Competition would cut cable prices, economist says

Changing state law to allow unfettered competition for cable television viewers would result in a 15 percent to 17 percent decline in cable television rates, a University of Missouri economist said in a study released last week.

But those savings could be years away for many consumers, said Joseph Haslag, director of the Economic and Policy Analysis Research Center on the university's Columbia campus.

Haslag's report, written for the Show-Me Institute, a conservative-leaning group founded by St. Louis lawyer Bevis Schock, predicts that allowing telephone companies to provide cable television services would save Missouri consumers $66 million to $78 million annually.

"My analysis is conducted after all the investment has been undertaken and assuming there is competition in all the markets," Haslag said. "It is a long-run set of assumptions that this is going to happen."

The report was issued the same day the Missouri House Special Committee on Utilities Commerce held a hearing on a proposal to take away local control over cable franchises and hand the responsibilities to the Missouri Public Service Commission. Local city governments are fighting the bill through the Missouri Municipal League but hold out little hope for stopping the measure. The bill has already passed the Senate.

"We're not wild about it, but we know we are not going to do anything," said Gary Markenson, league director. "It has got overwhelming support from AT&T and most of the cable companies, and they have a lot of influence behind them -- like half the lobbyists in the Capitol Building."

Under the measure, any company seeking to provide cable television service would apply for, and in most cases receive, a franchise from the PSC naming the cities and counties where they will provide service. Unlike local cable franchises, there is no requirement that the companies applying for a franchise serve all, or even most, of the potential customers in the locations where they operate.

Within three years of obtaining a franchise, the bill would require the companies to be a service option for 25 percent of their potential customers. That figure would rise to 30 percent after six years.

"We all want competition," Markenson said. "But we don't want them to just come in and cherry-pick the profitable areas."

Under Cape Girardeau's franchise with Charter Communications, the cable provider is required, with a few exceptions, to offer service in every part of the city, The city has a say in where the company strings its cable, requirements for service quality and support for the community access channels, said Eric Cunningham, city attorney.

But the legislation under consideration would take away those powers. "In theory, there is nothing wrong with everybody having to work under the same rules," Cunningham said. "But when those rules are more lax than businesses are able to get now, who is being benefited? It is not the citizens."

Compromise bill

This year's bill is a compromise worked out before the legislative session through negotiations between AT&T and the cable television industry. The worries expressed by the cities are unfounded, said Kerry Hibbs, a spokesman for AT&T.

The telephone company, the largest provider of land-line services in Missouri, won't run roughshod over cities where it wants to do business and will continue to support local access channels, Hibbs said.

"Where you are today, you have no competition at all to speak of against your local cable companies," Hibbs said. "AT&T or another big company is your best shot at getting that."

The service will be more responsive to customers, Hibbs said, and AT&T plans to aggressively push the video programming services. "It is a massive project, but it will go a lot quicker if we can get a single state-issued franchise like we are trying to do in Missouri."

So far, Hibbs said, 11 states have moved to take statewide control over cable franchises. The result has been healthy competition, he said.

The cable industry supports the bill in its current form because, unlike last year's measure, it releases them from their current local franchise agreements when they expire, said Steve Veile, a spokesman for the Missouri Cable Television Association. "Last year's version was totally geared toward the telephone companies, while the cable companies had to continue to operate as they had for the last 30 years," Veile said. "This year, they came up with a bill that really streamlined the franchising process."

But the support has weakened, Veile said, as amendments have tilted the bill more in favor of the telephone companies. "Things beneficial to the cable industry have been stripped out of the bill," he said. "We are supportive but concerned about some the amendments that have happened."

For Haslag, the important part of the bill is that it makes it easier for competitors to enter local markets, which have been all but closed because of requirements to serve every potential customer. "The legal structure has created a friction, a barrier to entry into the markets," Haslag said. "I looked at what happens if you remove that barrier to entry."

rkeller@semissourian.com

335-6611, extension 126