Beware the Legacy Cable Guy

Published January 1, 2006

In a move that makes Jim Carrey’s character in The Cable Guy look angelic, the California Cable and Telecommunications Association (CCTA) recently circulated a letter to Sacramento lawmakers in an attempt to scare them into protecting cable’s dominant video market position.

It’s now easy for cable companies and others that offer high-speed Internet services to get into the voice market, but it’s difficult for telephone companies to enter the video market. The ease of entry into voice is due to a technology called Voice over Internet Protocol (VoIP), which allows low-cost telephone calls over the Internet. The invention and spread of this technology slashed consumer telephone bills and sliced a good portion of revenue from telecom companies.

With the convergence of multiple communications technologies, everyone is expecting a similar scenario in the video market, but it’s not happening as quickly. That’s because the change relies not on technological advances, but on government taking down roadblocks like cable franchise rules. And there’s a big lobby that doesn’t want to see competition happen.

The CCTA’s November 9 letter begins by stating, “The Bell telephone companies are beginning to aggressively offer local video services in California and around the nation.” True enough, and that should be good for consumers, right?

According to the CCTA, there “could be serious negative impacts” to new competition, and CCTA President Dennis Mangers asks letter recipients “to oppose such efforts before it is too late.” The impending crisis is clearly that the cable guys don’t want any additional competition. Of course they don’t advertise it that way.

Instead, the CCTA makes a weak doublespeak argument that telephone companies should not be allowed to compete because they might not do it right. That is, the cable guys are worried the telcos might not compete in every single jurisdiction, and if they don’t do that, well, the sky is obviously going to fall.

Have Some Faith

That blatant plea for government help in staving off competitors should be rejected as quickly as a Nigerian spam scam. Competition is always good for consumers, and in some of the few areas where the Bells have managed to overcome outdated cable franchise laws, the results are astounding.

Just weeks following passage of a bill this summer that authorized Texas to grant statewide video franchises, Verizon introduced its FiOS TV service in Keller, Texas, offering 180 video and music channels for $43.95 a month, or a 35-channel plan for $12.95 a month. It also offers three tiers of broadband Internet access over fiber for $34.95 to $199.95. In response, the local cable company, Charter Communications, dropped its prices, offering a package of 240 channels and fast Internet service for $50 a month. That’s a big savings for the people of Keller, compared to the $68.99 Charter once charged for a TV package alone.

A Fairness Issue

Market forces should be working like this all over the country to bring benefits to consumers. Unfortunately, vested interests like cable companies and local governments, who have controlled and taxed the market for years, are doing everything they can to stand in the way.

California legislators should see cable franchise reform as a fairness issue. The telcos had no one protecting them from the sudden onslaught of competition in voice from the cable industry, so it’s really not fair that the cable guys get a better deal. Ultimately, legislators are in Sacramento to represent Californians, and they deserve more competition in the communications arena.

Sonia Arrison ([email protected]) is director of technology studies at the Pacific Research Institute. This article is reproduced with permission of TechNewsWorld and ECT News Network.