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Cable Technology Feature Article

October 21, 2008

Video Franchise Reform A Warning to Incumbent Providers

By Rajani Baburajan, TMCnet Contributor

Competition is heating up among cable providers in Illinois after the passage of video franchise reform in Illinois in June 2007, among many other states in the U.S. The reform allows new entrants into the cable television market to earn a statewide franchise more easily than they would have under old laws. A new cable provider has already been approved in Illinois since the reform and has been growing as a tough competitor to the incumbent cable providers.
Despite the threats posed by the new cable law, Comcast (News - Alert) is reportedly planning to raise the rates- for the second time this year.
Lizanne Sadlier, executive director of TV4US (News - Alert), said, “Without any regard for the hardship many of its customers are facing in this ailing economy, an incumbent cable company is raising rates again in Illinois while it still has a chance.”
TV4US is a non-profit organization representing thousands of consumers across the country and is dedicated to fighting for the rights of cable TV customers.
“With little time left as a monopoly, the company knows the days of frequent rate hikes are coming to an end,” continued Sadlier. “Soon, most Illinois consumers will have a choice in video providers and will enjoy lower prices, greater programming choices and better customer service.”
Comcast announced a substantial 3 percent increase for its standard service from November 1. The price will increase from $54.49 to $56.12. Comcast had raised its rates earlier this year by an average of 5.8 percent for its basic cable service. The new price translates into an overall increase of Comcast rates by 45.7 percent in Illinois since 2002.
In 2006, Bank of America Equity Research found that in areas where competition among cable service providers is tough, prices for video services are between 28 percent and 42 percent lower than that in areas without competition. This would mean that people in Illinois would opt for alternate providers, and that incumbent providers like Comcast will have to rework their strategies to face the new challenges.
The statewide franchises mean lower entry cost for providers and more choices for customers at lower prices. The new move also encourages broadband investment across the country, say industry analysts.
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Rajani Baburajan is a contributing editor for TMCnet. To read more of Rajani's articles, please visit her columnist page.

Edited by Michelle Robart