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from: Capital Times

Cable cost eyes are on Texas

Jeff Richgels — 6/02/2007 3:23 am

Competition from phone companies designed to be boosted by the nation's first state cable franchising law has not lowered cable TV prices in Texas but has provided consumers with a lower cost alternative, a study has found, Multichannel.com reported this week.

Rates in Texas are closely watched because in 2005 it became the first state to shift cable franchising from the local to state level. A controversial bill to do that in Wisconsin has passed the Assembly but not the Senate.

Although executives from Verizon and AT&T have told shareholders and analysts that they will not compete on price in the video market, lower consumer cost is frequently offered as a reason for other states to pass state franchising bills.

Members of the National Association of Telecommunications Officers and Advisors were prompted to begin tracking rates in February 2006, Margaret Somereve, assistant to the director of public works for Farmers Branch, Texas, and the NATOA chapter president told Multichannel.com.

Testimony claimed rates were 25 to 45 percent lower in Texas, due to the passage of SB5, Somereve said.

NATOA members "knew there was no such decrease, but we had to get hard facts together," she told Multichannel.com.

The rates in the Texas study, more than a year in the making, reflect regular, published video-subscription rates that consumers will pay long-term, NATOA officials said.

Rates for a basic tier of cable service that includes off-the-air broadcast TV signals and public, educational and government channels have actually increased over the last two years in markets where there are two or more competitors, according to the study.

The greatest hike, according to the group, is in Denton, Texas. There, Charter Communications has raised its basic rates from $12.78 in 2005 to $19.05 today, in spite of competition from Grande Communications and Verizon. Basic rates by the competitive providers have not declined; they have remained level, according to the survey.

Verizon has provided a lower-cost alternative for both basic and expanded-basic video services, but the channel lineups are not the same, making direct comparisons difficult, the study notes.

According to the survey, the disparity in rates is greatest in Southlake, Texas, where Verizon charges $34.95 for what it terms standard service, compared to $48.99 for Charter's expanded basic, which has more channels.

No conclusions should be made about cable rates in Texas, as competition is still in its infancy, Waco, Texas-based economist Ray Perryman of The Perryman Group, told Multichannel.com. He added that new providers don't have a permanent effect until they have proven themselves to consumers.

"I see rates coming down (in the future)," he told Multichannel.com.

Jenny Parker, a media director for AT&T, told Multichannel.com that the study appears to focus solely on rates and fails to capture benefits such as improved customer service or new, innovative features that are a direct result of new entrants to the market.

Iowa state franchising: Iowa Gov. Chet Culver this week signed a bill transferring cable franchising authority from local governments to a state agency, Multichannel.com reported.

"This bill is as good as we were going to get after weeks of negotiation," Tom Graves, executive vice president of the Iowa Cable & Telecommunications Association, told Multichannel.com.

The utilities division of the Department of Commerce will now issue franchises. A competitive provider must notify the communities it intends to serve. At that time, an incumbent operator with an active local franchise can decide whether to seek a state franchise, too. The state agency will have 15 days to award the franchises, which will be for a term of 10 years.

Competitive providers will have to pick up a portion of the basic maintenance of current, noncommercial institutional networks. But municipalities will have to take over that cost after 10 years.

E-mail: jrichgels@madison.com

Jeff Richgels — 6/02/2007 3:23 am