TV4us

The Facts

The movement to bring real competition to cable TV is sweeping the nation.  Over a quarter million concerned consumers across the country have joined TV4US in demanding competition in the video market.  Their voices are beginning to be heard.  In the last two years, 18 states have passed video reform legislation, including California, Texas, Florida, Illinois, Ohio and, most recently, Wisconsin.

New service providers are entering these markets in droves. For example, since video franchise reform was passed in Ohio in June 2007, 31 companies have applied for service agreements from the Ohio Department of Commerce.

How does this benefit consumers? Competition drives down prices, expands broadband access, contributes to local economic growth and increases programming options.

Here is some of the evidence:

Competition Cuts Costs
When cable providers compete, consumers begin to see cost savings.  In Texas, for example, consumers experienced immediate cost savings upon the entry of new competitors.

• A survey by Bank of America Equity Research that compared video prices in markets in Texas, Florida and Virginia showed that cable TV prices were 40-75% higher in non-competitive markets.¹

• In areas where there was competition in the cable market, incumbent cable companies have implemented price cuts of 28-42%.²

• When Verizon introduced its FiOS TV service in Keller, Texas, offering 180 video and music channels for $43.95 a month, or a 35-channel plan for $12.95 a month, the local cable company dropped its price from $68.99 for a basic TV package to $50 a month for 240 channels and fast Internet service.³

• According to numerous studies and government reports, competition will result in an average decline of 23% in consumer prices.⁴

• A Federal Communications Commission (FCC) study concluded that wireline competition would produce the biggest savings for consumers, lowering cable TV prices by 27% per channel.⁵

• Based on a survey of consumers, cable customers living in competitive markets reported saving an average of $22.30 per month. The same survey uncovered the fact that customers who attempted to switch, but were enticed to stay with the existing cable TV provider, reported saving (on average) $26.83 per month.⁶

• The U.S. General Accounting Office found cable TV prices to be 28% lower in competitive markets.⁷

• Senior Fellows for the Brookings Institute, Dr. Robert Crandall and Dr. Robert Litan, estimated that competition would result in price reductions of 14%.⁸

• Professors Ellig and Brito of George Mason University's Mercatus Center estimated that cable monopolies create $10.4 billion in losses for consumers, due to high prices and forgone benefits.⁹

• Similarly, it was estimated that legislative delay in passing video franchise reform would cost consumers at least $8.2 billion each year.¹⁰

• Former FCC Chief Economist and George Mason University Law Professor Tom Hazlett estimated that the lack of competition amounts to an annual $9 billion consumer welfare loss.¹¹

Competition Creates Jobs

When competition enters a market, demand for video services increases and new jobs are created.  Construction workers, linesmen, craftsmen and others are all needed to build a fiber optic network capable of providing video and other services. Customer service representatives and marketing professionals are also needed to bring the service to the public. And, through the investments made in the community, indirectly related jobs are created as well.

• Cable competition is predicted to result in a net gain 33,700 new and permanent jobs in the video services industry. These jobs typically pay 77% higher wages than those in other sectors.¹²

• An additional 67,400 indirect jobs are predicted to be created elsewhere in the economy due to cable competition.¹³

• The FCC and GAO have estimated that, for every 1 percent decrease in price, demand for cable TV services would increase by 2.2 percent and 3.2 percent respectively. This means that price competition grows the cable TV and video market, adds investment, creates jobs, facilitates economic development, and increases the tax base for local communities.^14,15

• To date, over 2,200 new jobs have been created as a direct result of Indiana's reform legislation.¹⁶

• AT&T Inc. filled more than 1,200 positions in Michigan after it rolled out U-verse there last year and expects to add 800 workers by 2009 to help continue U-verse's rollout across Metro Detroit.¹⁷

Competition Expands Access

The FCC has recognized that broadband technology is a key driver of economic growth. Allowing more players onto the playing field encourages cable and telecom providers to build out and expand their service to communities at a rapid pace.  Not only does this bring expanded video service, but also expanded broadband access.  For example, Verizon and AT&T are committed to spending billions of dollars on infrastructure in order to bring video and broadband access to more homes.  And with decreased barriers to entry, many smaller companies are expanding their networks and services.   

