Los Angeles (January 11, 2007) — With cable television consumers frustrated by soaring cable bills and poor customer service, states are finding video franchise reform can significantly lower prices and improve service by removing the local monopolies that have long protected cable companies from competition.
Consider what happened in Keller and Plano, Texas, just outside of Dallas. Charter Communications was charging $68.99 for cable TV service in the area. But after Texas passed statewide franchise reform, Verizon jumped into the Keller and Plano markets offering 180 channels for just $43.95 or 35 channels for just $12.95. Charter responded by slashing its prices and offering a bundle of 240 channels - plus high-speed Internet - for just $50, $18.99 less than they were charging previously for cable alone.
Arizona, California, Indiana, Kansas, Michigan, New Jersey, North Carolina, South Carolina, Texas and Virginia passed video franchise reform laws since 2005. Congress looked at the issue in 2006, but did not pass a law because franchise reform got tangled up with the issue of net neutrality.
Video franchises are the revenue-sharing agreements that cable TV companies sign with local governments in return for the exclusive right to offer video services to customers.
Two new Reason Foundation reports detail the benefits of statewide franchise reform and outline how states can effectively author laws to protect consumers and spur competition that will drive prices down, improve service, and enable even faster innovation.
George Mason University recently demonstrated franchise reform could save Americans $9 billion a year. University of California-Berkeley Professor Yale Braunstein found cable competition in California would drop the average cable bill by 15 to 22 percent, saving consumers in the state $690 million to $1 billion. In 2006, California's Democratically-controlled legislature overwhelmingly passed a franchise reform bill.
"Cable and video reform is a nonpartisan issue," said Adrian Moore, the study's project director and vice president of research at Reason Foundation. "In today's age of web videos and on-demand services, there are so many phone and tech companies itching to enter markets across the country that Democrats and Republicans are finding they can save taxpayers a lot money by simply allowing competition in the video service industry."
Today, video service is highly regulated at the local level and many local governments are dependant on the revenue produced by lucrative cable franchise agreements. But we are in the midst of a fundamental shift in the way cable and phone companies do business and the way consumers watch video.
"With iTunes and YouTube capturing huge shares of viewers who skip the traditional TV model altogether, local governments would be wise to make plans for the day when local TV distribution is no longer a cash cow," stated Steven Titch, author of the Reason Foundation report.
Full Reports Online
The full report, I Want My MTV: Reforming Video Franchises for Competitive TV Services, is available online at www.reason.org/ps352.pdf. The full report, Better Prices and Better Services for More People: Assessing the Outcomes of Video Franchise Reform, is online at www.reason.org/ps355.pdf. Reason's telecom research and commentary is here: www.reason.org/telecom/index.shtml.
Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason produces respected public policy research on a variety of issues and publishes the critically acclaimed monthly magazine, Reason. For more information, please visit www.reason.org.
Steven Titch, Telecom Policy Analyst, Reason Foundation, (281) 571-4322
Adrian Moore, Vice President of Research, Reason Foundation, (661) 477-3107
Chris Mitchell, Director of Media Relations, Reason Foundation, (310) 367-6109