Cable Rate Hike: Is Reason Better Service or Monopoly?
A year after Congress unleashed the forces of competition in the television industry, Americans have seen the price of cable TV service go, well, up.
In fact, since the federal telecommunications act was enacted, cable rates have been rising faster than ever - nearly 6 percent a year, even after adjusting for inflation. At least two large advocacy groups are fighting back. On Tuesday, Consumers Union (publisher of Consumer Reports) and the Consumer Federation of America called on the federal government to freeze cable rates.
The industry "looks like the equivalent of the 19th-century robber barons," says Gene Kimmelman of Consumers Union's Washington office. "I think the public's getting pretty mad and Congress is getting concerned."
A rate freeze - the first step of a proposed four-part plan to battle what he calls cable's monopoly power - would save consumers $1 billion in its first year, he claims.
The cable industry argues that it's not a monopoly, pointing to the small but emerging satellite-TV industry as well as the dawn of TV competition from telephone companies. The National Cable Television Association also says the industry has charged more because of increased programming or huge investments in upgrading its networks.
But cable companies often do add programming without boosting rates once telephone companies set up competing service, says Geoff Potter of Ameritech, a phone industry pioneer in video. The Chicago-based firm has seen it happen in the more than 30 Midwest communities it serves. And consumers appear to appreciate the choice.
Cable "certainly had a monopoly," says Carole Cronin, a former cable customer in Naperville, Ill., who made the switch to Ameritech this summer. "It seemed to offer a wider variety" than cable did.