Policy Documents

No. 112 The Consumer Benefits of Video Franchise Reform in Illinois

John Skorburg, James Speta, and Steven Titch –
April 4, 2007

Illinois has the opportunity to join a growing number of states that have streamlined the process of competitive entry into cable TV markets by giving the state the authority to grant a video franchise to a new entrant seeking to launch service anywhere in the state.

Phone companies are upgrading their networks with fiber-optics to offer television and other video services using Internet protocol technology, called IPTV. Requiring phone companies to engage in negotiations with some 10,000 cities and counties nationwide to secure video franchises, especially when phone companies already have franchises to deliver telephony and Internet services over the very same wires, would discourage and delay the roll-out of new services.

Other researchers have found that competition among cable video providers results in lower prices for consumers and higher quality services. If competition in cable markets were the rule rather than the exception nationwide, economists estimate consumers would benefit to the tune of $8.4 billion a year, and society as a whole would stand to gain some $10.4 billion a year. Those states that are leading the way in removing video franchise requirements have experienced falling prices and the roll-out of new video services.

An original analysis conducted for this study finds the typical Illinois household with a cable subscription would save $103 a year due to lower prices, plus gain $12 a year in services valued over and above the amount paid for them, for total consumer benefits of $115 a year. If every community in Illinois were to become competitive, the benefit to consumers would total $316 million a year due to lower prices and $36.5 million due to increased consumption of desired services, for total annual consumer benefits of $352.5 million.

Statewide video franchising could bring significant benefits to Illinois consumers. Service providers are ready and the market is ripe. Forward-looking legislators can light the competitive fires and make Illinois a showcase state for advanced fiber-optics, broadband, and video and information services.