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Report Claims Telecom Competition is Lowering Prices

Posted on: Wednesday, 11 February 2004, 06:00 CST

By JONATHAN D. SALANT

WASHINGTON (AP) -- People pay less for high-speed Internet access, local phone service and cable television in places where new companies combine those services than in other areas, according to a congressional report Tuesday.

The General Accounting Office said the new providers are offering competition to existing telephone and cable operators, but few customers get the benefits because they operate only in a few cities.

In addition, because of problems raising money and signing up customers, "the long-term viability of these providers is not clear."

Like phone and cable companies, the new providers are stringing wires through neighborhoods to hook up customers. The GAO found that financial problems are preventing them from expanding; they have avoided most large metropolitan areas because of the cost of wiring them; they cannot offer some popular cable channels; and they have been unable to obtain permission to provide service to high-density condominium or apartment buildings in areas they serve.

The GAO looked at six cities with competing companies: Augusta, Ga.; Lenexa, Kan.; Boston; St. Cloud, Minn.; Yankton, S.D.; and Waco, Texas.

It found:

-- Residents in five municipalities paid at least 15 percent less for expanded basic cable TV than customers in similar cities without similar competition.

-- Residents in four municipalities paid at least 4 percent less for telephone service.

-- Residents in three municipalities paid at least 20 percent less for high-speed Internet service.

The study showed that such competition "provides significant benefits to consumers," the GAO said.

Brian Dietz, a spokesman for the National Cable and Telecommunications Association, dismissed the report's findings.

"It isn't surprising that new entrants seeking to obtain market share in an already competitive market have set prices below economically sustainable levels," Dietz said. "This is all the GAO case study reflects."

Last month, the Federal Communications Commission reported that satellite television providers such as DirecTV and the Dish Network, which didn't exist 10 years ago, have emerged as major competitors to cable TV, capturing almost one-quarter of all households who pay for TV.

Even with the increased competition, however, cable rates have continued to rise faster than inflation. Congress deregulated the cable industry in 1996; over the next seven years rates increased by 53 percent, while inflation rose 19 percent.

Cable operators have said the higher prices reflect increased costs to operators, including technical improvements to systems, better customer service, additional services and new and improved channels.

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