Despite Promises That Franchise Reform Would Lower TV Rates, The Opposite Has Happened

from the so-much-for-that-theory dept

Wed, Dec 29th 2010 9:06pm — Mike Masnick

For years, the telcos pushed for cable franchise reform, which was sorely needed to some extent. Basically, for decades, various local municipalities would offer a "franchise" for cable TV providers, so that residents really only had a single choice. When I was growing up, if you wanted pay TV you had one option and one option only. The reason for this did make some sense at the time. Laying infrastructure for cable was disruptive and expensive, and towns didn't want multiple providers to dig up everyone's lawn or whatever. On top of that, with a single franchise managed by local government, that local government could put conditions on the franchise that helped local residents (for example, here in Silicon Valley some franchises required super high speed broadband connections between schools, government building and a few other facilities). However, with it also came the downsides of a monopoly.

In pushing for franchise reform, one of the key arguments made was that adding competition would lower prices -- which is not a ridiculous assumption at a high level. However, as Broadband Reports is now noting, that's not what's actually happening. It points out how AT&T, which benefited massively from said franchise reform, has continually raised the prices on U-Verse, and there's also been a similar corresponding increase in prices of cable TV, contrary to the promises.

All that said, I'm not ready to claim that franchise reform was a mistake. I agree that the claims of telco supporters appears to have been bunk, but that's to be expected. The real problem was that with basic franchise reform, we didn't get significant competition, but limited competition from companies who are still using regulatory capture to enable higher prices.

I think the real turning point on pay TV prices (contrary to the claims of some) won't come due to franchise reform, but as more people ditch pay TV altogether and cut that cord to go internet-only.

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Filed Under: franchise reform, pay tv, prices, tv
Companies: at&t

33 Comments

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Anonymous Coward, 29 Dec 2010 @ 9:31pm

Two things to consider:

1) When you look at the overall cost of cable, number of channels, and so on, and compare it to your mid 80s cable price, you are actually doing pretty good these days. Many of the franchise systems were keeping rates down by not doing upgrades and not moving forward. Without the changes, those systems would likely be the same as they were, which would be a crime.

2) When you "cut the cord" you cannot at this point obtain the same level of service online. You can only hope to get similar programming choices through piracy at this point.
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Anonymous Coward, 29 Dec 2010 @ 9:33pm

Re:
When you consider that there are far more commercials now than there were a decade or two ago I think we're, in many respects, worse off. Not to mention programming seems to have gotten worse if anything. I don't need 1000 channels of useless infomercials and worthless junk, I only need one channel with something good to watch ;)
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Anonymous Coward, 29 Dec 2010 @ 9:34pm

"I think the real turning point on pay TV prices (contrary to the claims of some) won't come due to franchise reform, but as more people ditch pay TV altogether and cut that cord to go internet-only."

But Internet prices are also high (especially compared to other countries) thanks to monopolistic laws that favor incumbents. So either way we're still going to pay a fortune.
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Bill W (profile), 29 Dec 2010 @ 9:45pm

Don't hold your breath
I don't think we are getting anywhere towards meaningful value until one of the providers turns toward providing value to the consumer. Of course there is no current incentive to do that due to the current monopolistic/duopolistic environment. I can choose Comcast or U-verse, period. Each is so entrenched that the consumer (me) is treated with disdain. But entry costs to the arena are prohibitive, I see no relief in sight!
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Steve, 29 Dec 2010 @ 9:48pm

Still not enough
The cost of cable my go down as more people decide to go Internet only; but most people only have 2 or 3 choices for net access as well. still not enough competition. If there were 8 or 10 options, some fiber, some copper, even wireless options at every address, then you would see real competition and fair pricing. As long as people only have a small handful of choices, the prices will never come down.
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Anonymous Coward, 29 Dec 2010 @ 9:49pm

I think one of the main issues is the oligopoly currently in place. There no real choice.
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Anonymous Coward, 29 Dec 2010 @ 10:00pm

Pray to Google to save us. They're probably the only ones who might.
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Designerfx (profile), 29 Dec 2010 @ 10:34pm

not quite, mike
you're thinking of the wrong cord being cut. With the speeds that 4g is supposed to have fairly soon, people might be cutting all cords (cable, tv, internet), not just the tv cord, so to speak.

I mean 42mb theoretical (22mb downstream) is enough to replace the entire triple play, for me. it's just a matter of having reasonable usage limits and not 5GB/month.
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Anonymous Coward, 29 Dec 2010 @ 10:36pm

Re: Re:
You are correct. But if you selected a package today that is equivalent to what you got 25 years ago, the price is very comparable as well. The AT&T Uverse starts at 19.95, which I suspect is very similar in price to what it cost for cable in 1985 or so.

