Magazine article Insight on the News
Cable Competition Fizzles as Rates Continue to Rise
Observers agree that the 1996 Telecommunications Act has fallen short of its promise to provide cheaper and better telephone and cable service. Small satellite dishes may be the best alternative.
Tele-Communications Inc. charges residents of Ferndale, Mich., $32.23 a month for cable service. But the company's rate for customers living less than 10 miles away in Troy is $19.95. The difference is that Troy residents can turn to a competing cable service offered by Ameritech Corp, an option unavailable in Ferndale.
"We have certainly seen aggressive responses on rates and, finally, some attention to customer service as a result of our presence in the marketplace," says Donna Garofano of Ameritech.
Consumers' greatest complaint since passage of the Telecommunications Act two years ago has been rising cable rates. The law diminished the ability of the Federal Communications Commission, or FCC, to regulate cable rates, and monthly bills have shot up 13 percent -- more than double the rate of inflation.
Congress anticipated that widespread competition to cable monopolies would spring up after removing regulatory barriers preventing telephone and other companies from entering the business. But that has not happened, and true cable competition exists in only about 80 communities nationwide.
"You can't wish competition into existence overnight," says Gene Kimmelman, codirector of the Consumers Union's Washington office. "This is why we're absolutely convinced the FCC should clamp down on rates." Few expect the FCC to freeze cable rates, although Chairman William Kennard has expressed concern about the industry's "unreasonably high" increases.
Why the rise in rates? "Cable rate increases are reflecting cable's substantial investments in more quality programming, innovative new services and improved customer service," says Scott Broyles, a spokesman for the National Cable Television Association. "Consumers themselves are voting with their eyeballs" by continuing to pay for cable television.
Lawmakers and regulators hope competition from companies such as Ameritech expands. The Midwestern phone company is stinging cable lines right along its phone lines in the suburbs of Chicago, Cleveland, Detroit and Columbus, Ohio. And it has attracted more than 100,000 subscribers since 1996, with prices for expanded basic service ranging from $23 to $29 a month. …