Because of the many difficulties incurred wiring a community for cable television service, and the desire of most communities to limit the number of wires either strung up in front of its visual features or buried beneath its land, most cable companies have had the luxury of operating a limited monopoly within the community. The limits have been provided by the local franchising authority on grounds of lack of effective competition, but the ubiquitous availability of MVPD service from DirecTV and DISH Network is making this LFA authority a thing of the past.
Case in point – Comcast systems serving Bloomington IL, Burr Ridge IL and Justice IL. The near universal availability of the two satellite services fulfills one of two FCC tests that allow any of the three to duck local oversight over rates. There have to be at least two unaffiliated similarly-programmed MVPDs available to 50% of the citizens in a community. That situation pretty much exists wherever there is a cable system.
The second prong is that at least 15% of the franchised area’s households subscribe to one of the cable system’s competitors. Comcast filed with the FCC, demonstrated that the 15% threshold has been cleared in these communities, and was granted relief from LFA oversight.
This has been happening quite a bit of late – many different cable operators in many different communities have been making similar requests of the FCC. In one way, it is not particularly encouraging that cable systems are losing share to satellite; but it does have the effect of freeing up their pricing power.
RBR-TVBR observation: At the local level, the battle between cable, satellite and – these days – telco, is not a purely competitive situation. It would be if switching from one to the other were as easy as switching from one local grocery store to another. But it isn’t.
There is definitely competition between terrestrial and satellite MVPD services, but it is severely limited by the difficulties consumers encounter moving from one type of service to the other. We have personal experience converting our most recent residence from one to the other, and needless to say it was a time-consuming and aggravating ordeal. It’s not the fault of the MVPD – it’s just that it involves more than flipping a switch.
We’re sure many of you can cite similar experiences. But we’re not sure how much effect LFAs had on cable prices anyway. We’ve lived in more than a few different service areas in our time, and if any of our cable companies have had trouble raising their rates, you couldn’t prove it by us.