• In Texas, the first state to pass video franchise reform, video enabled services have grown 8 times faster than it has in the rest of the country.¹⁸

• Eighty-two percent of the video service companies surveyed in Texas reported that the new law has accelerated their deployment of these services in the state.¹⁹

• Texas accounted for 20 percent of all national growth in video-enabled services in the year following the law's enactment.²⁰

• More than 108 statewide video franchise applications have already been granted by the Texas PUC. Over 660 communities now have choices - some for the first time ever. The number of customers offered video grew by 1,815%.²¹

• Indiana was among the leaders in passing video franchise reform in early 2006. As a result high-speed internet services have been expanded by major providers reaching a combined 102 new communities across the state. And as of December 31, 2006, Indiana had 1.5 million high-speed technology lines, a 72% increase over 2005.²²

• New video service is reaching even the most rural areas. For example, when video franchise reform was passed in Indiana, AT&T announced a 250 million dollar, multi-phased initiative to bring high-speed DSL service to all AT&T central offices in Indiana within 12 months. This first build-out phase involved 33 rural communities across the state, including rural towns as small as Stewart, Indiana (population 268).²³

• Smithville, one of Indiana's oldest telecommunications companies, plans to roll out new broadband, television and phone services to Hoosiers and will do so in 17 rural counties. Executives of Smithville said they will invest $90 million over three years to build a fiber-optic network that will be faster than most offerings and will reach 29,000 customers, mostly in southwestern Indiana.²⁴

• Another example of a smaller phone company taking advantage of franchise reform and launching service in a small market is Cavalier Telephone & TV (formerly Cavalier Telephone Co.). It is now offering digital TV services in Williamsburg, Virginia-population 12,000-in competition with cable TV.²⁵

• Reducing the franchising barriers should ultimately increase annual investments in providing fiber and broadband services by between $3.35 billion and $5.76 billion per-year. On a state-by-state basis, it is estimated that the additional investment over 10-years would range from $80.1 million in North Dakota to $6.11 billion in California.²⁶

Competition Leads to New Technology and Greater Programming Choices

In a competitive market, video service providers distinguish their services by offering new and better technology and more choices in programming.  

• The FCC found that cable television providers offer at least 6 percent fewer programs in the absence of competition.

• New video providers are offering a wider selection of high definition channels, thus motivating their competitors to follow suit. For example, Verizon's FiOS television and AT&T's U-verse announced plans for a fivefold increase in their HD channels and a significant increase in the number of on-demand HD movies. DirecTV also expanded its HDTV offerings. As a result, Comcast needed to keep pace and announced an increase in HD channels and a wider selection of on demand movies.

• Competition has inspired incumbent cable providers to offer new services. In response to Time Warner announcing new services in Ohio, Jeff Kagan, a telecom analyst said, "We've not seen change in the cable TV space at this pace ever ... It's the competition that's driving these changes."²⁷

• New providers are also expanding programming options. Some new video providers offer the NFL Network and Big Ten Channel in its basic package lineup, while most cable customers, unless they subscribe to premium services, were unable to see the key NFL contest between the Green Bay Packers and Dallas Cowboys that was carried only on the NFL Network last fall.

• New providers are offering more diverse and specialized choices. Verizon FiOS includes many small, independently owned networks in its packages, including 12 Spanish language channels. And AT&T's U-verse added 12 new channels recently, including Filipino, South Asian and Vietnamese content.

• Competition has also led to a race among companies to increase broadband speeds. The nation's largest cable operator doubled download speeds of its broadband service in four cities where they were facing competition - Reston, VA; Sarasota, FL; Fort Wayne, IN.; and Howard County, MD.²⁸

• Innovative technologies offered by new video providers include interactive games, access to web-based services, such as virtual Yellow Pages, and the ability for consumers to transport photos, music and videos from their computers to their televisions.

