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Report: New Cable Rules Don't Lead To Lower Prices

FCC's promises of lower prices, better service unfulfilled

By Martin H. Bosworth
ConsumerAffairs.Com

July 11, 2008 

The expected goal was that cable companies would reduce prices and improve their offerings in order to promote better competition -- but that didn't happen, a new report says.

The report released by the Alliance for Community Media found that not only did cable prices drop minimally or not at all in markets with new telecom competition, but that many cable franchises are cutting or eliminating public, educational, and government (PEG) channels and facilities from their offerings, and the new competitors are doing a poor job of picking up the slack.

"Even in the early stages of adoption and implementation, the negative fallout from the state video franchise laws has been substantial and will continue to mount," the alliance said. "As incumbents and new entrants apply to operate under these new franchises, more communities will experience the cutbacks and degradation of PEG services reported in this survey, leaving many communities in the nation without the diverse, local programming provided through PEG channels."

Among the report's findings:

• Respondents from 17 communities in 8 different states report loss of access to PEG facilities managed by cable operators soon after state video franchise laws removed local obligations from those companies. Comcast used the new state video franchising laws to close all of its PEG facilities in northern Indiana and southwestern Michigan.

• 26 percent of respondents that had local cable access in public locations such as libraries and schools, and 41 percent of the respondents who had a local cable network supporting PEG channels reported loss or reduction of that access. Communities across the country were affected, in states such as California, Florida, Texas, and Ohio.

• AT&T's high-speed "U-verse" service was reported to delay access to PEG channels, preventing recording of PEG programs to digital video recorders (DVRs), and did not support closed captioning for PEG programs.

• Two-thirds of respondents said basic cable rates have increased in their communities even after the new franchising rates were adopted in their communities and competitors began offering service. Only 1 percent said that rates have gone down.

Under the FCC's new rules, new entrants into a market could negotiate on the state level, rather than with the particular town or municipality the entrant wanted to provide new services to. The time for municipalities to approve or deny new franchises was reduced to 90 days.

The new rules also prohibited what the FCC called "unreasonable" requirements for opening a new franchise, a move critics said would enable telecoms to build out only in wealthy neighborhoods and ignore lower-income areas.

FCC chairman Kevin Martin aggressively campaigned for the new rules as a part of his larger reform plans for the cable industry. During his time as chairman, Martin has regularly advanced rulings or opinions designed to restrict cable companies, while relaxing rules for their rivals in the telecom sector.

The new franchise rules were immediately challenged in court by both the cable industry and local community groups, but an appeals court ruled on June 27 that the rules were "reasonable," and did not represent an undue burden on customers or restrict competition.

The Commission members were also subjected to multiple hearings before Congress on the agency's lopsided favorable treatment of telecom companies over the industry, with the video franchising rules singled out as an example of the agency usurping Congressional authority in its decision-making.

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