Consumer-advocate groups are back on the warpath this week after a new FCC survey reports that in 2000 the first full year since Congress ended price controls on cable TV bills in March 1999 the average monthly cable bill went up 5.8 percent. That's a good sight higher than the 3.7 percent rate of inflation, and it has people wondering: Where's that deregulatory magic?
This was the first year that satellite-TV services, which lack cable's need for local infrastructure and thus are able to enter markets at will, exerted "a small but statistically significant influence on the demand for cable service," the FCC said. But that didn't slow down cable bills' rise and satellite-TV providers had the worst rate hikes of all.
"The bottom line is that cable rates are still going up and it's hard to see how satellite companies have hindered cable's push for higher prices," said Gene Kimmelman of the Consumers Union.
Another source of competition, the deregulation of phone companies and cable companies alike that was supposed to get phone companies into the cable business and cable companies into the phone business, hasn't materialized. Where it's happening, it works rates in those few areas are down 19 percent but the nationwide trend is barely visible. As for cable-against-cable competition, again, where it is, it's working; rates are 5 percent lower than non-competitive areas. But it's far from common.
"Clustering" when a cable company controls a large region of subscribers, supposedly achieving a cost-saving economy of scale hasn't paid off either. Rates in clustered areas were higher than in non-clustered areas. "Clustering was supposed to bring greater efficiencies and cost savings for consumers," says Kimmelman.
Cable providers say, with some justification, that customers are still getting their money's worth, with ever-increasing numbers of channels and corollaries like Internet service being thrown into the monthly service. Besides, rates haven't gone up that much. "For the third consecutive year, cable rates have continued a moderate trend," spins National Cable Television Association CEO Robert Sachs. "Cable is operating in a competitive marketplace."
Part of the problem, of course, is that cable isn't a very competitive marketplace. Heavy infrastructure demands make it a natural monopoly in most areas, and it takes a big rate hike indeed to get a customer to switch to what's usually the alternative: rabbit ears. Without liquidity in the marketplace, the rush of competition takes a lot longer than a year to materialize.
Which is the reality that Michael Powell, George W. Bush's new FCC chairman (and Colin's son) will have to sell the public over his tenure. Powell took the job last week with a fiery speech about deregulating pretty much everything you can think of, and on principle he's got the right idea. Free up the market, and you get better stuff for less money.
But politically, it can be a tough sell. In California's half-assed deregulation plan, tough environmental regulations, a demand spike and a rickety transmission system conspired to leave the utilities subsidizing the ratepayers, and the ratepayers/taxpayers somehow convinced they shouldn't have to pay a penny more.
As for the cable scene, is there such thing as a fair price for 56 (or 200) channels of pop-culture noise? Is there some inalienable right to affordable Cinemax that the Founding Fathers missed? Finding the price point for cable TV is no more the government's job than holding down those ridiculous Coke prices at the multiplex. It's for the buyer and the seller to work out for themselves.
When satellite-TV providers start doing more business and phone companies recover from this year's case of the telecom blues, cable providers will do what they have to do to stay competitive.
And everybody'll have their 300 channels for the going rate, and then we'll hear from Gene Kimmelman about how there's nothing good on.