• New video service providers are offering enhanced digital video recording (DVR) features that allow viewers to record multiple (as many as four) programs at a time and program their DVR remotely from their computer or cell phone.

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_{1. “Battle for the Bundle,” Bank of America, Equity Research, Wireline & Wireless Telecommunications Services, January 23, 2006.}

_{2. Ibid.}

_{3. “Reform Video Franchising Now,” Tech News World, February 17, 2006.}

_{4. “The Cabling of America: Job Growth in Cable TV and Video Services,” TeleNomic Research, May 25, 2006.}

_{5. FCC Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, February 4, 2005.}

_{6. "Does Cable Competition Really Work? A Survey Of Cable TV Subscribers In Texas," The American Consumer Institute, March 2, 2006.}

_{7. "Wire-Based Competition Benefited Consumers in Selected Markets," Report to the Subcommittee on Antitrust Competition Policy and Consumer Rights, Committee on the Judiciary, U.S. Senate, GAO-040242, General Accounting Office, Washington, DC, Feb. 2004.}

_{8. The Benefits of New Wireline Video Competition for Consumers and Local Government Finances, Criterion Economics, LLC, May 2006.}

_{9. Video Killed the Franchise Star: The Consumer Cost of Cable Franchising and Proposed Policy Alternatives, Mercatus Center, George Mason University, Jerry Ellig, Jerry Brito, August 2006.}

_{10. "In Delay There is Plenty": The Consumer Welfare Cost of Franchise Reform Delay, Phoenix Center, George S. Ford, PhD, Thomas M. Koutsky, J.D., January 2006.}

_{11. "Cable TV Franchises as Barriers to Video Competition," Hazlett, Thomas W, George Mason Law & Economics, March 5, 2006.}

_{12. The Cabling of America :Job Growth in Cable TV and Video Services, TeleNomic Research, May 25, 2006.}

_{13. Ibid.}

_{14. "Report on Cable Industry Prices," Federal Communications Commission, MM Docket No. 92-266, Washington, DC, 2002, Table 3, p. 20.}

_{15. The Effect of Competition from Satellite Providers on Cable Rates," United States General Accounting Office, July 2000.}

_{16. "An Interim Report on the Economic Impact of Telecommunications Reform in Indiana," Digital Policy Institute, February 15, 2008.}

_{17. "AT&T adds 1,200 jobs after cable law changed," Detroit News, January 17, 2008.}

_{18. Study of the Effects of the Texas State-Issued Video Franchise Law On Fiber to the Home Deployments and Video Competition, RVA Render & Associates, LLC, December 12, 2006.}

_{19. Ibid.}

_{20. Ibid.}

_{21. Ibid.}

_{22. "An Interim Report on the Economic Impact of Telecommunications Reform in Indiana," Digital Policy Institute, February 15, 2008.}

_{23. "The Economic Impact of Video Franchising and Broadband Investment in Michigan: 2006," Barry L. Litman, Ph.D.and Robert E. Yadon, Ph.D., Ball State University, May 19 2006.}

_{24. "Telecom Smithville to invest $90M in fiber optics for rural areas," Erika Smith, Indianapolis Star, April 8, 2008}

_{25. "Richmond-Based Communications Company Expands into Williamsburg with Digital TV Service," Oct. 17, 2006. (Cavelier Telephone & TV press release available at http://www.cavtel.com/company/press/2006_10_17.shtml.)}

_{26. "Reducing Barriers to Investments in Fiber Connections and Advanced Broadband Services for American Households," The Internet Innovation Alliance, Kevin A. Hassett and Robert J. Shapiro, February 2007.}

_{27. "Cable Providers Step Up Features," by Amy Saunders, The Columbus Dispatch, March 8, 2008}

_{28. Marguerite Reardon, "Comcast Matches Verizon FiOS speeds," CNET News, March 29, 2006.}