Promised cable bill savings aren't happening

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Posted by on October 25, 2009 at 16:54:13:

Price promises of backers of cable bill fall flat

By JASON STEIN | Wisconsin State Journal

When interests such as AT&T pushed for a bill in 2007 to open up more competition in the cable television market, the proposal's supporters promised consumers would "see cost savings almost immediately."

Nearly two years after an intense lobbying effort helped push the controversial video competition bill through the Legislature, those lower cable prices haven't materialized. A recent study found prices for expanded basic cable increased nearly 28 percent from late 2006 to early 2009. Madison-area provider Charter Communications has said it will raise rates on its lower-tier cable-only customers by $3 in December.

"It was a form of puffery and everyone knows it," Barry Orton, a UW-Madison telecommunications professor who formerly did consulting work for cities opposed to the law, said of the predictions of lower prices. "And those rates prove it."

The law's supporters say it is holding down prices of bundled packages of video, telephone and Internet service and leading to better customer service and new products such as the Big Ten Network.

One local lawmaker has sought to settle the price question with a limited legislative audit. Rep. Gary Hebl, D-Sun Prairie, is also seeking to roll back some parts of the 2007 law he says limit protections for consumers and end funding for local public access channels.

But critics say Hebl's wide-ranging bill would harm the cable industry and prove a setback to the video competition law just as it is starting to work.

"It's so mindboggling to me that just when we're starting to see some of the fruit blossom on this tree, there are some people who want to chop the thing down," said Sen. Jeff Plale, D-South Milwaukee, a co-author of the 2007 law.

The law ended franchising of cable companies by cities and local governments and instead created a statewide franchising system, making it easier for companies to get into the business. The bill also ends, on Jan. 1, 2011, the payments that cable providers made to about 30 cities to support public access channels, including the Madison City Channel and Madison's public access channel WYOU.

Price tracking not easy

With all the bundled options available to consumers, tracking how prices have changed since the law's passage is difficult.

A University of Minnesota study found that prices often rose even in states that passed video competition laws, including Wisconsin. The study found prices for expanded basic video here rose 28 percent between December 2006, a year before the state's law took effect, and February 2009.

That's a different story from the one projected in a February 2007 report by the conservative Wisconsin Policy Research Institute, which said the cable bill could lower video prices here by between $83 to $149 a year if Wisconsin followed the experience of other states. TV4US Wisconsin, a group whose backers included AT&T, said on its Web site that with video competition, consumers "begin to see cost savings almost immediately" over cable companies' prices.

Legislator advocates protection

Tim Vowell, a spokesman for Charter Communications, said the bill has increased competition in the state and helped hold down prices for bundled packages. In December, Charter will raise its expanded basic cable price in Madison by $3 to $54.99 per month, though that price hike won't affect the majority of Charter customers with bundled or promotional packages, he said.

AT&T spokesman Jeff Bentoff said his company made a significant but undisclosed investment in the state because of the cable bill, making service available to more than 500,000 households. Bentoff said that was leading to more competition, including on price, and more union jobs dealing with its video service, but he did not provide specific numbers.

"Is there a credible argument that consumers are worse off having new options?" he said.

Hebl said he supported making it easier for AT&T to enter the market but wants to restore regulations that had been lost.

"The protection needs to be there for our consumers," he said.

Tom Moore, executive director of the Wisconsin Cable Communications Association, said Hebl's bill would make it hard for the state's cable companies to compete with the satellite dish providers that are still their biggest competitors.

That's because Hebl's bill would do more than restore the money from video providers for the public-access channels with funding agreements negotiated with the cable companies. It would also allow any municipality to start collecting a 1 percent fee on the companies' revenues, he said.

"That kills us," Moore said.

But Mary Cardona, executive director of the Wisconsin Association of PEG Channels (public, education and government), praised Hebl's bill as a lifeline to public-access channels that, without the bill, face severe budget problems.

"This bill puts people first and it makes sure our communities have their access channels," Cardona said.

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