Lower Cable Rates? Try Competition

COMMENT

September 12, 1993|By MIKE BURNS

Will all those who got a 10 percent reduction in their cable TV rates this month please raise your hands?

Excuse me, but I don't see many hands out there. Or are you just too busy counting the money you saved as a result of the beneficence of Uncle Sam and Mother Comcast?

The latest con game with subscriber bills is brought to you by government re-regulation of cable systems, the Cable Act of 1992. That was supposed to bring us a 10 percent cut in consumer bills. Instead, it just allowed cable operators to shuffle prices like pasteboards in a three-card monte game.

If you think that sounds a lot like the "benefits" of telephone deregulation foisted upon consumers by the government a decade earlier, you're not alone.

In the cable game, the government re-regulated, but gave cable firms enough exemptions and loaded pricing formulas to raise the stakes even higher.

Now the phone companies are getting into the cable delivery business, and the cable systems want to provide phone service. Dare we hope for competition at last? Or will it be the usual deal-cutting, to the consumer's disadvantage?

Here in Harford County, the cost of Comcast's Preferred service (the most popular) increased a few cents per month, despite company assurances that it would stay the same or drop. Those with Limited or basic service (broadcast channels only) got a 17 percent reduction, but very few people choose that option.

And with three Baltimore broadcast channels refusing permission to carry their programs on cable -- another blessing of government regulation -- even Limited service may soon prove to be no bargain.

Competition is the only way to achieve real price cuts. National studies show that cable subscribers pay an average 35 percent less when operators compete for business in the same area. In northern Anne Arundel County, where two operators vie for the same customers, subscribers paid 35 percent less per channel than Harford residents.

(There are two cable companies in Harford, but they don't compete for the same territory, except for 700 houses in the north part of the county. Clearview serves only 5,000 homes in northern Harford and is unaffected by new government pricing rules.)

The major benefit to Harford Comcast customers is the addition of 23 channels on preferred service. That brings down the cost per channel close to that of the northern Anne Arundel customers.

More channels supposedly mean more value, although that's debatable. Another benefit of government regulation: the non-stop shopping channels can force cable systems to carry them, while information/entertainment channels may opt out. But more channels of any ilk mean higher fees can be charged, under federal formulas.

The end result is that a Harford subscriber with preferred service and one premium movie channel sees his total bill go up. Ditto for a subscriber with preferred and Home Team Sports. (Comcast still charges the most for HTS; 95 percent of systems with it don't charge extra.)

The biggest cost reductions will be seen by those who buy a lot of extras: Additional outlets are free, instead of $6.25 a month; remote controls are 36 cents, instead of $4.25, but formerly free converter boxes cost $2.06. And so forth.

When government price regulation ended in 1984, cable companies steadily jacked up rates without the least apology. But competition was scarce, so the government decided to step back in to control prices.

Federal law allows local government to regulate prices of basic service (broadcast and public-access channels only) and related equipment and services. The Federal Communications Commission, upon complaint, can also regulate the preferred, or extended basic, services. Premium-pay and pay-per-view are totally exempt.

Comcast hopes to avoid local regulation, which it claims will reduce price flexibility and result in overall higher prices. The Harford council, which is considering price regulating authority, believes local oversight might keep a tighter rein on future increases.

Councilwoman Theresa Pierno charges that Harford Comcast reneged on a pledge not to raise certain rates if there was no local regulation. Instead, the cable firm raised published charges on service calls (now 24 cents a month for insurance coverage, formerly free) and new connections (now $79.05, formerly $49.95 but usually free or discounted in frequent promotions).

Comcast responds that subscribers can cancel the service-call insurance and pay hourly charges for service calls when needed. Currently, installation is free and can still be discounted, so long as Harford does not impose price regulation. Comcast's price cut for Limited, or basic, service blunted much of the county's potential impact.)

Local government's regulatory clout may indeed be limited. But Bel Air has already managed to black out cable TV downtown, requiring that cable be laid underground, not strung on poles.

Tearing up the streets for cable is prohibitively expensive, so county offices, businesses and residences go without. But they save 100 percent of the new cable rates.

Mike Burns is The Baltimore Sun's editorial writer in Harford County.

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