Deregulated Cable Rates Fall
March 21, 2000
On April 1, 1999, a feature of the 1996 Telecommunications Act kicked in to near-ubiquitous predictions that consumers would be hit hard in the wallet. Rate controls on cable TV programming for more than 60 million U.S. households were set to come off.
However, according to the Bureau of Labor Statistics, exactly the opposite happened. In fact, deregulated cable has been better for consumers than regulated cable.
- When cable TV rates were re-regulated in 1992 under the Cable TV Protection and Competition Act, rates rose 2.39 percent annually, adjusted for inflation.
- But since deregulation last year, real rates have declined about .75 percent on an annualized basis.
The debate over cable rate controls was the substitutability of regulation for competition, the argument being that until there are choices for cable subscribers, regulation must be a short-term palliative. But as economists say is often the case under price controls, cable companies found loopholes in the regulations -- from adding "service charges" to filling their menus with shopping channels, which pay to be carried on cable systems -- and thus were able to raise effective rates.
Source: Thomas Hazlett (American Enterprise Institute), "Surprise, Surprise," Barron's, February 28, 2000.
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