Cable price controls fast disappearing

The last vestiges of cable price controls are quickly being dismantled by Comcast Corp. and other cable companies, as well as the federal agency that regulates the industry.

The town-by-town deregulation actions for the lowest level of cable service certainly will lead to price hikes for the people who can least afford them - lower-income families, according to a top consumer advocate.

"The people who purchase basic cable are usually the people who can only afford the basic tier, and they cannot afford sharp price increases," Stefanie Brand, director of the New Jersey Division of Rate Counsel, said last week.

Regulated basic cable costs about $15 a month in New Jersey while the more expansive unregulated cable services typically cost $60 a month.

The federal Bureau of Labor Statistics data show that the prices for cable and satellite TV services, which are heavily influenced by unregulated services, rose at a rate twice that of inflation between May 1996 and May 2009.

Basic cable entails local broadcast and public-access channels and is still regulated in local towns despite the sweeping 1996 federal law that wiped away most cable price controls.

Cable companies, though, can petition the Federal Communication Commission for exemption from these final price constraints if they prove "effective competition" in a town from a satellite-TV provider, a telephone company entering the TV business, or a municipal-owned cable service.

The pace of rate deregulations has accelerated rapidly with the growth of satellite-TV and the expansion of Verizon Communications Inc. and AT&T Inc. into the pay-TV business.

In the last 18 months, the FCC deregulated basic cable rates in 4,215 towns across the United States, including dozens in the Philadelphia area, under a little-publicized bureaucratic procedure that doesn't require a public vote of the FCC commissioners, according to information released last week by the FCC at The Inquirer's request.

Overall, the federal agency has deregulated basic cable rates in a total of 7,542 towns, or locales, in the last 15 years.

A startling 56 percent of those deregulation actions came since early 2008. An FCC official said there are "many, many" pending special petitions from cable companies for more deregulation decisions. Philadelphia's basic cable rates remain regulated. But the FCC has erased price controls in suburban towns in Pennsylvania and South Jersey.

Brand's agency, which is part of the New Jersey Department of Public Advocate, has been a national leader in opposing cable companies when they petition the FCC, including one Comcast petition to deregulate basic cable rates in more than 100 New Jersey towns. The FCC granted the request earlier this year.

Camden, Trenton, Atlantic City and Jersey City, and the Shore towns of Surf City, Long Beach Township and Barnegat Light were part of the petition. Pennsauken, Paulsboro, Galloway, and Lawnside in South Jersey also were contained in the petition.

Comcast claimed in the petition that penetration by satellite-TV services in those New Jersey towns had reached a critical mass of competition. That level is reached when a satellite provider exceeds 15 percent of the local market.

Sena Fitzmaurice, a Comcast spokeswoman in Washington, said that about 70 percent of the company's franchise areas are deregulated for basic cable for one of three reasons: effective competition, the local town elected not to regulate basic rates, or state laws eliminated basic-cable regulation. Comcast's cable system passes 50 million homes.

"The goal," Fitzmaurice said of the FCC petitions, "is more flexibility in a competitive environment." She attributed the recent surge of deregulation actions at the FCC to a petition backlog and a "massive boost in competition" from the phone companies.

Comcast's basic cable remains, she said, the lowest-cost option for pay-TV customers when compared with satellite or the phone companies.

Brand admits to "limited success" opposing the cable companies at the FCC, but vows that "we are not giving up."

She believes that the housing data the cable companies use to justify findings of effective competition could be outdated and misleading. She said the agency would review the data when the 2010 Census was released.

Comcast's Fitzmaurice said the FCC required the cable company to use 2000 Census data in its petitions unless the government updated the data.

Cable companies may face more competition, Brand added, but they don't seem to compete for basic cable customers. Instead, they focus on triple-play customers, or those who order telephone, TV, and broadband Internet.

In the Pennsylvania suburbs, the basic cable rates in dozens of towns were deregulated in 2008, according to the FCC data.

The towns included Bensalem, Hulmeville, Upper Makefield, Hatfield, Ambler, Horsham, East Pikeland, Upper Gwynedd, Upper Merion, East Goshen, East Whiteland, West Chester, Upper Moreland and Radnor. Comcast cited the entrance of the Verizon FiOS TV in its petition.

The regulated prices for basic cable service guaranteed access for low-income households to news and information services, said Joel Kelsey, policy analyst with the Consumers Union, the nonprofit publisher of Consumer Reports.

He was concerned that basic cable rates are deregulated when a phone company enters a local TV market. But the phone company may not wire the TV business to all the homes in a town.

So, in effect, there isn't competition in the whole town. "We think competition is a good thing but we think uneven competition can lead to many consumers paying more," Kelsey said.

2008 was a banner year for cable companies seeking to deregulate basic cable rates.

             No. of Towns

Year             Deregulated

2001 183

2002 269

2003 94

2004 270

2005 1,062

2006 344

2007 578

2008 3,860

2009 355*

Source: Federal Communications Commission

*2009 is year-to-date.

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