For immediate release
Tuesday, July 08, 2003
WASHINGTON, DC – Gene Kimmelman, Senior Director of Public Policy and Advocacy at Consumers Union (CU), said the following in response to the annual report on cable industry prices issued today by the Federal Communications Commission (FCC):
The FCC’s latest report on cable rates, while methodologically challenged, shows that cable rates are rising at an alarming rate, far faster than inflation – increasing 8.2 percent from July 2001 to June 2002, or nearly six times the rate of inflation. According to the Bureau of Labor Statistics, cable rates have increased about another five percent since then, through May 2003.
The cable companies’ claims that higher costs are driving these price increases don’t hold water. As CU’s January report Cable Mergers, Monopoly Power, and Price Increases demonstrates, cable revenues are rising much faster than industry costs. Cable companies have monopoly power, and this shows in the prices they charge. While 95 percent of American homes have only one cable company to turn to, in the five percent of homes where consumers can choose between two cable companies they wind up paying about 17 percent less than consumers who have no choice.
Today’s FCC annual report is particularly flawed. It does not adequately analyze the data it used. For example, the FCC surveyed a sample of cable operators to determine how they set prices, yet they failed to audit the data for accuracy. They simply took the cable industry at its word.
Competition from satellite is not holding cable rates down. The satellite industry does not yet provide a viable alternative to cable for a significant number of consumers. Clearly, Congress needs to step into the cable morass and help protect consumers from cable price gouging. Consumers should have the chance to pay for only the channels they want to watch. If Congress won’t put a lid on cable rates, at least such a la carte pricing should allow consumers to save money.
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.