The Impact of Municipal Franchising

Municipal franchising of cable TV is supposed to serve consumers’ interests, but consumers hardly feel well-served: Cable garnered lower customer satisfaction scores than the Internal Revenue Service in a recent survey.[25] Consumers complain most often about cost and service quality.

This dissatisfaction is understandable. Although the Consumer Price Index increased by 2.52 percent annually between 1991 and 2006, the price of cable increased by an annual average of 3.47 percent in that period. Not surprisingly, rates were measurably less in communities with competition in cable services. According to government figures, the monthly cable rate was 15.7 percent lower in competitive markets compared to those without competition.[26]

Cable industry executives insist that rates are rising because customers are getting more for their money. Therefore, in our survey of 15 communities in Southeast Michigan, the state’s most populous region, we calculated changes in cable rates on a per-channel basis. The average of the increases over 15 years was nearly 67 percent. In fact, cable rates in these communities have on average experienced an annualized rate of increase that is nearly 38 percent above the annual inflation rate from 1991 to 2006.

Consumers are indeed getting more channels in their cable packages. But it is important to note that customers have little choice when a cable operator decides unilaterally to add channels and charge more for them.