[opendtv] FCC report on cable industry prices

  • From: "Albert Manfredi" <bert22306@xxxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Wed, 27 Dec 2006 17:22:19 -0500

Just before the holidays began, a new item said that this was forthcoming. Well, here it is.


In the intro section:

Overall, cable prices increased more than 5 percent last year and by 93 percent since the period immediately prior to Congress?s enactment of the Telecommunications Act of 1996. Expanded basic prices rose more than 6 percent or twice the rate of inflation last year. Prices are 17 percent lower where wireline cable competition is present. DBS competition, however, does not appear to constrain cable prices ? average prices are the same as or slightly higher in communities where DBS was the basis for a finding of effective competition than in noncompetitive communities. Finally, increases in programming expenses were equivalent to more than half of the overall increase in prices for the basic and expanded basic tiers.

They show graphs indicating that the only type of competition that does anything to stem the price inflation is to have another cable operator in a community. On the other hand, comptetition from DBS alone does essentially no good.

Here are the closing paragraphs of the main section of the report:


31. In Appendix B of this report, we use econometric analysis to provide a more sophisticated examination of the data collected. As described in Appendix B, we estimate the effect of market structure and other factors on cable prices. Our results show that cable prices tend to be higher in local MVPD markets where cable operators have a larger share of the market. This relationship may indicate an exploitation of market power by dominant firms or may reflect higher costs to serve these markets. In addition, we find that prices tend to be lower in areas served by vertically integrated cable operators than in areas served by unintegrated cable operators, suggesting that vertically integrated operators pass some of their cost savings to their subscribers. Complete results are described in Appendix B.


32. Cable systems found to face effective competition continue to exhibit lower prices than cable systems that serve communities in which no such finding has been made. As in previous years, the competitive differential varied, with the largest differential occurring in communities with a second cable operator. Overall, for the 12 months ending January 1, 2005, cable prices rose at an average rate of 5.2 percent, compared with general inflation of 3.0 percent for the year ending January 2005.

Seems to me, communities with a high penetration of cable are also those with much less than adequate OTA offerings, and perhaps also those in which a large percentage of the population is apartment dwellers, with no good OTA reception option. I have to believe all these factors are intertwined.


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