Reality Check: Cable Prices To Drop?
Group Says Increased Competition Will Lower Prices
On Tuesday, state lawmakers will vote on a bill that, if passed, would deregulate the cable industry. But could it mean a drop in prices?
The bill would allow other companies -- likely the telephone companies -- to provide video service with a state franchise. Lawmakers in favor of the bill said it would increase competition and lower rates for consumers.
Whether the bill will actually help is subject of the latest "Reality Check."
A group called TV-4-Us has flooded the airwaves lately, and recent reality checks showed that the group was really a coalition of several groups, including AT&T.
AT&T has been attempting to get into the cable industry, but has had trouble breaking through what it calls monopolies in order to cut rates for consumers, WISC-TV reported.
Cable prices have risen 93 percent nationwide in the past 10 years. TV-4-Us cited a study in favor of the bill that showed that prices would drop if more competitors sprang up. The study showed that Wisconsin cable subscribers could save $148 million, assuming a 15-percent cut in prices.
Two government surveys done in 2004 reflected the same numbers, finding savings between 15 and 23 percent on average when competition was introduced. According to the Wisconsin Policy Research Institute, Madison customers could save almost $138 a year.
Despite the studies' rosy pictures, however, in Montgomery County, Md., -- a suburb of Washington, D.C. -- real prices showed that when three different providers entered a market there were no price cuts.
The county reported that between Comcast, Verizon and RCN, prices actually rose between 4 and 15 percent and there wasn't the promised "price war," WISC-TV reported.
While AT&T promised price cuts, chairman Ed Whitacre said not to expect a price war, but a value war.
"I don't think there's going to be a price war," said Whitacre in early June 2006, "I think it's going to be a war of value and of services."
Several factors go into the price, which makes it hard to predict. They include the cost of programming, how many customer must a company serve, how much will they pay for public access channels and maybe most importantly, how much can a customer will save if they bundle cable with Internet and phone services, WISC-TV reported.
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