WASHINGTON, D.C. - The Telecommunications Research and Action Center (TRAC), the nation’s leading telecommunications-focused consumer education and advocacy organization, today announced its support for rapid and immediate action by Congress to enact much-needed video franchising reform to help relieve consumers from the burden of ever-increasing cable bills. “Congress knows that it can help consumers save money on their television bills,” said Samuel A. Simon, Chairman of TRAC’s Board of Directors and co-author of the book Reverse the Charges: How to Save Money on Your Phone Bill.

Consumers of cable television have been placed under an increasing strain as annual cable rate increases have far outpaced the rate of inflation. According to the Federal Communications Commission (FCC), from 1998 to 2004, cable rates increased at an average annual rate of 7.5%. Conversely, the rate of inflation as measured by the Consumer Price Index increased by 2.1% over the same period. Cable companies like to claim that their rate increases are caused by rising programming costs. The real reason consumers are feeling the pinch is not higher costs for the cable monopolies, but rather because of a lack of competition.

Competition for video services has been shown to provide consumers with lower prices and more programming choices. The example of cable’s competition with direct broadcast satellite (DBS) providers bears this claim out. According to the General Accounting Office (GAO), in franchise areas where there is a DBS provider, cable rates are significantly lower. In addition, cable television providers offer an average of 5% more channels in franchise areas where DBS providers offer access to local television channels. According to the FCC, in areas with effective competition, monthly cable rates were 7.3% lower than in areas without effective competition. While cable companies continued to raise their rates in competitive areas, they did so at a slower rate than in areas without competition.

While competition from DBS providers has helped consumers, real rate relief comes only when a competing wire-based competitor enters a market. According to the GAO, cable television rates in markets where there is a competing wire-based company are 15% lower than in markets where there is no wire-based competitor. Data from the FCC shows even larger savings (15.7%) for consumers in areas with a competing wire-based competitor. In Keller, Texas, where Verizon recently began competing with the incumbent cable operator, the cable company reduced rates by 20%. Unfortunately, less than 2% of U.S. markets currently have effective competition by wire-based cable operators.

For consumers, this lack of effective wire-based competition has condemned them to large annual rate increases that are taking an increasingly large bite out of their monthly budgets. According to the advocacy group Consumers for Cable Choice, the lack of action by Congress to enact real video franchise reform has cost consumers more than $3.2 billion in 2006 alone. Consumers can see just how much money they could have saved by visiting www.consumers4choice.org, where the mounting consumer losses are tracked on a per-second basis.

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