International Municipal Lawyers Association - Local Government Blog

Deceptive Competition: What the 2010 U.S. Census Figures Might Reveal About Cable Competition in Your Community | March 9, 2011

Author: Matthew Schettenhelm

In the past three years, cable operators have flooded the FCC with petitions claiming that because satellite providers serve the same communities, the cable operators face “effective competition” and should be deregulated. What has caused this dramatic uptick in filings at the turn of the decade? As you might suspect, the answer appears to relate less to a sudden emergence of meaningful competition (which, for most, remains hard to come by) than to old-fashioned gamesmanship.

In many recent petitions, cable operators, seeking to beat the release of 2010 U.S. Census data, have distorted the competitive status of many local markets by comparing current satellite subscribership with 10 year old (2000 U.S. Census) occupied housing data. For communities that have grown over the past decade, this creates a highly misleading picture of competition: it overstates satellite subscribership, often dramatically. Yet, lacking better data, the FCC—which finds effective competition if a cable operator shows that 15% of community households subscribe to satellite—has accepted these mismatched showings and freed cable operators from local regulation.

This need not be the case. Local government attorneys can now quickly and easily clarify this distortion using a simple tool: 2010 U.S. Census data. We have found that using 2010—not 2000—U.S. Census housing data often materially changes the 15% analysis. If your community has experienced any growth over the past decade, you should review whether a cable operator has recently filed an effective competition petition. If so, a simple filing with the FCC could correct the operator’s “effective competition” status and preserve valuable community benefits.

Why an Effective Competition Finding Matters

An “effective competition” finding helps the cable company and hurts the local community. After the FCC finds “effective competition,” a local government may no longer regulate the cable company’s basic cable service rates. In addition, cable operators use “effective competition” status to justify other anti-consumer practices. For example, certain operators have claimed that they no longer must place PEG channels on the basic service tier, and can require additional equipment to view it. The “competitive market,” it is said, will protect these benefits. But in areas where this so-called “effective competition” is the product of a cable operator’s skewed market calculations, cable subscribers in the community are left with no protection at all.

Why Recent Petitions May Not Fairly Reflect the Competitive Market in Your Community

In recent years, cable operators have flooded the FCC with effective competition petitions. In 2009, the total number of local markets found subject to effective competition more than doubled, increasing from 3,205 to 7,034. The FCC explained that the increase was due largely to petitions relying on the 15% satellite market share test. The FCC also found that cable rates are higher in markets that supposedly face “effective competition.”  The FCC openly attributes this effect to these recently-filed petitions.[1]

The fact that monthly cable bills have risen in new “effective competition” communities should not be a surprise for a simple reason: many recently-filed petitions do not document real competition at all. Because the FCC compares a community’s satellite subscribership with its total occupied households (to find effective competition, the FCC requires over 15% of households to subscribe), and because the U.S. Census only updates household counts every 10 years, many cable operators have claimed “effective competition” by comparing current satellite subscribership with ten year old household data. In many communities, this has produced “effective competition” findings that recent household data reveal to be simply wrong.

What Your Community Can Do

Local government attorneys now have an easy way to counter this tactic. For many states, the U.S. Census Bureau has already released occupied household numbers by community. For many others, such data will be released shortly.[2]

If your community has been the subject of a recent effective competition petition (even one already granted), you should test the cable company’s reported subscribership count against the occupied household count reported in the 2010 U.S. Census. If the total number of competing subscribers the company reports is less than 15%, your community should correct the record and preserve local benefits. The cable operator should not achieve “unregulated” status based on an openly misleading depiction of your local cable market.

Should you have any questions, please do not hesitate to contact us (Miller & Van Eaton, PLLC).

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This blog is made possible by the International Municipal Lawyers Association (IMLA), but may include guest bloggers (who are attorneys with experience in local government matters) who might or might not work for IMLA. Their views (and those expressed on this site) do not necessarily express the views of IMLA.







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