Cable Industry Blames FCC for Coming Rate Hikes
Cable Industry Blames FCC for Coming Rate Hikes
Cable Industry Blames FCC for Coming Rate Hikes

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    Cable companies are saying they will raise rates following the FCC's decision last Friday not to waive the set-top box integration ban. Details are scarce, but it appears likely that the rate hike will take the form of increased rental fees for cable-owned set-top boxes, and will take effect January.

    Rob Stoddard of the NCTA calls the FCC's decision “a $600 million set-top box tax[.]” He also calls the FCC's decision to enforce provisions of the 1996 Telecommunications Act an “11th-hour action.” A Forbes article also quotes Comcast, Time Warner, and the American Cable Association as saying that these rate hikes are coming. There is further coverage from the Associated Press and Ars Technica.

    One of the reasons that the cable industry had been giving in support of its waiver requests is that failure to grant these waivers would result in higher prices. Now, by raising rates, groups like the NCTA will be able to crow about how accurate their predictions were. They are acting in fulfillment of their own prophecies.

    If this is an attempt to make the FCC look bad, it is likely to backfire: Most consumers look at their bills, and do not read closely-argued economic and policy analyses. They call their cable companies to complain instead of filing comments with the FCC.

    Presumably, the higher rental fees on set-top boxes will, at the margins, drive consumers toward third-party hardware. A more diverse hardware ecosystem is likely to lead to a more open and competitive market, which should reduce the cable operators' dominant market power and ability to raise rates at will. We should count on increased competition, and not the munificence of the cable operators, to be beneficial to consumers in the long run. Right now, true competition in hardware is missing because a cable-owned set-top box is usually required to access the full range of cable services, like Video on Demand. To quote Commissioner Copps, “Right now, two companies dominate the market for interactive cable equipment. Opening up that market to competition would bring in scores of new companies to compete and innovate, which ultimately would mean higher quality products at lower prices.”

    Until that competition in the hardware market arrives, these rate hikes demonstrate that consumers remain at the cable operators' mercy.