Competitors Making Inroads Against Cable

By Steven Levingston
Washington Post Staff Writer
Saturday, February 11, 2006

Federal Communications Commission Chairman Kevin J. Martin said yesterday that the agency should make it easier for new companies to compete with cable providers in bringing video services to consumers.

Speaking at an FCC meeting held symbolically in Keller, Tex. -- the community where telephone giant Verizon Communications Inc. rolled out its first fiber-optic TV service last year -- Martin said in prepared remarks that the commission should "facilitate" such efforts and "seek to eliminate unreasonable barriers to entry."

Martin did not mention specifics, but phone companies have been seeking relief in recent months from having to win TV franchise awards one-by-one in thousands of localities around the country.

Martin's remarks came as the commission released a report finding that direct satellite TV providers nibbled away at the dominance of cable operators over the past year, but also that further steps are needed to improve competition. In addition, fostering the spread of new service providers "promotes the deployment of the broadband networks over which the video services are provided," Martin said.

The report found that the video industry has made advances in picture quality, technological innovation and consumer choice. But Commissioner Jonathan S. Adelstein echoed Martin's concerns about competition, noting that the top four video providers served 63 percent of the audience last year, up 5 percent between June 2004 and June 2005, the period covered by the report.

Adelstein said it is significant that some large telephone companies are upgrading their operations and entering the market. "This investment could bring the most substantial new competition into the video marketplace that this country has ever seen," he said.

The report found that cable's share of the market slipped to 69.4 percent in June 2005 from 71.6 percent in June 2004. Satellite providers boosted their share to 27.7 percent from 25.1 percent over the same period.

The National Cable & Telecommunications Association, a trade group for the cable industry, noted the report's reference to advances in technology, picture quality and consumer choice.

"The FCC report confirms that the home video marketplace has never been more competitive," Kyle McSlarrow, the association's president and chief executive, said in a written statement.

But consumers didn't get any price relief from cable operators as an enticement to continue service, the FCC report found. "Cable operators generally have responded to the growth of [satellite] and other competitors by expanding service offerings rather than lowering prices charged to consumers," the report said.

Consumer advocates said prices have continued to rise as cable operators have expanded their bundled packages of channels. Jeannine Kenney, senior policy analyst at Consumers Union, said that since cable deregulation in 1996, prices have climbed 64 percent, nearly 2 1/2 times the rate of inflation, in large part because of expanded basic offerings.

"Great, we've got 400 channels, but people are still only watching on average 17," Kenney said.

Consumers Union has pushed for so-called a la carte cable service that would allow consumers to choose the channels they receive. On Thursday, the FCC released a separate study saying that consumers could save money from a la carte programming, reversing an earlier commission finding on the topic.

Yesterday's report also found that 14 percent of all U.S. television households, or 15.36 million, rely on over-the-air broadcasts for their TV viewing.

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