Municipal Control of Franchising Inflates Cable Rates and Impedes Broadband Investment

Proposed reforms would spur competition and job growth in Michigan

For Immediate Release

Contact:
Diane S. Katz, Director of Science, Evironment and Technology
Phone: 313-378-6986 or 989-631-0900

MIDLAND — Cable rates in many southeast Michigan communities have on average experienced an annualized rate of increase that is nearly 38 percent above the annual inflation rate from 1991 to 2006, according to a survey released today by Diane S. Katz, the Mackinac Center’s director of science, environment and technology policy. Replacing Michigan’s 1,200 local franchising authorities with a uniform statewide franchise would reduce obstacles to market entry. The resulting competition would save consumers millions of dollars annually, create thousands of new jobs and expand the availability of broadband services, according to the report.

"Much of the local franchise regulation in force today was fashioned in the 1960s and 1970s — the Cyberspace equivalent of the Stone Age," Katz said. "It was intended to serve consumers’ interests, but consumers hardly feel well-served: Cable garners lower customer satisfaction scores than the Internal Revenue Service."

Advances in technology now make it possible for both cable firms and telecommunications companies to provide voice, data and video services to most homes and businesses, the report notes. What hasn’t changed, however, is the franchise regime by which most municipalities dictate the terms and conditions under which a cable television company is authorized to provide service. By so tightly controlling market entry, municipal franchising has inhibited competition and broadband investment.

Franchise reform legislation is pending in the Michigan Legislature and, if enacted, promises to ease market entry for newcomers. But each week of delay in enactment puts Michigan further behind other states in the competition for technology investment, according to the report. About a dozen states already have enacted or are considering statewide franchising.

"Given our affinity for television — we watch more than eight hours per day per household, on average — franchise reform would have a significant impact on millions of Michigan residents," said Katz. "Consumers stand to gain far greater power over the cost and quality of video service. Otherwise, we will continue to experience ever-higher cable rates and miss out on remarkable new video functionality made possible by technological progress."

The Mackinac Center report is available at www.mackinac.org/7931.

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