The court described the FCC rule as “arbitrary and capricious” and seemed to single out major cable operators. As readers may recall, Comcast had sued the FCC for relief under those earlier conditions, claiming the Commission had arbitrarily signed off on telco mergers while restricting Comcast. (See FCC Caps Cable .)
When the FCC adopted the Cable Act of 1992, consumers were demanding justice in what was deemed a “runaway train” of price increases levied by cable operators in the presence of little or no real competition… and those complaints ended up on the desks of the FCC and Congress.
Since that time, competitors like DirecTV Group Inc. (NYSE: DTV), Dish Network LLC (Nasdaq: DISH), AT&T Inc. (NYSE: T) (U-verse), and Verizon Communications Inc. (NYSE: VZ) (FiOS), have cut cable TV penetrations to below 50 percent nationwide. But the problem is that rates have not dropped significantly. Instead, they have continued to rise even in the midst of growing competition.
There are significant reasons that those prices have not dropped:
- Building and upgrading infrastructure is expensive.
- Paying for burgeoning amounts of programming is expensive.
- Complying with Federal regulations is expensive.
- General overhead costs are expensive. [Ed. note: Is there something, anything that's inexpensive for cable MSOs these days?]
Unlike the computer industry where prices have continued to fall, due to development of less expensive and smaller components making production less expensive, the cable TV industry seems to demand higher prices to keep up with innovation, programming costs, and continual upgrades to infrastructure.
The demand for more programming delivered faster, easier, and with more bells and whistles does not come cheap. So there is a price to pay for demand.
However, there are changes on the horizon, with the current video package delivery system (becoming outdated and being perceived as over-priced) shifting to a more IP-based platform that will combine content viewing and information gathering. The question remains whether continued competition, innovation, and a change in consumer viewing habits can reduce consumer rates.
— Leonard Grace, a cable industry vet, is a telecom strategist and blogger. He can be reached at [email protected]. Special to Cable Digital News.