Audit: Wis. cable rates rose 21 percent in 2 years

AP News
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Posted: Dec 01, 2009 5:12 PM

Basic cable rates in Wisconsin increased an average of 21 percent over the past two years, despite a new law designed to increase competition and lower costs, an audit released Tuesday said.

The data suggests that the law which took effect in 2008 did not have a substantial effect on either lowering charges or slowing their growth, State Auditor Janice Mueller said in a letter to lawmakers who chair the Legislature's Audit Committee.

"This isn't a surprise because cable rates go up every year no matter what happens in a state Legislature," said University of Wisconsin-Madison telecommunications professor Barry Orton. He lobbied against the changes and predicted then that they wouldn't live up to the hype. Orton said Tuesday that the audit proves he was correct.

"Rates would have gone up just the same if the law hadn't been passed," he said.

The cost increases in Wisconsin mirror those seen in other states, based on a University of Minnesota study from earlier this year cited in the audit. That study found that basic cable prices increased in 45 of 47 states between December 2006 and February 2009.

The law did away with a system in place since the 1970s that allowed local communities to strike deals with cable providers. In its place, a new statewide licensing system was created that made it cheaper and easier for large companies like AT&T to provide video services, like the Internet-based U-Verse.

Satellite providers, such as DirecTV and Dish Network, are not bound by the state law but are regulated by the Federal Communications Commission. Twenty-eight video service providers were approved for state franchises as of August, according to the audit.

The Legislative Audit Bureau report examined rates charged by cable service providers in 17 Wisconsin communities in both July 2007, six months before the law went into effect, and again in July 2009.

Basic service charges increased 21.2 percent and expanded basic charges went up 11.5 percent over that time, the audit said.

Some portion of that increase can be attributed to a 35 percent increase in the number of channels available under basic service and a nearly 15 percent jump in expanded basic channels, the audit said.

In July 2007 the average monthly basic charge was $13.93 for 20 channels. Two years later the average was $16.89 for 27 channels. The average expanded basic charge increased from $45.97 to $51.24 with the channels provided going from 75 to 86.

The Audit Bureau cautioned that it's difficult to know whether the trends it found will continue given the relatively short period of time since the law passed. It's also hard to easily interpret the data given the variations in the number and types of channels providers offer and special rates companies occasionally offer, the audit said.

The increasing practice of bundling video, Internet and telephone services will make it even harder to know what affect competition is having on cable rates, the audit said.

The law was changed with bipartisan support in the Legislature as well as a massive push from AT&T, which hired 15 lobbyists in 2007 to work on the bill. At the time it passed, the bill's co-sponsor Rep. Phil Montgomery, R-Ashwaubenon, said it "will mean lower prices, better service, and increased consumer protection for cable and video subscribers."

Montgomery said he was disappointed that rates didn't drop, but cable customers did enjoy other benefits over the past two years including more channel selection and better technology.

AT&T Wisconsin President Scott T. VanderSanden also said at the time that the law would result in "better prices."

AT&T's U-Verse is now available in 140 communities across the state and that will lead to greater competition, better customer service and more value for customers, said the company's spokesman Michael Marker in a prepared statement. He did not directly address the report's findings that prices have gone up over the past two years.

Gov. Jim Doyle said the recession may have slowed competition under the new law and said it will take time for all the positive benefits to be felt.

"Increasing competition in the cable marketplace has always been about providing better value for customers and improving customer service," said Thad Nation, executive director of Wired Wisconsin, a nonprofit coalition working on technology issues. "No one expected all of those benefits overnight."