Cable TV and competition

Federal deregulation: Government oversight needed to patch holes in free market policy.

October 14, 1999

CONSOLIDATION, not competition, has been the primary result of deregulating the cable TV business in 1996.

From a patchwork of small providers without competing local franchises, the industry quickly evolved into nationwide concentrations of corporate giants aiming to become full-service communications providers of phone, Internet and TV. The largest, AT&T, is poised to control cable connections to 25 million homes.

Rates, no longer regulated by any level of government, are rising ahead of the cost of living. "More channels" is the rationale, though the expansions are often of limited benefit to subscribers, who now number some 65 million households. Promised system upgrades by franchise holders have been delayed. Most places offer subscribers no alternative provider.

But competition is coming. Washington area start-up Starpower is stealing subscribers from monopoly franchises in Montgomery County, Washington and Northern Virginia. Unlike established cable firms, Starpower doesn't have to serve all residents, so less lucrative markets won't benefit. The real prize is the service of all consumer telecommunications through a single fiber-optic cable.

Big providers seldom compete in local markets. Comcast and AT&T want to trade franchises to concentrate their power. Comcast would rule the Baltimore-Washington corridor, while AT&T would get to provide local phone service over Comcast cable.

Local governments can't regulate cable rates, but they have the power to approve or reject a new owner. Carroll County may soon get that option because franchise-holder Prestige Cable is up for sale.

The 1996 federal Telecommunications Act placed its faith in deregulation and competition to yield consumer benefits. But it allowed oligopolistic concentration of cable TV services, ostensibly to encourage local telephone competition, but not to open up Internet service competition. These contradictions need to be addressed by federal oversight if true competition is to flourish.

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