For Immediate Release: April 5, 2006

SAN FRANCISCO – Consumers are paying too much for cable services, a problem that can be fixed by Congress, according to a new study by the Pacific Research Institute, a free-market think tank based in California. “Cutting the Cord: Streamlining the Video Franchising Process” co-authored by Sonia Arrison, director of Technology Studies and Vince Vasquez, technology public policy fellow, explains the video franchising process, why it’s broken, and how to fix it.

“The regulations that currently govern the cable industry were created at a time when cable was the only realistic video provider in town,” said Ms. Arrison. “Now that the environment has changed and the Internet allows for more players, it’s time for Congress to open up the marketplace so consumers can benefit from increased competition.”

PRI’s study is relevant to debates occurring in Congress on communications reform, including a recent bill introduced by Representatives Joe Barton (R-TX) and Bobby Rush (D-Ill).

“As members of Congress examine this issue, they should keep in mind that delays in reform mean delays in economic growth and savings for Americans,” said Ms. Arrison. “For instance, in our study we note that a one-year government-created delay for competitive service providers like AT&T and Verizon to enter the national video market could cost cable subscribers from $6 to $8 billion in unrecoverable consumer welfare losses.”

While some states like Texas and Indiana have already enacted statewide reforms, PRI’s study urges reform at the national level. “We have seen huge discounts for consumers when the marketplace is opened to competition on the state level, but consumers will benefit most when a national structure is in place,” advised Ms. Arrison. “That’s because new video services travel over the Internet, an international medium that is best managed by national, not state entities.”

“Cutting the Cord” offers policy recommendations that will help modernize the communications landscape including:

1. Reducing the regulatory burden of video franchising for all service providers.
   
   
2. The federal prohibition of “goodie bag” compensation that franchisees have traditionally forked out for the use of public rights of way. These add costs and rate hikes for local residents, most of whom will never benefit from the superficial government gifts.
   
   
3. Contentious “build out” requirements written within many franchise agreements should be discarded.
   
   

Forcing video providers to pay for more equipment than is necessary to serve consumers is a wasteful and naïve policy. Facilitating new market entrants is a more sustainable way to achieve local service ubiquity than are heavy-handed mandates that needlessly overrun business costs.

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About PRI
For 27 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. For more information please visit our web site at http://www.pacificresearch.org/