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Standard-Examiner

By Jeff DeMoss, Standard-Examiner, Ogden, Utah

Mar. 11--You could end up paying less for cable television, eventually, if state and federal efforts to encourage more competition come to fruition.

Consumer prices for cable TV have risen sharply in recent years, prompting some to cry foul over what they see as an unnatural monopoly whose grip has tightened through industry consolidation and exclusive deals with local governments.

Defenders of the current system say price hikes have been justified by expanded services and new technology, and that more regulation of the industry would only wrest powers of self-determination from the hands of local governments.

In most states, including Utah, cities have negotiated franchise agreements with a single cable provider.

Now, a push to allow states to intervene is gaining momentum locally and elsewhere. The Utah Legislature attempted to address the issue this year, and while it generated a lively discussion, no definitive action came of it as lawmakers await regulatory developments at the federal level.

Senate Majority Leader Curtis Bramble, R-Provo, sponsored a bill that would have allowed competitors to build their own cable networks or lease bandwidth on existing ones. Whether it would ultimately benefit consumers depends on whom you ask.

Over several decades, cable providers have entered into franchise agreements with local governments, and the result has been long-term, exclusionary contracts, he said.

While there is no law against competition, the nature of existing contracts creates economic barriers to other players who want to enter local markets, Bramble said.

"Cities will say they have an incumbent provider, and the only way they will let someone else come in is if they do a full build-out citywide," he said. "What you have is the very real effect of local governments creating a protected market for the incumbent provider."

The cost of building a network that reaches a whole city in a limited amount of time is prohibitive for most providers, according to Qwest Communications International Inc., one of the main backers of cable franchise reform legislation.

"That's financial suicide for most businesses," said Gary Younger, Qwest spokesman for Utah. "That hurdle itself is enough to drive most potential competitors out of serving an area."

The cable industry sees state intervention to create competition as both unnecessary and contrary to free-market principles.

Jerry Oldroyd, a Salt Lake City attorney representing Comcast Corp. in Utah, said the system in place has worked well for years, and cable companies have raised prices to account for higher programming costs, expanded offerings and other expenses.

Oldroyd said Comcast has spent more than $500 million to build its network in the state, and it would be unfair for the state to force the company to allow competitors to benefit from that investment.

"That's like telling a car dealer that because he sells more cars than anyone else, he has to give part of his showroom space to competitors," Oldroyd said.

Comcast Utah spokesman Ray Child said the company welcomes healthy, natural competition, but reform as it is proposed tips the scales against incumbent providers.

Bramble and supporters of his bill agreed to put it on hold this year to allow further discussion now that the Federal Communications Commission is addressing the issue.

Last week, the FCC issued a report in which it said changes are needed to bring competition into cable markets nationwide. The commission is now in a public comment period while it decides how to proceed with regulation.

An FCC report indicates that cable rates in the U.S. rose 93 percent on average from 1995 to 2005, and that customers living in the two percent of the national market that has more than one cable provider pay 17 percent less for cable than those in markets with only one company.

"Prices have gone down in almost every segment of telecommunications except cable," said J.R. Godfrey, regional vice president of regulatory affairs for AT&T Inc.'s western region. "Competition drove prices down in other areas, and it will do the same for cable."

The National Cable & Telecommunications Association, which represents the cable industry, says the FCC figures are skewed.

Association spokesman Brian Dietz said that when you account for the extra services that are offered today, prices have actually fallen over the past decade in terms of value.

For example, "triple play" services, whereby customers purchase high-speed Internet, cable TV and phone services in one package, have declined more than 20 percent in price over the last decade when adjusted for inflation, Dietz said.

Ten states have already passed cable franchise reform laws, shifting control of franchising authority from counties and municipalities to state governments.

Passing such a law in Utah is a concern for the Utah League of Cities and Towns, said Roger Tew, the group's tax analyst.

"It strips cities of the ability to determine for themselves," Tew said.

He said most cities, when approached, have willingly granted changes to their cable franchise agreements.

Telephone companies like AT&T and Qwest are pushing for reform as they try to make inroads into video and other services beyond phone lines.

The phone companies were on the other side of a similar dispute more than 10 years ago, when smaller companies were trying to break into what they considered telephone monopolies.

The Telecommunications Act of 1996 essentially allowed smaller phone companies to do in the telephone market what large phone companies are pushing for today in the cable market through franchise reform.

The irony of the situation is not lost on Qwest Utah President Jerry Fenn. He said Qwest used the same build-out requirement to maintain an economic barrier to competitors when telephone reform was a hot topic in the early 1990s.

"We learned our lesson in 1996," Fenn said. "Competition is in the best interest of our customers and residents of the state."

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