Nobody is forcing anyone to take 1000 channels. To use the top tier all the channels price and try to compare it to services offered in the past is difficult. It is also hard to compare to the "cut the cord" universe, because even the most basic service on cable has more available than most cut cable people can get.
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Deimos280 (profile), 29 Dec 2010 @ 11:04pm

A "monopoly"?? on something thats for entertainment? Thats like saying Hollywood has a monopoly on movies :'D Maybe im missing something, but I'm sure people spend more on cigarettes than they do on internet and cable every month. When did cable become a god given right? sorry if im missing the point...
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Anonymous Coward, 29 Dec 2010 @ 11:16pm

Re:
Since when does everyone smoke? I don't so I spend zero on cigarettes and $130 for cable + internet.
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Josef Anvil (profile), 30 Dec 2010 @ 2:04am

I think Mike got this one right
As soon as consumers realize that they have a lot more control on this issue then there will be some changes in the market. Pay TV is under a similar threat that the music industry faces and its just at the beginning, similar to the time just before Napster hit.

We do need the broadband, but the other communications services that we are forced to consume are not all that necessary anymore. Google Talk and Skype are showing us that telephony and even video telephony can be delivered without a fee to the consumer. Many broadcast TV channels are offering their programming on their websites for free so that we can "catch up", and there are plenty of new and interesting TV alternatives popping up on the web.

Cable and Telco's can ignore the way younger consumers are choosing to use the web if they wish, but they should be paying very close attention to the online gaming community as well. More and more people will be opting for broadband only from Cable and Telco providers and choosing alternative channels for their entertainment online. The should effectively shake up the market.
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The Mighty Buzzard (profile), 30 Dec 2010 @ 2:33am

Re: not quite, mike
Not bloody likely until I can get a wireless signal as reliable as copper or fiber. I don't care if I'm getting 512Gb/s downstream wireless. If I lose signal all the time or can't even get a signal at all at home, I'm not interested.
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j647 (profile), 30 Dec 2010 @ 4:04am

Re:
yes there is, no service at all, they want you to think there's no choice
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Anonymous Coward, 30 Dec 2010 @ 5:05am

All that said, I'm not ready to claim that franchise reform was a mistake. I agree that the claims of telco supporters appears to have been bunk, but that's to be expected. The real problem was that with basic franchise reform, we didn't get significant competition, but limited competition from companies who are still using regulatory capture to enable higher prices.

That is because there was no real "Franchise Reform".

The laws that govern those things didn't get changed enough and that is why you have an eco-system that doesn't flourish.

Competition will come only in the form of piracy for all intent and purposes and that is sad. The good thing is, that people are not willing to give up sharing anything and they already proved that they will fight for it.

So laws really don't matter at this point in time for the general population, but if people want new business that can capture some revenues from this social event, laws will need to change a lot specially copyright laws.
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Anonymous Coward, 30 Dec 2010 @ 5:26am

Re:
2) When you "cut the cord" you cannot at this point obtain the same level of service online. You can only hope to get similar programming choices through piracy at this point.

Actually you get better service pirating.

Aside from Netflix nothing else nowhere comes close to quality, variety and price of pirated goods.

You got RSS feeds that automagically download all new episodes in the format that you want, it takes 20 min to download something.

Now for legal content use MIRO and subscribe to thousands of free channels.

To be honest, since I stopped pirating, I also stopped watching TV and found everything I wanted on VODO, MIRO and Youtube, I don't have enough time to watch everything I download for free and more importantly legally.
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JBeiber, 30 Dec 2010 @ 5:31am

Cut it
It is not true competition. A few huge companies control the whole game, so they can convince the consumer to pay whatever they all claim is justifiable. Notice when one company raises rates for some reason, they all follow. Consumers have come to expect periodic bill increases, and their only options are to cut the cord, or switch to the other guy.

But thats your choice after all. People think its bizarre these days to not have pay tv. The real question is why have we become so dependent on television in the first place? Why are our society's basic household necessities food, water shelter, heat, electric, and television? Its not like there isn't plenty of media choices out there to keep us informed and entertained without paying for it or paying a lot less.
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Anonymous Coward, 30 Dec 2010 @ 5:31am

Re:
I don't know about right, but when it became so expensive?

Cable is a superfluous thing, it is not an essential so, I believe people should just cut out that expense.

There is free TV over the air, internet, games, community recreation and other stuff that people could be spending $500 bucks on it.
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Deimos280 (profile), 30 Dec 2010 @ 6:17am

Re: Re:
sorry, just saying, a morning coffee and bagel adds up to more than what I spend on internet every month. with all the complaining you hear about dish, and comcast, you would think it was a right to have cabel t.v. lol
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hegemon13, 30 Dec 2010 @ 6:44am

Re:
"When you "cut the cord" you cannot at this point obtain the same level of service online. You can only hope to get similar programming choices through piracy at this point."

Actually, most people can. How many shows, after all, do most people watch? Network shows and many basic cable shows are available free on Hulu (with the older episodes available for $8 a month). For another $8 a month, you can get Netflix, with access to a massive streaming library, plus access to basically anything you could ever want by mail. Over-the-air HD provides a lot of channel-surfing content, as well as higher quality broadcasts of network shows.

