Perspective: Time to rethink video competition

In the last two years, 11 states have passed legislation that makes it easier for telecom companies to compete with cable TV companies in the video business.

Just a few weeks ago, the Federal Communications Commission got into the act as well, issuing new regulations to encourage video competition.

But Kevin Martin, chairman of the FCC, has it partly right and partly wrong when he talked about competition being "desperately needed in the video market" and expressed outrage that cable rates have gone up 93 percent since 1995.

Competition through deregulation is vital. As it occurs, it provides new products and services and brings prices down. But the increase in cable TV prices over 12 years is something quite less than outrageous when you account for inflation, then think of all the increased value consumers have received from the communications industry.

Inflation alone was responsible for almost 35 percent of the price increase over the period in question. So an average cable bill that went up from $23.07 to $44.53 did not increase in real terms by $21.46, but by $13.46. That may still seem like a lot until you compare that to the 78 percent increase in postage stamps over that period, or the 66 percent increase in movie tickets. The extra money for the stamps or tickets gives you nothing more than you received in 1995. The extra money for video does.

The extra money for the stamps or tickets gives you nothing more than you received in 1995. The extra money for video does.

Today, for instance, both traditional video and voice companies are providing customers with an option to bundle all their communications needs, reducing the consumer cost of any one service. Those who are able to purchase their voice, video and Internet access from the same provider will often find that prices drop up to 23 percent for services that were prohibitively expensive for them, or just not available as little as 10 years ago.

The number of video options, meanwhile, has increased dramatically, allowing consumers to watch anything from "Dora the Explorer" to "Fish TV" to "Happy Days" almost 24/7 thanks to digital video recorders included in some "cable boxes," or via products such as On Demand, which is a library of free programs available when a person wants them.

Other facts:

• For anyone who has flipped over to the high-definition channels, the increased quality of video is clear.

• The upgrade to digital delivery has greatly enhanced video service.

• Video providers now routinely offer an array of parental controls that enable parents to control exactly the time and type of programming allowed into the home.

• The real price per channel has decreased 5.3 percent in the last 10 years, in part because of expanded channel availability.

The wave of video franchise reform legislation is already benefiting consumers through lower prices and new products and services, while local economies are seeing new capital investment, job creation and increased revenue.

The marketplace for the provision of communications services--voice, video and Internet access--is increasingly competitive and includes traditional telephone companies, traditional cable companies, satellite, broadcasters, Web video and wireless broadband. The mechanism of an open competitive market will itself regulate prices effectively and correctly.

Deregulating video is good for consumers and good for our economy. There is no need to try to sell it with misleading statistics about cable prices.

Biography
Bartlett Cleland is director of the Institute for Policy Innovation's Center for Technology Freedom. He also serves on the board of the Internet Education Foundation.

More Perspectives

[bdplaid]

But you don't include:

As pay service, cable was supposed to offer viewing sans commercials. But while we pay large sums for cable and other closed system video, commercials are ever-present. <br /><br />Cable networks are voracious and greedy, plain and simple. They want to collect from both ends: viewers, and also from advertisers. And considering the content across the board, I'm not happy at all.<br /><br />I am a video producer by trade, and can assure you that with the influx of digital it is cheaper now to produce content (especially including HD) than ever before. Pound for pound, analog vs digital, digital video equipment is cheaper to buy, easier to maintain, and far easier to distribute than was analog video 10 years ago.<br /><br />So why are prices going up? I've already said it: because they can. It's the one thing that viewers can expect and for which the cable companies will not disappoint. <br /><br />Thanks,<br /><br />hd

[alflanagan]

Missing Information

Some important things were left out here. Like who contributes to the Institute for Policy Innovation? It sure likes one of those "think tanks" corporations set up to advocate positions as a supposedly independent "non-profit" entity.

[allen b--2008]

Hidden Costs of Digital

What is the cost of cable. Is he just talking about the cost of the subscription service? I bought a home in a newer development in a rural community and went to get cable. My cable company only offered "The new wave of cable" digital, so I signed up. I had cable hookups in all 4 bedrooms, the living room, and the family room. I had to pay an extra $17 per month for every digital reciever. (One reciever = 2 TV's.) Now they come and hook up my recievers, and I find out that my house was built with the assumption of Analog cable in mind. There were no home runs of cable to a central location, they were all daisy chained room to room to room. Now the best that I can do is get cable in 4 rooms, and if I want to watch anything in the other rooms I have to watch what is on one of the other TV's. Hurray for the Cable Companies.......

[disco-legend-zeke]

put an antenna on the roof and get Digital HD for free.

in las vegas there are 17 channels of OTA digital.<br /><br />clear as a bell on a pair of rabbit ears.<br /><br />If you are a little further out, a yagi antenna for well under $100 will pump digital through your (existing) house wiring with no monthly charge.<br /><br />How old is the house? You might want to make the builder upgrade to "home run" wiring.

[walterwood]

Cost per channel vs 24 hours in a day & a la carte pricing

Who cares how much the cost of cable is per channel. I can only watch some much television in a 24-hour day. Even with a digital box that cost me extra each month I still can not find anything decent to watch. <br /><br />Give me a la carte pricing where I only pay for the channels I want! Currently if I want the new NFL Channel the cable company want to charge me for a bunch of other channels I will never watch.

[disco-legend-zeke]

Does anyone other than industry Flacks write this stuff?

this is the second "article" i have read today tha is so obviously a press release sponsored by the (you know what i think of them, but i am ding my best to supress my tourettes today) cable companies.<br /><br />The infrastructure of the cable companies is depreciating, the cost of new infrastructure is decreasing even faster.<br /><br />One of the problems is that the cable companies are using money that should be used to improve infrastructure, or at least returned to the shareholders as profit, to fill the pockets of management through stock byback programs (which benefit only holders of futures options)<br /><br />The fact that these greedy and corrupt organizations can afford talented writers, lobbiests, and direct political contributions underscores the need for better regulation.<br /><br />Just to give you an idea of the deceit... Current COX cable TV ad says get the big package of channels for only $9.95 per month. <br /><br />Then the announcer dropes his voice to a whisper and says "for the first month."

[MikeeeC]

Misleading Perspective

One issue the author completely ignores is the fact that cable is technology. Comparing inflation in cable prices to inflation in stamps and movie tickets is deliberately misleading. Instead, cable service should be compared to technologies like satellite, Internet connectivity, or consumer electronics, all of which clearly demonstrate DOWNWARD pricing trends. Thus, in real terms, the increase in the cost of cable has been much more pronounced than the raw numbers indicate.<br /><br />In addition, most of the increase in the cost of cable has not been to benefit the typical consumer. By forcing consumers to purchase huge service bundles, the cable companies ensure themselves increased profits and do a great disservice to consumers. If I want to add Noggin for my children, I am forced to pay an additional $15 per month, with the bulk of that subsidizing a bunch of worthless garbage that I do not even want coming into my house. The price per channel is a useless metric, unless the consumer is given the ability to choose their own channels.<br /><br />Further, the author claims that consumers receive ?extra value? due to additional services available from cable providers. Again, this is deliberately misleading. These additional services come at a greatly inflated price. I can get a ?special deal? from our cable company ? Internet, TV, and phone service ? for $99 per month. However, DSL is available for as little as $10 per month, and unlimited phone service for as little as $20 per month ? and these are not ?introductory? rates which will increase in a few months.