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Big Cable: Too Big?

Monday, November 5th, 2007

15,000 attendees turned out to the 2007 Cable Show in Las Vegas earlier this year, and more than a few must have been perplexed by this year’s improbable show theme:

“Competition works. Consumers win.”

For an industry many consider anti-competitive and consumer-unfriendly, the show theme seemed counter-intuitive, if not outrageous. Competition? Perhaps the idea was to pacify Day One’s featured speaker: Kevin Martin, Chairman of the FCC.

The FCC under Chairman Martin has been publicly critical of the Big Cable. This chart, compiled by the New York Times, helps explain why. The cost of cable television in the United States has outpaced inflation by a significant margin. This fact seems to indicate that the cable industry – led by Comcast, the nation’s largest cable provider – is taking advantage of a monopoly status to raise rates at will.

The cable industry strongly insists there is no monopoly. While Comcast is by far the largest provider of pay TV, they go head-to-head with other cable providers, like Time Warner, in many local markets. What’s more, phone companies like Qwest offer the same bundled packages – phone, high-speed internet and pay TV (through satellite partners) nationwide. Comcast would point out that they lost 65,000 subscribers in the last quarter. There’s plenty of competition, the cable industry contends. The cable industry has been deregulated since 1996 through an act of Congress, and that’s just the way Big Cable likes it.

Chairman Martin has been pushing the other members of the five-member commission to invoke the “70/70” rule of the Cable Communications act: when 70% of U.S. households are cable-ready, and 70% of those households subscribe to cable, the government is empowered to regulate the industry in favor of lower prices and more diverse programming. In an agency meeting last week, the commission rejected the “70-70” finding, citing unreliable data, in a vote considered a blow to cable consumers in general and Chairman Martin in particular.

Despite this defeat, the FCC have recently affected other, smaller changes that benefit consumers and the competitive landscape. For example, as of last month, specific cable companies may no longer have exclusivity on apartment buildings; building managers must allow competition between rival cable companies and satellite TV.

But this represents only a minor victory for consumers. In the remaining 13 months of his appointment, Martin’s goals are more ambitious:

  • Cable ownership limits, imposing a 30% cap on Comcast’s share of the pay-TV market while preventing other giants like Time Warner from making substantial new acquisitions
  • A la carte legislation, allowing cable subscribers to pick and choose which specific channels they want, instead of paying for large bundles of channels that go unwatched
  • Increased diversity programming, lowering the price of channel access to minority and women programmers
  • Dual carriage, forcing cable operators to carry local TV signals in both analog and digital form until all cable subscribers have upgraded to digital reception equipment

Chairman Martin is drafting a revised proposal for a possible vote at the agency’s next meeting, scheduled for December 18th. Consumer groups and cable proponents alike eagerly await the outcome. Is Big Cable too big? Does the pay-TV industry require government regulation? How will TV viewers benefit from greater competition? Stay tuned.

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