Competition Must Play a Role in Cable Rate Study

The state Legislature leaped into action upon learning that
cable rates in Pennsylvania have increased at an average of 8 percent per year over the
last decade, about 3.5 times the rate of inflation.

It formed a committee to study the phenomenon.

As it does so, the Legislature needs to look at its own
failure to produce competition generally in the telecommunications industry -- a
failure that allows the cable companies to operate as regional monopolies and charge
exorbitant rates.

Just five of the 400 cable companies that operate in
Pennsylvania provide service to two-thirds of Pennsylvania households -- a statistic
that, by itself, illustrates the problem.

Instead of studying the cable rates as if they exist in a
vacuum, the Legislature should consider the state government's failure to produce
competition throughout the telecommunications industry. That failure began in 1993 when
the Legislature and the Public Utility Commission allowed Bell of Pennsylvania to raise
rates for its monopolized local phone service, in exchange for a promise to establish a
comprehensive, high-tech telecommunications system throughout the state. That promise not
yet been met.

The failure was further emphasized when the PUC allowed
Bell to establish rates for access to its phone system that effectively prohibited
meaningful competition for local phone service. Without competition for local phone
service, there is no competition for "bundled" services at lower rates,
including Internet access and cable television.

Although there are other components to the cable cost
increases, including technological and programming expansion with the industry,
competition is the surest course to reduced costs for consumers. The best proof is in the
long-distance telephone industry, in which the cost of a long-distance call today is less
than it was 20 years ago.