Average Cable Rates on the Rise

ByMark Baumgartner

Feb. 15, 2001 -- If your cable television bills seem to be getting more expensive it's because they are.

The Federal Communications Commission reported this week that average cable television bills nationwide jumped by 5.8 percent in the one-year period through July, considerably higher than the 3.7 percent increase in the price of all goods and services.

Consumer advocates pounced on the news, saying the report proves that telecommunications deregulation has failed to deliver the promised benefit of lower cable rates.

The cable industry said the single biggest factor behind the higher rates is the increased costs for programming, including sports and entertainment.

"This month marks the five-year anniversary of the Telecommunications Reform Act, which promised consumers lower rates for cable television," said David Butler of the Consumers Union. "This report shows what happens when you deregulate a monopoly before competition can take hold."

Consumer advocates believe the report bolsters their efforts to restore some form of regulation on the cable industry. "We believe the government needs to consider some semblance of a cap on cable prices," Butler said.

That kind of talk is music to the ears of consumers like Norma Wallen, who says her cable rates are rising too fast.

Wallen is a 46-year-old resident of Seattle, Wash., who cannot work because of a disability and who pays AT&T Broadband $80 a month for cable services.

"Price is an issue," Wallen said. "I don't do anything else, I don't have any other recreational pleasures. I got the top-of-the-line service because I don't want to hear that somebody else is watching something I can't. It's a financial strain but there are no other options" to AT&T.

Wasn’t Supposed to Be This Way

Supporters of deregulation asserted that cable rates might rise in the short term but would begin to decline as competition, particularly from telephone companies, intensified, Butler said.

An analysis by the Consumers Union shows that cable rates have increased 30 percent in the past five years, nearly three times the rate of overall inflation.

Cable operators attributed the higher prices to increased costs for programming, including sports and entertainment, which accounted for roughly 40 percent of the increase. They also cited system upgrades, increased equipment costs and inflation.

"The primary driver of cable rates is the increased cost of programming," said Ellen East of Atlanta-based Cox Communications. "Our programming costs went up in double digits this year [while} average rates were up 5 percent."

The reason that Cox doesn't pass on all of the higher programming costs is competition, East said. "Competition is everywhere. The National Cable Television Association has statistics showing that four of five new multichannel video subscribers are signing up with direct broadcast satellite" services, East said.

The biggest cable companies have their own programming divisions. As a result, consumer advocates like Butler dismiss the notion that program costs justify the higher prices.

"If programming costs go up, they're simply paying higher prices to one of their divisions," Butler said. "They're taking money from one pocket and putting it in another while charging consumers higher rates."

New Players in Nation’s Capital

Consumers like Wallen are not alone in thinking that cable rates are getting out of hand, according to Butler, who noted that even some of the staunchest supporters of the 1996 deregulation appear to be having second thoughts.

"Rep. Henry Hyde [the Illinois Republican who was then chairman of the House Judiciary Committee] held a hearing on cable rates last year," Butler said. "Hyde said perhaps Congress was too hasty and [lawmakers] should perhaps consider new regulations."

And this week's report by the FCC "adds fuel to the fire," Butler added.

Consumer groups also take hope from the new political climate in the nation's capital, where congressional committees have new chairmen, the regulatory agencies have new chieftains and the White House has a new occupant.

"New people are positions of influence," Butler said. "They can all point to the findings of this report as a reason to re-open the Telecommunications Act."

The FCC annually reports on cable industry prices but the agency is not expected to press for new regulations. Its new chairman, Michael Powell, is on record as opposing new restrictions on the telecommunications industry.

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