For instant access to the few shows people watch that aren't available via free or subscription-based streaming, there's always iTunes. When you get rid of an $60+/month cable bill, you can afford to buy a lot of episodes for $2.00, and you get to keep them. So, unless you are a huge TV junkie (in which case, your cable bill is probably more like $100 or more), you can easily get the same service, without pirating, for less. And, you can pick and choose want you want to pay for.
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hegemon13, 30 Dec 2010 @ 6:45am

Re: Re: Re:
No, U-verse starts at an INTRODUCTORY price of 19.99. Wait till the promotion ends!
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jsl4980 (profile), 30 Dec 2010 @ 6:56am

Multiple providers is a good thing
In my area we have our cable provider and now Verizon FIOS. I made a quick call to my cable provider saying that I was switching to FIOS and they took $30/month off my bill for the next year. If we didn't have FIOS then the cable provider wouldn't have any incentive to cut me a deal. The prices are better if you ask for it in my area.
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Jon B. (profile), 30 Dec 2010 @ 7:02am

Ok, so the tv monopoly is beaten by the Internet, but that just shifts the debate from TV service to Internet service, which still suffers from the same issues. Not much is changing here.
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Anonymous Coward, 30 Dec 2010 @ 7:04am

Re: Re:
Outside of netflix, what you listed wasn't a $60 a month cable bill, it was about a $25 cable bill. Which means you can watch one Itunes episode every third day or so. You could easily "cut back the cable" to $25 a month, give netflix your $8, and use the other services you mentioned to get other stuff you are missing - if they are all there, and on time.
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JEDIDIAH, 30 Dec 2010 @ 8:07am

Cutting the cord.
Nope. Cable is much more expensive than that these days.

That's why people are getting fed up with it. Cable companies force you to buy 5 tiers or packages just to get the 5 channels you want. That's not even getting into the "premium" channels that are extra on top of that.
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Anonymous Coward, 30 Dec 2010 @ 8:16am

Re: Re: Re: Re:
The price was good for at least 1 year. That was good enough for me.
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Almost Anonymous (profile), 30 Dec 2010 @ 9:13am

Re:
'''That is because there was no real "Franchise Reform".'''

I was going to say the exact same thing: WHAT reform? Cable is still a monopoly; I don't claim to know exactly why, but cable companies will NOT service another cable companies 'area'. Same thing with DSL: I wanted to get DSL through AT&T but they said they "couldn't", that Centurylink services my area. Turns out their service really blows, I had to go with the much more expensive Mediacom Cable for decent internet.

Before some goon says, "See, you had a choice!"... No. I really didn't. A choice between two different types of monopolies is not really a choice.
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Bozo, 30 Dec 2010 @ 12:00pm

this one
Techdirt,

I'm not quite sure why you keep hoping deregulation will provide increased competition. That's how it should work, but it never does. How much more proof do we need?

Unfortunately, when you remove all limits, capitalism is just monopolism. You regulate to preserve competitive markets. The problem today is that government is controlled by corporations, so it won't properly regulate.
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Anonymous Coward, 30 Dec 2010 @ 1:51pm

Consider content prices
Disclaimer: I work for a small company that provides IPTV service to a couple of communities.

The biggest reason we raises prices is because of increases in content prices. We have to pay for almost all of the channels we carry, with the exception of local access and home shopping channels.

As for programming tiers, ala carte pricing, etc, our hands are tied much of the time by our content provider agreements. A certain major sports network requires that they're in around 80% of our subscribers' packages. If they're included in fewer packages than that we can't carry them, and they're not cheap. If we dropped them we'd lose subscribers who are interested in sports programming. A lot of other networks have similar agreements.
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Anonymous Coward, 30 Dec 2010 @ 2:42pm

Here in North NJ price competition between Cablevision and Fios has dropped the price for triple play to $70. Both are offering this price to lure back ex-customers. Before Fios you would would easily pay $100 for the cable and internet.
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Anonymous Coward, 30 Dec 2010 @ 6:09pm

The reason why wireless ISPs have low limits is because a lot of them run wired as well, and they would rather get you for both services than have you just go wireless.

I don't see the prices falling anytime soon for that reason. Well, they will eventually when companies who only do wireless start dropping prices and they will have to, so they can compete, but I don't see it happening willingly.

Eventually they all become the same price though and then they start going up. Thats what you are seeing with cable now, though programmers charging more for it is part of the reason. Greed goes across the board for sure.
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Ormond Otvos (profile), 30 Dec 2010 @ 9:03pm

Free Riders...
Never enough, never cheap enough.

Humans have no limits on their entertainment addiction.

Millenia of campfire stories.

We're hooked.
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herbert, 3 Jan 2011 @ 8:00am

all this has done is enable companies to create/maintain exorbitant profits! there has been little or no benefit to consumers at all! i wouldn't mind betting that all the cable companies have got together and 'price fixed', with some gaining in some areas and others gaining somewhere else!
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