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Consumers Stung by Cable Rates, Practices

For Immediate Release
Monday, February 9, 2004

Contact: Mark Cooper, CFA, (301) 807-1623

Consumer Analysis Shows FCC Report Whitewashes Real Reason Behind Skyrocketing Bills

(Washington, D.C.) – Cable rates continue to rise at three times the rate of inflation, cable companies are using “bundling” of products and services to further gouge consumers and lack of real competition is costing the public at least $4.5 billion a year, according to a consumer group analysis of the cable industry.
“The FCC has steadfastly refused to address the serious questions of market abuse by cable operators since the industry was deregulated in 1996, and the Commission’s latest report about the industry sinks to all-time new lows in glossing over just how badly consumers are being harmed,” said Mark Cooper, director of research for Consumer Federation of America, and author of The Continuing Abuse Of Market Power by the Cable Industry.
Co-sponsored by Consumers Union and released in response to the FCC’s Tenth Annual Report on Competition in Video Market, the analysis shows that climbing cable rates have far outpaced all cost increases and that most consumers don’t want the extra channels/services they are forced to pay for in the “bundles” of channels cable companies compel them to buy. As a result, the excess profits on basic and expanded basic service have mounted sharply since the passage of the Telecommunications Act of 1996.
Cable operators use market power to control what consumers watch by determining which channels will or will not be carried on their system and they much more likely to give preference to the shows they own, the report noted. They are 64 percent more likely to carry shows in which they have an ownership interest. Broadcasters have used their rights to demand carriage to get preferential treatment for their shows too, and driven up the price of programming, even though consumers would not pay for many of them, if they were not forced to buy bundles.
“As a result, consumers are paying too much and independent programmers are left out in the cold,” Cooper said.
“The time has come for Congress to give consumers the right to choose and pay for the cable channels they want,” said Gene Kimmelman, Consumers Union public policy director. “It is ridiculous that the FCC gives a nod and wink to cable companies’ practice of bundling channel packages at exorbitant rates when it knows the typical household watches only 17 channels.”
To read the full report, click here.