Study: Deregulation Bad for Consumers

W A S H I N G T O N, June 11 -- Business deregulation — which advocates say brings low prices, better service and greater competition — is a raw deal for consumers, a study by the nonprofit Consumers Union concludes.

"Consumers are getting gouged on prices, getting dreadful service and not having the expanded choice that deregulation promised," says James Guest, president of Consumers Union, which publishes Consumer Reports magazine.

The report, appearing in the magazine's July issue, examines how deregulation has affected prices and customer service for airlines, local and long-distance telephone service, cable television, banking and electricity. In most cases, according to the report, prices actually fell faster in a regulated environment than after deregulation.

Free-market advocates argue that deregulation triggers greater competition, driving down prices and spurring innovation.

"In theory, deregulation is terrific," says Guest. "In practice, it is not."

The Cable Guys

The worst case the group found is cable television. Cable rates have gone up 43 percent since deregulation, Guest says, and the industry is one of the worst when it comes to customer satisfaction.

"The competition that was promised never in fact materialized," Guest says of the cable television industry. "So in 95 percent of communities across the United States, there is only one cable TV provider. What's the effect? Skyrocketing rates for local consumers."

The report calls for greater government regulation for some industries, stronger enforcement of antitrust laws and stronger consumer protection laws.

Advocates of deregulation say the report misses the point.

"The problem here isn't the competition we have now, it's the previous lack of competition that was created by government regulation," says Wayne Crews of the libertarian Cato Institute. "When you have heavily regulated industries that are finally after decades being turned over to the marketplace, you're going to have some speed bumps along the way. But you don't want to turn back the clock."