Study: Statewide Cable Video Franchise Reform Helps Consumers

 

(January 11, 2007) - In Washington and across the country, cable television consumers are frustrated with soaring cable bills and poor customer service.  Video franchise reform can significantly lower prices and improve service by ending the local monopolies which have long protected cable companies from competition.

Nine states, Arizona, California, Indiana, Kansas, New Jersey, North Carolina, South Carolina, Texas and Virginia, have passed video franchise reform laws since 2005. Congress is also considering a video franchise reform bill.

Video franchises are the revenue-sharing agreements that cable TV companies sign with local governments in return for the exclusive right to offer video services to customers.

A new Reason Foundation/Washington Policy Center report, Better Prices and Better Services for More People, describes the benefits of statewide franchise reform and outlines how states can pass laws that protect consumers and spur competition that will drive prices down, improve service and enable even faster innovation.

"Cable and video reform is a nonpartisan issue," said Adrian Moore, the study's project director and vice president of research at Reason Foundation. "In today's age of web videos and on-demand services, there are so many phone and tech companies itching to enter markets across the country that Democrats and Republicans are finding they can save taxpayers a lot of money by simply allowing competition in the video service industry."

Today, video service is highly regulated at the local level and many local governments have become addicted to the revenue produced by lucrative cable franchise agreements. But we are in the midst of a fundamental shift in the way cable and phone companies do business and the way consumers watch video.

"This new report lays out several instances where the consumers, companies and governments all come out ahead because of private-sector innovation," said Carl Gipson of the Washington Policy Center. "When government gets out of the way in this instance, everybody wins."

"With iTunes and YouTube capturing huge shares of viewers who skip the traditional TV model altogether, local governments would be wise to make plans for the day when local TV distribution is no longer a cash cow," stated Steven Titch, author of the report.

In Keller and Plano, Texas, Charter Communications was charging $68.99 for cable TV service in the area. But after Texas passed statewide franchise reform, Verizon jumped into the Keller and Plano markets, offering 180 channels for just $43.95 or 35 channels for just $12.95. Charter responded by slashing its prices and offering a bundle of 240 channels “ plus high speed internet “ for just $50, $18.99 less than they were charging previously for cable alone.

About Reason

Reason Foundation is a non-profit think tank dedicated to advancing free minds and free markets. Reason produces respected public policy research on a variety of issues and publishes the critically acclaimed monthly magazine, Reason. For more information, please visit www.reason.org.

Contacts

  • Steven Titch, Telecom Policy Analyst, Reason Foundation, (281) 571-4322

  • Adrian Moore, Vice President of Research, Reason Foundation, (661) 477-3107

  • Carl Gipson, Policy Analyst, Washington Policy Center, (206) 937-9691