GAO: Cable Re-Regulation Problematic

Summary

The U.S. Congress General Accounting Office (GAO) October 24, 2003, report on cable rates correctly recognizes that competition, not regulation, is the best way to advance consumers’ interests.

* The report acknowledges that Direct Broadcast Satellite has grown rapidly and successfully as a competitor to cable.

* It confirms that cable operators increased investment in programming and infrastructure — as well as customer service — in response to DBS competition. Cable operators have focused on quality and service improvements due to competition from DISH Network, DirecTV, SMATVs, wireless cable operators, telephone companies, and cable overbuilders.

* GAO acknowledges that the rate regulation approach used in the mid-1990s may have diminished programming quality, discouraged investment in facilities, and burdened industry and regulators. It also reports that regulation may not even have held down retail prices, even as it created all these other problems.

* The report acknowledges that cable operators have made enormous investments over the past several years to upgrade their networks. GAO says basic cable subscribers benefit through expanded channels and choice and better picture quality, and also notes that this improved infrastructure allows for new services to be offered.

* GAO confirms that ownership of cable networks does not affect the license fees paid to carry them.

* GAO considered but does not endorse various new regulations that some parties have proposed (e.g., changes in program access rules, changes in retransmission consent rules). The report clearly recognizes that competition is
the best way to control prices and improve quality and choice.

View the Full report (.pdf file)