FCC: Cable Rates Up 122% Since 1995

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The cost of cable television's most popular programming packages rose a combined 122% from 1995 to 2008, according to a Federal Communications Commission report released on Jan. 16.

But the report did not look at per-channel cable rates, which have generally been stable, meaning that cable operators have been adding channels about as fast as they have been raising rates.

The FCC's 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 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.

Cable has long 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 sports rights or networks with high-rated or award-winning shows.

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 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 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 agency 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 than cable operators that have not. That conclusion appeared to contradict the FCC's claim that satellite TV didn't constrain cable rates.

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