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Time to rethink video competition

Institute for Policy Innovation's Bartlett Cleland says FCC has it partly right and partly wrong when it comes to fostering video competition.

In the last two years, 11 states have passed legislation that makes it easier for telecom companies to compete with cable TV companies in the video business.

Just a few weeks ago, the Federal Communications Commission got into the act as well, issuing new regulations to encourage video competition.

But Kevin Martin, chairman of the FCC, has it partly right and partly wrong when he talked about competition being "desperately needed in the video market" and expressed outrage that cable rates have gone up 93 percent since 1995.

Competition through deregulation is vital. As it occurs, it provides new products and services and brings prices down. But the increase in cable TV prices over 12 years is something quite less than outrageous when you account for inflation, then think of all the increased value consumers have received from the communications industry.

Inflation alone was responsible for almost 35 percent of the price increase over the period in question. So an average cable bill that went up from $23.07 to $44.53 did not increase in real terms by $21.46, but by $13.46. That may still seem like a lot until you compare that to the 78 percent increase in postage stamps over that period, or the 66 percent increase in movie tickets. The extra money for the stamps or tickets gives you nothing more than you received in 1995. The extra money for video does.

The extra money for the stamps or tickets gives you nothing more than you received in 1995. The extra money for video does.

Today, for instance, both traditional video and voice companies are providing customers with an option to bundle all their communications needs, reducing the consumer cost of any one service. Those who are able to purchase their voice, video and Internet access from the same provider will often find that prices drop up to 23 percent for services that were prohibitively expensive for them, or just not available as little as 10 years ago.

The number of video options, meanwhile, has increased dramatically, allowing consumers to watch anything from "Dora the Explorer" to "Fish TV" to "Happy Days" almost 24/7 thanks to digital video recorders included in some "cable boxes," or via products such as On Demand, which is a library of free programs available when a person wants them.

Other facts:

• For anyone who has flipped over to the high-definition channels, the increased quality of video is clear.

• The upgrade to digital delivery has greatly enhanced video service.

• Video providers now routinely offer an array of parental controls that enable parents to control exactly the time and type of programming allowed into the home.

• The real price per channel has decreased 5.3 percent in the last 10 years, in part because of expanded channel availability.

The wave of video franchise reform legislation is already benefiting consumers through lower prices and new products and services, while local economies are seeing new capital investment, job creation and increased revenue.

The marketplace for the provision of communications services--voice, video and Internet access--is increasingly competitive and includes traditional telephone companies, traditional cable companies, satellite, broadcasters, Web video and wireless broadband. The mechanism of an open competitive market will itself regulate prices effectively and correctly.

Deregulating video is good for consumers and good for our economy. There is no need to try to sell it with misleading statistics about cable prices.