Consumers' pocketbooks are being hammered because cable has few real competitors. Satellite is only now beginning to compete with cable to provide television services throughout the country, and most Americans have only one cable operator to choose in their own neighborhoods. This lack of competition has allowed cable rates to rise dramatically.
Satellite television offers only limited competition
Satellite television's growth as an effective competitor to cable has been hampered by technological constraints. For instance, in some areas satellite is unable to provide local TV channels and subscribers' homes must have unobstructed south-facing views to pick up signals. Read the FCC's satellite television factsheet. Also, cable has a competitive edge because it can offer consumers the advantage of television programming and a high-speed Internet bundle. Read more in a Consumers Union letter (PDF) to the House Energy and Commerce Committee, Subcommittee on Telecommunications and the Internet.
The National Association of Telecommunications Officers and Advisors (NATOA) detailed how hard it is for communities to have control over the monopoly cable companies that are supposed to serve them in comments to the FCC (PDF). And one of only two satellite companies is owned by News Corp., a broadcaster and programmer, that maximizes profits by raising – not lowering – prices for the popular programming consumers want.
Cable Monopolies Cost Consumers
The result of this cable market dominance is costing consumers an estimated $4.5 billion to $6 billion per year more than if there was real competition, according to a Consumers Union (CU) and Consumer Federation of America (CFA) report on cable prices (PDF).
The FCC's Tenth Annual Report on cable competition (PDF) shows that a staggering 98% of the country only has one cable company to pick from, and the four largest cable companies serve more than 50% of all U.S. cable subscribers.
Competition does more than lower prices and improve service quality — it can also help speed the transition to digital television, according to Public Knowledge President Gigi Sohn in testimony at a Senate Commerce Committee hearing on satellite TV legislation.
Media Consolidation Influences Cable Costs
Media concentration is linked to the endless upward spiral in cable rates and other anti-consumer practices. Today, a handful of companies own the major networks and cable systems, as well as the major studios that produce the programs that we watch. The America Channel, an emerging independent cable network, filed comments with the FCC (PDF) explaining how hard it is for independent cable channels to get carried on cable.
Control in the Hands of Few
Six media companies dominate the programming shown on cable. Each of these companies is either a national network broadcaster, a cable or satellite operator or has significant ties to both.
Each of these companies is also a national network broadcaster, a cable or satellite operator, or has significant ties to both.
- Disney owns the broadcast network ABC, broadcast stations and cable networks such as ESPN, Lifetime, A&E, History Channel, and SoapNet
- Viacom owns broadcast networks CBS and UPN, local affiliates reaching almost 39 percent of the American television viewing audience, and cable channels including MTV, BET, Comedy Central, Nickelodeon, Showtime, Spike TV, CMT, and VH1
- Time Warner owns the second largest cable company in the country, and owns the WB broadcast network, and cable channels including CNN, Headline News, HBO, Court TV, TBS, TNT, Oxygen and Cartoon Network
- General Electric owns broadcast network NBC and local broadcast outlets as well as cable networks Bravo, USA, Sci-Fi, Trio, CNBC, and MSNBC
- News Corp / Liberty Media owns the Fox broadcast network, local affiliates of both Fox and UPN reaching about 39 percent of the American TV viewing audience, national DBS satellite operator DirecTV and cable channels Fox News, FX, National Geographic and more than a dozen Fox Regional Sports networks
- Liberty Media is the largest single shareholder of News Corp and owns channels like The Hallmark Channel, Discovery, Animal Planet, QVC, Starz, and TLC
- Comcast is the largest cable operator with 23 million cable subscribers, and also owns a significant stake in channels like TV One, E!, The Golf Channel, Outdoor Life Network, G4techTV and regional sports networks serving three of the nation's six largest metropolitan areas—Chicago, Baltimore-Washington, and Philadelphia. Comcast recently purchased a significant stake in MGM, with Sony, and signed new network development pacts. Analysts anticipate Comcast will launch more new networks that they own--not from independents
According to an article in Washington Monthly from television executive Ted Turner, 90 percent of the top 50 cable TV stations are owned by the same parent companies that own the broadcast networks.
Consumer Groups Warn Policymakers
Consumers Union (CU) is also concerned about the merger between the satellite company DirecTV by News Corp., the parent company of FOX. CU and Consumer Federation of America (CFA), testified (PDF) before the House Judiciary Committee and testified at a Senate Judiciary Committee hearing warning that the merger will lead to reduced competition and higher prices.
CU and CFA also filed comments (PDF) and economic data (PDF) with the FCC about that merger to demonstrate the harmful impact the merger would have on consumers. Because News Corp owns not only a broadcast network (FOX), but dozens of cable channels and local broadcast stations, Consumers Union and Consumer Federation of America argued that without proper oversight, they could raise prices for high-demand cable and broadcast channels to every cable and satellite provider.
The bottom line is that there are only two large satellite providers in the U.S. to compete with cable, and with the DirecTV/News Corp. deal, one of them has extensive ties to the cable and broadcast industries.
Today's New Technologies
Today, new technologies are emerging that may lead to mre competition for television programming. In addition to the limited competition satellite and upstart cable companies have provided, local phone companies have announced their intentions to enter the market too. But these companies are targeting upscale neighborhoods, meaning competition for average consumers might be years away.
Until those new technologies can effectively compete with cable, one suggestion to address escalating prices is to allow consumers to have cable channel choice. Take Action on cable channel choice, then learn what you can to about your own cable bill in Consumer Tips. Then Get Involved to make a difference for your community.