Louisiana to Open Cable to Competition – in Some Areas

Louisiana is close to approving a bill that would allow for statewide video franchising, but the bill would not affect some important localities, because their town charters have home-rule provisions that allow them to set their own franchise rules.

The bill is good news for customers. As Sonia Arrison explains, the problem with the status quo local franchising system “is that many cities are unfortunately working to protect franchisees from competitors in exchange for the significant financial and service concessions they get from cable companies.” According to Arrison, Texas implemented a reform similar to Louisiana’s, with great success:

Just weeks following passage of a bill last summer that authorized Texas to grant statewide video franchises, Verizon introduced its FiOS TV service in Keller, Texas, offering 180 video and music channels for US$43.95 a month, or a 35-channel plan for $12.95 a month. In response, the local cable company, Charter Communications, dropped its prices, offering a package of 240 channels and fast Internet service for $50 a month.

That’s a big savings for the people of Keller, compared to the $68.99 Charter once charged for a TV package alone. Unfortunately, Americans in other parts of the country don’t yet have the benefits of policy reform and are still paying too much.

Arrison also cites a Mercatus study finding that present franchising schemes cost “consumers approximately $10.4 billion annually in higher prices and forgone services,” while “widespread video competition could create $6.3 billion in consumer benefits annually. Current subscribers in markets without wireline video competition could see their annual cable rates fall by about $86 each. Consumers who do not currently subscribe, but would subscribe at a lower, competitive price, would each gain an average of $43 annually.”

Kudos to Louisiana for taking a step in the right direction. If only they included the whole state – or if Congress took action against local franchising – competition would increase and customers would benefit even more.