Geoff Feiss, General Manager- Montana Telecommunications Association Comments on Video Competition

The Federal Communications Commission recently released its annual Cable Report, which studies rates and service offerings of the nation’s cable TV providers. The report shows that average monthly rates for cable service — including basic and expanded basic cable programming services — increased by 5.2% over the 12-month period ending January 1, 2005, from $40.91 to $43.04, and by a whopping 93% since Congress’s enactment of the Telecommunications Act of 1996.

The price for expanded basic service, which more than 84% of cable consumers subscribe to, increased by 6.2% over the last year, in contrast to the national consumer price index, which increased by 2% through November.

In fact, consumer prices for telephone services declined 0.3 percent, largely reflecting a 0.7 percent decrease in charges for long distance land-line telephone services. The index for information technology, hardware, and services declined 4.2 percent, and charges for internet services and electronic information providers has declined in each of the last five months and is 13.9 percent lower than in November 2005.

Meanwhile, back to the Cable Report: prices for basic and expanded basic cable programming rose less (4.9%) in areas relieved from basic tier rate regulation, than in areas still regulated, where rates rose by 5.2%. Indeed, prices charged by cable operators in communities where a second cable operator provided service were 17% lower than communities without second operators.

And in further affirmation of the Economics 101 principle of competition, prices rose the least in the most competitive arena, the so-called digital tier which offers data and Internet services.

So it’s not surprising that the Federal Communications Commission last week decided to push cable competition a bit further. Specifically, the Commission issued an Order requiring local cable franchise authorities to rule on applications by new competitive cable providers within 90 days for entities that are already authorized to access a community’s rights of way, and six months for all others. The FCC found that in many instances local franchising authorities make it difficult for new cable TV entities to enter markets by unreasonably refusing to award competitive franchises. For example, franchise negotiations that extend beyond certain time frames amount to an unreasonable refusal to award a competitive franchise. So does requiring an applicant to agree to unreasonable build-out requirements. The FCC further found that, unless certain specified costs, fees, and other compensation required by local franchising authorities are counted toward the statutory 5% cap on franchise fees, demanding them could result in an unreasonable refusal to award a competitive franchise.

This is good news for cable consumers and competitive cable operators alike. Consumers, of course, benefit from both price and service/feature competition. In short, you get more—for less.

And the FCC’s order makes it easier for a new generation of cable providers to enter the market. That new generation is represented by none other than telephone companies that are deploying broadband data networks capable of providing a new level of video programming. Call it video on steroids. With Internet-based TV (or IPTV), consumers will be able to create individual cable programming, tailored to specific tastes. You’ll be able to tell the network what you want to watch, and when. Instead of being limited to certain channels, you’ll eventually be able to pick and choose from an almost infinite array of programs.

Local telecom providers already have deployed extensive broadband networks. They are further upgrading their networks today to be able to provide the first generation of IPTV. Some of the nation’s largest telecom providers, like AT&T and Verizon are already deploying IPTV in a few of the nation’s largest markets. Montana’s rural telecom carriers are on a parallel track, with trials already being conducted and launches of IPTV being planned for next year.

To be sure, obstacles still remain. In addition to ensuring that local franchising authorities don’t become barriers to competition, we need make sure that video content is available to video program providers. Many large content owners have established exclusive deals with large cable operators, effectively closing out the market to smaller, or even large, but competitive, providers.

Once again, the solution is to open—not close—markets.
We’ve seen the benefits of competition in the voice and data markets already. The next step is to jump on the video competition bandwagon. Stay tuned for more exciting programming to come!

Wishing you a wonderful and productive New Year, this is Geoff Feiss of the Montana Telecommunications Association.

Contact: Geoff Feiss, General Manager

Montana Telecommunications Association

406.442.4316

[email protected]

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FCC proposal may aid Qwest in TV market http://www.matr.net/article-22045.html

Cable One buys more cable operations in Idaho http://www.matr.net/article-22032.html

AT&T offers cable TV http://www.mercurynews.com/mld/mercurynews/16297735.htm