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Why is cable so expensive?

Cable TV viewers who suspect that their cable bills have increased over the years are absolutely correct. The Federal Communications Commission (FCC) has reported that the average monthly bill for cable TV service increased by 93 percent between 1996 and 2013. The increase in cable TV rates is in stark contrast with the rates of telephone service and wireless service. The FCC also has reported that telephone rates decreased by 40 percent and wireless rates fell by 80 percent between 2003 and 2013. In a typical year, the average monthly bill for cable TV usually increases at a rate of several percentage points. The increases in cable rates cover basic cable packages as well as expanded packages and premium cable channels.

Cable is so expensive for consumers for a couple of major reasons. One reason is the manner in which local government agencies regulate cable TV fees. In most jurisdictions, regulating authorities have some control over how much money cable companies can charge for basic cable service. The rates for premium channels and expanded cable services often remain unregulated. The regulatory situation allows cable companies to charge as much money as they want for certain services. Another reason is the fact that some powerful cable companies have been losing money in other arms of their businesses that are not directly related to the cable industry. The companies sometimes attempt to raise rates on cable TV viewers to make up for financial losses in other areas.

Regulations on cable TV rates

City and county commissions regulate the great majority of the vast cable TV industry. The local commissions, which are typically put in place by state government agencies, give cable TV companies the right to offer their services in a particular community. The commissions also have some say over how much money the cable companies can charge for their services. In many regions, the commissions also field complaints about the quality of customer service provided by the cable company. The problem is that the authority of the commissions is severely limited. The commissions typically control the rates for basic cable service. The rates for premium cable tiers are largely out of the hands of the local government commissions.

In most regions, local cable TV providers essentially have a monopoly in the area. Consumers who are unhappy with their cable service rates usually cannot turn to a rival company. These factors lead to expensive cable TV bills for many consumers.

Ancillary businesses for cable firms

In recent years, some major cable companies have bemoaned the fact that they have sustained losses in other areas of their business empires. For example, some big cable providers also have significant holdings in print media, production companies or other businesses. The print media industry in particular has encountered a series of financial setbacks in the past several years. Cable companies with holdings in multiple business ventures have been known to raise rates on cable TV customers in an effort to offset losses in other business divisions. Cable TV viewers end up facing higher monthly bills.

The future of cable TV rates

The FCC has begun to take action that could make it easier for established telephone companies to compete with cable TV companies for customers in some areas. This process could allow telephone companies to offer digital TV service to viewers at competitive rates. Some industry experts believe that the added competition would lead to lower monthly cable bills for viewers. Federal lawmakers still have to weigh in on the new proposals put forth by the FCC.

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