NCPA - National Center for Policy Analysis

Competition, Rather Than Regulation, In Cable

March 26, 1999

Next week, the federal government will step out of the business of regulating cable-TV rates -- which it has been doing for seven years. Experts say that competition will control rates far more effectively than Washington ever did.

  • When cable firms were relieved from local controls in 1984, average charges for basic service began climbing from $8.98 a month to $18.10 a month in 1992.
  • Federal regulation didn't stop the rise -- with the average rate hitting $27 a month last year, and rising 24 percent over the past three years.
  • Nevertheless, competition spurred cable operators to double the number of full-time networks available to viewers over the past seven years.
  • Competition in the form of direct broadcast satellite systems has pushed cable firms to improve their systems and their programs.

Two out of every three new subscription hookups is to DBS systems and the price of the dishes -- some $1,300 in 1991 -- has plummeted to the point they are sometimes given away. The industry has added nearly nine million new customers in the last four years.

Competition is now being offered by the Internet -- in the form of packages of voice, video, data and text services.

In the 150 markets where two cable companies compete head to head, consumers pay at least 10 percent less for basically the same services. If all cable companies faced this same competition, consumers would save more than $3 billion a year, by some estimates.

Sources: Editorial, "Ending Cable-Rate Controls Will Boost Competition," and Gene Kimmelman (Consumers Union), "We Need More Than Promises," both in USA Today, March 25, 1999.

 

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