Choice in cable lineup may be option
Facing an increasing number of angry constituents, a group of senators said they are considering new regulations that would allow consumers to have more control of their escalading cable-TV bills.
Cable companies have constantly found new offerings to add to their already large lineup of channels. Although these niche offerings may only appeal to a small percentage of subscribers, cable companies pass the cost of keeping them on the lineup to all of their customers.
This may soon change, as the members of the Senate Commerce Committee are pressuring cable companies into changing their practices to allow consumers to have more freedom.
Senators said they are considering regulations that would allow consumers to select which channels they wanted instead of having to buy packages with channels they may never watch.
A change such as this would allow consumers to pay less for their cable services because they would only have to pay a certain amount per channel.
This news comes as some of lawmakers say their constituents are complaining more about the rising cost of cable TV than any other topic, including gay marriage. The senators say they are concerned because the rates have increased at three times the rate of inflation.
According to a report released by the General Accounting Office (GAO), the price of cable TV rose by 40 percent from 1997 to 2002. The general increase has been linked to the FCC’s Telecommunications Act passed in 1996, which eased regulations on the industry. Current estimates place it at 50 percent.
Consumers who can’t fathom how a 19 percent inflation rate could justify the drastic change see the rise in rates as out of place.
Although this Act deregulated the cable companies, it did nothing to include satellite broadcasts that have been seen as a direct competitor to cable. The companies have complained that they have not been able to fairly compete because of opposition from other companies in addition to cable’s strong grip.
A problem seen by these satellite companies is the fact that in most areas where they compete, there is only one cable company available to consumers. This allows the cable providers to ease up their competitive pricing schemes.
This complaint was the finding of the GAO report that said that prices were 17 percent lower in areas where two cable companies compete. This type of environment only currently accounts for a small margin of the market, coming in at 5 percent.
In spite of the criticism from lawmakers and consumer-rights organizations, cable company executives say they are reluctant to change their current pricing model because it would cost their industry billions.
They say the reasoning behind this statement would be the need for them to employ expensive set-top boxes that would allow for this ability. According to company executives, this cost would have to be passed on to consumers, regardless of their choice to participate in the program.
In addition to the increase in prices, they say that certain niche channels, such as TechTV and ESPN Classic, would be phased out because there would not be enough viewers.
Under their current pricing scheme, cable companies charge one set fee that is disbursed among the various channels on their line up. A change in this structure would make it so channels would only be paid the money collected from consumers who select it.
USF junior Kunal Shah said this lose of programming could bring about bring about discontent among viewers.
“These days people are more about having choices than anything else,” Shah said. “Each station has a following with certain people, I don’t know how strong of a following they have, but you will always have some people who are not happy.”
Cable companies say that this exodus of programming would lessen the amount of diversity that is present on cable and satellite programming.
Irregardless, lawmakers see these concerns as being overbroad and told the companies that they would still be able to cope with the change. John McCain, R-Arizona, said that the companies will still be able to offer packages while giving other customers a choice.
McCain, the Commerce Committee chairman, has formed a close partnership with Consumer Reports publisher Consumers Union, to help draft an amendment that would make the customer selection system available in the United States.
If the amendment passes, U.S. cable customers will join a number of other markets outside the U.S., such as areas of Canada, that offer the system.
Along with the problem of overcharging for service, several consumers have also voiced their disapproval for the amount of indecent material found on cable stations. This has caused some lawmakers to turn their attention to the loose restrictions on cable indecency.
They feel that it is unacceptable that the cable companies lack a means for consumers to disable channels they feel are not appropriate for their children to watch.
Under current laws, the FCC can only regulate content on channels that is broadcast over air. The courts have ruled that the FCC should not have control over the programming content on cable because consumers pay to have it sent into their homes.
Feeling that a decision such as this would be detrimental to their business, the National Cable and Telecommunications Association, the cable industry’s major trade group, said several providers plan to furnish their consumers equipment, at no cost, to block channels they don’t want.
It’s important to remember that the introduction of these boxes would only allow consumers to block out the channels they didn’t want, but would not decrease the amount of money they pay for service.
Although some Commerce Committee members agree that something needs to be done to curb the rising cost of cable rates, others feel they have no business telling an industry how to sell their product.
With no sign to the end of discussions, it will be left to the lobbying efforts of consumers groups and cable company representatives to determine the fate of the consumer-choice plan.
Even if the plan is approved, it may still not mean much to consumers, as cable company may end up raising the price of channels to compensate for the cost of having numerous subscribers who only choose a couple channels.
This may be averted, though, as the lawmakers also want to set a maximum price at which the companies can charge consumers.