FCC: Cable Rates Up 122% Since 1995
Finds Prices Are 10% Lower in Two Cable System Markets But Dismisses DBS Impact
Ted Hearn -- Multichannel News, 1/20/2009 8:53:47 PM
Washington-- The cost of cable television's most popular programming packages rose a combined 122 percent from 1995 to 2008, according to a controversial report by the Federal Communications Commission released last Friday.
The results reflected the total cost of basic cable, which includes local TV signals that customers must purchase, and expanded basic, a package that includes such popular channels as CNN, Fox News, ESPN, and the Disney Channel that about 90% of subscribers buy.
Congress requires the FCC to prepare a cable price survey annually. As it has in the past, the agency found that the rates of established cable operators go down only when a second cable operator has entered the market.
"Cable prices decrease substantially when a second wireline cable operator enters the market. It does not appear from these results that (satellite TV) effectively constrains cable prices," the FCC said, claiming rates in a two cable system market are 10% lower.
For many years, the cable industry has disputed the FCC's methodology.
The 122% increase, for example, fails to reflect the impact of inflation or take into account qualitative improvements in programming, such as networks that secure important sports rights or networks with shows that have garnered top ratings and collect top awards.
In 2005, then-FCC chairman Kevin Martin banned the agency from analyzing cable rates on a per-channel basis. In prior FCC reports, per-channel cable rates either held steady or declined slightly in inflation-adjusted terms-results that clashed with Martin's view that cable rates were soaring out control.
The FCC said it wasn't necessary to conduct a per-channel analysis because consumers in the main are unable to buy cable networks on a per-channel or a la carte basis.
"If cable operators did offer consumers the option to purchase channels individually, it would be appropriate to consider the prices charged consumers for those channels," the FCC said.
The FCC's refusal to study per-channel cable rates has not been applied to other industries. Last October, Martin announced that cell phone rates from 2002 to 2007 declined 43% on a per-minute basis. He didn't mention that mobile phone carriers do not offer consumers the right to buy just one minute of air time.
The FCC report could have other flaws.
When the FCC stated that satellite TV didn't constrain cable rates, it didn't explain what that meant. It wasn't clear if the FCC was saying that cable rates are what they are regardless of competition from DirecTV and Dish Network, which combined serve about 30 million subscribers.
Elsewhere in the 39-page report, the FCC stated once again that cable systems that have lost at least 15% local market share to satellite providers charge about 2.5% to 4% less that cable operators that have not. That conclusion appeared to contradict the FCC's claim that satellite TV didn't constrain cable rates.
By documenting a decline in cable rates only with the arrival of a second cable operator, the FCC's report seemed to imply that the market in question was transitioning from a monopoly to a duopoly condition. The FCC did not state that for the vast majority of consumers, local pay-TV options went from three providers to four.
As in the past, the FCC in the new report focused on the pricing actions of incumbent cable operators when a second wireline pay-TV provider enters. But the FCC again did not explain why cable rates go down in those markets but satellite TV rates don't move at all.
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