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JULY 24, 2002
6:33 PM
CONTACT:  Consumers Union
Gene Kimmelman, Chris Murray or David Butler (202) 462-6262
Cable Price Hikes, Broken Promises Prompt Call For New Oversight
New report by Consumers Union says cable rates up 45% since deregulation began
WASHINGTON - July 24 - Cable television rates have increased 45 percent since the federal government began deregulating the cable industry in 1996, while the industry continues to break its promises to the government and consumers to promote competition, according to a new report by Consumers Union, the nonprofit consumer organization that publishes Consumer Reports magazine.

At a time when federal lawmakers and regulators are putting new checks and balances in place to prevent corporate irresponsibility, the consumer group is calling on policymakers to impose similar oversight of cable's monopolistic practices.

In a white paper entitled "Abusing Consumers and Impeding Competition: The State of the Cable Television Industry, 2002," Consumers Union says that the average monthly rates for cable TV have skyrocketed since Congress approved the Telecommunications Act in February 1996. From that time until June 2002, cable rates shot up 44.7 percent, while inflation rose 16.5 percent, as indicated by figures from the U.S. Bureau of Labor Statistics. That means that cable rates increased nearly three times as fast as inflation. Despite the enormous growth in satellite TV, satellite's popularity has not restrained increases in cable rates.

Meanwhile, cable's commitment to bring competition to other telecommunications sectors has gone largely unfulfilled. Cable's promise to expand into local phone markets and challenge Bell monopolies is still a pipe dream for all but a handful of consumers. Cable companies promised to open their systems to numerous providers of high-speed Internet services, but most have kept their systems closed to outside providers.

"Many cable industry leaders were willing to mislead Congress about how 'competitively' they would behave in return for deregulation," said Gene Kimmelman, director of Consumers Union's Washington DC office. "They led Wall Street on a wild goose chase in expanding telecom markets that were speculative at best, and then some of them cooked their corporate books to conceal how irresponsible their behavior had been."

Consumers Union is urging Congress and regulators to hold cable companies responsible for abusive practices in the wake of similar efforts aimed at accountants and their clients.

"When markets fail to police themselves properly, it is critical to impose oversight of market abuses, as Congress is attempting to do in response to problems in the accounting industry. Congress should do the same thing with cable companies," said Kimmelman. "When you look at the price hikes and the broken promises to compete, it is clear that there needs to be stricter public accountability in the cable industry."

In its white paper Consumers Union criticizes the Federal Communications Commission (FCC) for failing to encourage the development of new technologies to compete with cable, and it calls on Congress to make the FCC reverse course. It also calls on Congress to shift oversight of cable companies from the Federal Communications Commission (FCC) to state regulators. The group believes that states should have the same power over cable monopolies as they do over local telephone monopolies.

Consumers Union, publisher of Consumer Reports magazine, is an independent nonprofit testing, educational and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition and other consumer concerns. Since 1936, our mission has been to test products, inform the public and protect consumers


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