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AS
CABLE RATES RISE AGAIN, CONSUMER GROUPS SAY COMPANIES
ARE USING MONOPOLY POWER TO UNFAIR ADVANTAGE
New report takes critical look at how cable companies try to justify large rate
hikes
WASHINGTON, DC -- This month, cable television companies are raising basic cable rates substantially for consumers in every region of the United States. For example, as of January 1:
� Cablevision in Long Island, NY raised standard cable TV rates by 10 percent.
� Comcast in Washington, DC raised standard rates by 9 percent, including an "upgrade fee" last fall.
� Time Warner Cable systems in Orlando, FL and San Antonio, TX raised standard rates by 7 percent.
� AT&T Broadband systems in St. Paul, MN, Chicago, IL, and Boston, MA, raised standard rates by 7 percent.
When cable companies raise rates, they often blame the cost of programming, such as sports channels, and the expense of upgrading systems. But a new report by two of the nation's leading consumer groups says that these reasons do not stand up to scrutiny.
Consumer Federation of America and
Consumers Union, the publisher of Consumer Reports magazine, state that
the primary reason that cable rates have skyrocketed in recent years is that
cable companies are taking advantage of their monopoly power. The groups say
that exorbitant cable rate hikes are largely due to the lack of direct competition
that exists for the vast majority of cable companies nationwide.
The report, entitled "Cable Mergers, Monopoly
Power, and Price Increases," says that industry and government data
show that cable revenues are rising much faster than industry costs. Revenues
from advertising, digital cable, and other add-on services are enough to cover
the expense of upgrades and programming costs. The latest round of large rate
hikes is not justified.
The report also points out that approximately
40 percent of the top cable channels (as measured by subscriptions or prime
time ratings), which command the highest prices, are owned in whole or in part
by cable operators or companies that have large ownership stakes in cable companies.
In other words, for a substantial part of the cable industry, rising programming
prices is just a transfer from one division of the cable company to another,
which comes out of the consumer's pocket.
"Cable companies would not be able to raise prices nearly as much if they
did not have monopoly power," said Mark Cooper, Research Director of Consumer
Federation of America and the author of the report.
The groups criticized the Federal Communications Commission (FCC) for failing
to do enough to encourage competition in the cable and satellite markets and
failing to protect consumers from the cable industry's abusive pricing. They
urged Congress to take a hard look at the Telecommunications Act of 1996, the
law that initiated the deregulation of the cable industry. Since the law was
approved, cable rates have increased 45 percent, or nearly three times the rate
of inflation. The groups said Congress should overhaul the law in order to deliver
the benefits of competition and lower prices that the law originally promised.
They said Congress must empower state governments to hold down prices and treat
cable monopolies the same way they treat telephone monopolies.
"If Congress restores state power to prevent cable price gouging, it can
correct its mistake of allowing cable monopolies to abuse consumers and thwart
the growth of video competition," said Gene Kimmelman, senior director
of public policy and advocacy for Consumers Union.
For consumers frustrated with higher cable rates, there are not many direct
alternatives. 95 percent of American homes have only one cable company, while
the 5 percent who have choice between two cable companies that compete head-to-head
pay about 17 percent less on average. Satellite TV is one choice worth investigating.
Satellite companies offer TV channels at rates that are comparable to cable
in some areas, but the overall cost of satellite is often more expensive when
installation and equipment costs are added. Furthermore, satellite TV does not
offer local channels in some areas due to technical limits, and satellite dishes
do not work unless they have a clear view of the southern sky.
For more information about cable television prices, visit the Consumer Federation
of America website at www.consumerfed.org
and Consumers Union's web site at www.consumersunion.org
***
Consumers Union, publisher of Consumer Reports magazine, is an independent nonprofit testing, educational and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition and other consumer concerns. Since 1936, our mission has been to test products, inform the public and protect consumers
The Consumer Federation of America is the nation's largest consumer advocacy group, composed of over two hundred and forty state and local affiliates representing consumer, senior, citizen, low-income, labor, farm, public power and cooperative organizations, with more than fifty million individual members.
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