For Immediate Release:
February 14, 2006 Contact: Susan Martin, Press Office
415-955-6120 or smartin@pacificresearch.org Reforming Video Franchising Will Lower Costs for Consumers, Says Pacific Research Institute SAN FRANCISCO – Tomorrow the U.S. Senate Commerce Committee will conduct hearings on the issue of “video franchising” – the regulatory system that allows local governments to set the terms and conditions for businesses to enter the video market. “Congress should know that the current video franchising system is broken. For too long, local politicians have used it to restrict competition and line their pockets,” warns Sonia Arrison, director of Technology Studies at the Pacific Research Institute, a free-market think tank based in California. “The legacy idea behind the video franchise system was that cities were regulating a monopoly service for local residents. But as competition became available, cities have unfortunately worked to protect franchisees from competitors in exchange for significant financial and service concessions from cable companies,” Ms. Arrison said. “Cable consumers have been hit hardest by this government scheming – consumers have been deprived of the better rates and channel selections provided through competition.” She added, “The political favoritism continues to thrive at the expense of consumers, despite a series of federal laws designed to curb it.” Ms. Arrison provides the following points for members of the Senate Commerce Committee to consider as they listen to testimony on Wednesday: Local governments have stalled and evaded attempts to foster competition that lowers prices and increases quality for consumers. As a result, less than five percent of incumbent cable providers now face effective competition.
- Some activist groups have sought to protect “build out” provisions that require franchisees to install hardware throughout a city. This capital-intensive demand serves to further harm competition, as it distorts market dynamics and adds unnecessary costs.
Though some city officials and cable companies argue that build out laws are about "fairness," the reality is that millions of American households don't actually need or want video programming, just as there are millions who turn down broadband service despite heavy promotional discounts from competitive broadband providers. Accusations that new video competitors will “cherry pick” consumers and “redline” neighborhoods are ludicrous, uninformed, and misplaced.
- Currently, federal rules allow for cable rates to be marginally reduced in lieu of government-defined “effective” competition within a municipality. However, this price-control mechanism fails to deliver the superior consumer benefits of having true competition. Federal data shows that when cable service providers are allowed to freely compete in a city, consumers are offered lower cable rates, more channels, and enjoy a better price-per-channel ratio than consumers in non-competitive municipalities.
- Absent vigorous competition to promote good service in the video market, the government has attempted to step in and regulate behavior. Unsurprisingly, this command-and-control approach hasn’t worked: Cable television operators still rank dead last for consumer satisfaction among all measured industries by the American Customer Satisfaction Index, even trailing behind the U.S. Postal Service.
New technologies like Internet Protocol Television (IPTV) are on the cusp of delivering new choices and lower prices to consumers and it is time to open up the marketplace to allow for this technology to benefit consumers.
“With basic and premium cable rates soaring to all-time highs, and municipalities shutting out new, affordable video technologies, government failure in protecting the public interest is clearer than ever,” said Ms. Arrison.
### | Contact: | To schedule an interview with Ms. Arrison, please contact the PRI press office at 415/955-6120 or email smartin@pacificresearch.org.
|
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/ |
