Currently, only two percent of all Americans have more than one cable company to choose from, but those lucky few are paying 10 to 20 percent less than the rest of us who subscribe to cable. That's because the cable industry has evolved as a local monopoly, with little government, consumer or rate protections. As a result, cable companies for the most part have been able to raise rates without the check of competition or any meaningful regulation. In 2005, the big cable companies are expected to raise rates by about six percent.
Results of Deregulation
Until 1984, local governments kept cable prices in check. Then deregulation resulted in a torrent of price hikes, interrupted only by a brief period, 1993-1996, when rates were regulated. The Telecommunications Act of 1996 opened the flood gates to deregulation and more price hikes. Since passage of the 1996 Act, cable rates have increased by 59% -almost three times the rate of inflation –according to the Bureau of Labor Statistics.
In deciding to deregulate cable, Congress argued that market forces — i.e., competition from direct broadcast satellite (DBS) services and telephone companies — would help to control the rates for cable programming and create more programming choices for consumers. This has yet to be seen. In fact, consumers have faced ever-increasing cable bills after the Act's passage.
The Consumer Federation of America's Director of Research, Dr. Mark Cooper, along with Consumers Union, has published detailed analytical reports demonstrating that cable rates are dramatically higher than they would be in a competitive marketplace.
- In 2002, investigated the lack of effective competition (PDF) from other providers, including satellite, and failed technologies like wireless cable
- In 2003, detailed how dominant cable companies justify rate increases (PDF) — and how they abuse their monopoly power
- In 2004, analyzed media conglomerates' channel bundling (PDF) and how the lack of channel choice keeps prices artificially high
Lack of Competition
The significant competitive entry by telephone companies into the video market that Congress anticipated when it deregulated cable has failed to surface. Another Consumer Federation of America (CFA) report shows that competition between cable and satellite has failed to discipline cable's pricing power. Facing no meaningful competition or oversight, cable companies can raise monthly rates with impunity.
Even if cable had effective competition from satellite and telephone companies, it would still be hard to lower cable prices because the same conglomerates that own cable companies also own the programs they distribute. HearUsNow.org's page on cable's domination in the market explains what these companies own.
Cable Giants Grow Out of Control
Industry consolidation has also contributed to rising cable rates. Reports from the federal government's investigative arm, the Government Accountability Office (GAO), found in a study of cable prices (PDF) that as cable companies get larger, and as they cluster and dominate regional areas, prices rise faster.
Consumer Groups Voice Concerns
Congress, spurred on in part by thousands of letters from people outraged at exploding cable bills, held several hearings on the issue. A March 2004 Senate Commerce Committee hearing featured testimony from Consumers Union's Public Policy Director Gene Kimmelman and Montgomery County, MD Councilmember Marilyn Praisner and upstart cable company Knology CEO Rodger Johnson who lay the blame where it belongs — on cable companies that block competition and programmers that obstruct consumers' choice of their channels.
The Senate Judiciary Committee, in a February 2004 hearing, explored cable's competition from the satellite industry and small cable operators. Consumer Federation of America's Director of Research, Mark Cooper, argued that current competition isn't effective at lowering rates. Rodger Johnson of Knology argued that upstart cable companies lower rates for consumers.
Also at the hearing, Coralie Wilson, President of the National Association of Telecommunications Officers and Advisors, an organization of those responsible for local governments' telecommunications policy, testified about the difficulties local policymakers face in dealing with cable companies. Scott Cleland, CEO of the Precursor Group and a telecommunications analyst, provided analysis on the current cable marketplace.
At a March 2004 hearing in the House Energy and Commerce Committee, Consumers Union's Gene Kimmelman testified that the now-completed News Corp (FOX) and DirecTV merger would increase prices. Kimmelman testified to the same fact at a 2003 House Judiciary Committee hearing on competition from satellite companies.
One suggestion to address escalating prices is to allow consumers to have cable channel choice. But increased competition from other TV providers would help. To learn what you can do about your cable bill, read HearUsNow.org's Consumer Tips. Take Action on cable channel choice, then Get Involved to make a difference for your community.