Cable report miffs McCain
WASHINGTON — Most cablers are breathing a sigh of relief: A General Accounting Office report about rising cable rates released Friday did not call for new government regs.
“We’re pleased that after 14 months of careful study and careful work the GAO has found that this is the industry that has worked hard to benefit its customers and there really is not an enhanced role for government in the cable TV industry,” said Comcast exec veep David Cohen.
The GAO, Congress’ investigative arm, began the study last year in response to concerns by Sen. John McCain (R-Ariz.) and consumer groups about recent cable rate hikes.
The cable industry is so nervous that Congress will pass harsh new laws to rein in consumer cable charges that it launched a newspaper ad campaign last week touting the various investments it’s made in recent years to improve customer service.
While most cablers were encouraged by the report’s findings, they cannot rest too easy.
The study found that competition leads to lower cable rates and improved quality. Specifically, in the very few markets around the country that have two or more cable providers, the GAO discovered that the amount those companies charge consumers is 15% less than in markets without competition.
National Cable & Telecommunications Assn. topper Robert Sachs took issue with the competition argument in a conference call with reporters Friday. Sachs argued that competition exists in such a small number of markets, there is no way to extrapolate the findings to the national level.
“This finding represents 2% of the market nationwide,” he noted.
McCain, who chairs the powerful Commerce panel that oversees the cable industry, had the opposite reaction to the study.
“The apparent implication for all other consumers is that they continue to be fleeced by their cable operators,” he said Friday in a statement.
More worrisome for the industry is McCain’s insistence that the report provides “numerous issues ripe for examination by the Committee,” including increased sports and programming costs, the impact of ownership affiliation on cable carriage and a la carte programming options.
In the study, the GAO determined that in the past five years cable rates have jumped approximately 40%, in excess of the roughly 12% increase in inflation during the same time period.
The study identified higher programming costs (48% over three years), major capital investments ($75 billion between 1996 and 2002) and enhanced customer service costs as the main factors driving up rates.
But it also acknowledged the need for cablers to find ways to rein in or offset rising programming costs, targeting sports channels as the main culprits. The average license fee for a major sports net increased 59% from 1999 to 2002.
The agency also cautioned the feds about forcing cablers to move certain high-cost channels (such as ESPN) to a higher tier of cable service. The industry has been fighting consumers groups and lawmakers who want to develop an la carte system where customers pick the channels that make up their cable package instead of having to choose from pre-set packages.
The study argues that a la carte is impractical due to infrastructure challenges, namely the need to convert the analog base to an all-digital network and higher customer service costs unrelated to the digital conversion.