NCPA - National Center for Policy Analysis

Cable Rate Controls Impaired TV Quality

April 1, 1999

Federal controls on cable television rates have now ended. That should be good news for advocates of better program quality, economists say. The regulations actually discouraged production of high-cost and high-quality programs and encouraged cheap ones.

  • Regulations that reduced subscribers' bills by about 10 percent in the fall of 1994 encouraged cable operators to change channel lineups, shift marketing efforts to unregulated premium services and cancel system upgrades, according to the evidence.
  • The number of new subscribers plummeted and basic networks such as A&E and CNN saw years of ratings growth come to a halt.
  • Officials at A&E, Discovery and C-Span argued that rate controls destroyed quality programming while boosting home-shopping channels -- which pay system operators to carry them.
  • When rates -- still officially "controlled" -- were permitted to increase about 5 percent a year after inflation, subscriber growth bounced back in 1995.

Meanwhile, direct broadcast satellite (DBS) suppliers have signed up more than nine million subscribers in less than five years. The Federal Communications Commission estimates that the typical basic subscriber pays 10 percent more for DBS over cable. For that they get 200-channel menus, digital signals and programmability.

Rate regulation, critics say, fell on its face because it retarded service quality.

Source: Thomas W. Hazlett (American Enterprise Institute), "Good Riddance to Cable TV Regulations," Wall Street Journal, April 1, 1999.

 

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