act deregulated cable. For basic and expanded basic, rates have risen by more than 50%, the report said, and some cities, N.Y.C. for example, had been hit particularly hard with increases of as much as 94%.
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Among the U.S. PIRG recommendations was to shift responsibility for cable regulation from the FCC to state public utility commissioners and local franchise authorities. “Return oversight back closer to the people. Get it out of Washington, where they have lost touch with reality,” said Mark Cooper, research dir., Consumer Federation of America (CFA).
Even though 20% of the population has chosen satellite over cable, and chooses free, over-the-air broadcast TV, the advocates appeared to be saying that access to cable TV programming was something of a right and that people who didn’t have access to it couldn’t participate in democracy. “In terms of turning the television off, it’s not realistic to say that’s an option,” said study author Jay Halfon, pres. of N.Y. PIRG. “That is how most people in America get their video programming, their news and information. The problem is that we have a monopoly grip on that access.” Media Access Project Pres. Andrew Schwartzman said not having cable was “to opt out of democracy.” The advocates also said the cable industry was threatening to monopolize Internet access with cable modem service that would outstrip DSL in customers.
An NCTA spokesman said cable’s investment of more than $75 billion in upgrades and rebuilds had spawned more than 300 nationally delivered video networks, high-speed Internet access, video-on-demand, HDTV and competitive local telephone service in many areas. “The wild and unfounded claims of these Washington-based advocacy groups are recycled arguments that fell out of favor a decade ago. The regulatory environment envisioned by Congress in 1996 and maintained by the FCC has fostered the most robust telecommunications marketplace in the world. It’s providing a better deal for consumers, who are getting far more for their dollar,” he said.
While acknowledging the number of satellite subscribers was growing, U.S. PIRG said satellite was a niche product for rural consumers who couldn’t buy cable and for sports and movie enthusiasts willing to pay a premium for more access to games and high-definition programming. U.S. PIRG also pointed to what it called the prohibitive cost of equipment and to some consumers’ not having access to a southern exposure that would allow satellite reception. Cable’s domination of programming and its ability to hold some of that program exclusively through the so-called “terrestrial loophole” threatens the viability of satellite long term, they said. If DBS were truly a competitor, they said, cable wouldn’t still be raising its prices, saying cable operators didn’t even consider DBS in the price equation. The only market force that has managed to temper cable rates is the presence of an overbuilder, the report said, pointing to a General Accounting Office study that found rates were 17% lower when there was an overbuilder.
The cable industry has blamed much of the rate increases on rising costs for programming, but U.S. PIRG said vertically integrated cable operators typically got better deals on programming than did satellite or overbuilders. Increased ad revenue and revenue from new services more than cover rises in programming costs, the advocates said. They said more than 40% of the top cable channels were owned in whole or in part by cable MSOs or by companies with large interests in the MSOs. The advocates also complained of poor customer service by cable operators. U.S. PIRG and its supporters said the cable industry had undermined the leased- access provision of the Cable Act, which requires cable operators to set aside up to 15% of their channel capacity so unaffiliated programmers can offer competing service packages to customers. The cost is so prohibitive, the advocates said, that no one is taking advantage of leased access.
Besides shifting regulatory responsibility for cable, U.S. PIRG and its supports recommended that: (1) Consumers be allowed to choose cable service on an a la carte basis, an idea that cable companies said could ruin their business model. (2) Cable operators be required to adopt “reasonably priced” leased access rates. (3) Public utility commissions ensure a member of the public was put on the boards of all cable operators with more than 4% market share. (4) Viewers be given a voice in programming through local Cable Action Groups that would operate a local audience channel, well- funded and equipped by the cable company. (5) Cable operators be prohibited from entering into exclusive contracts for programming, equipment and other technical services. (6) Cable be prohibited from content restrictions on the Internet.
U.S. PIRG said the cable industry had become too consolidated, with the 10 largest cable operators having 85% of all cable subscribers and the top 3 -- Comcast, Time Warner and Charter -- having 56%.