Michigan Communities Remain Powerless Despite Disappointments

Caren Collins (248) 473-2830
MI-NATOA President

February 9, 2010

Over 1,500 Michigan communities still without cable competition

Michigan communities remain powerless despite disappointments of cable deregulation

(Farmington, Mich.) – Michigan’s experiment with deregulation of cable services has failed, according to the Michigan Chapter of the National Association of Telecommunications Officers and Advisors (MI-NATOA), whose member communities previously oversaw local franchise agreements with cable providers.

Michigan’s state legislature passed Public Act 480 in 2006. Cable and phone companies promised that the elimination of cable regulation would unleash widespread cable competition and create thousands of jobs in Michigan. Many observers hoped that more competition would reduce prices and improve customer service.

“Communities watched in 2006 as AT&T made promises to the Michigan legislature about lower prices and more competition,” recalls Caren Collins, president of MI-NATOA. "Three years later, there is little more than disappointment.  Cable prices continue to outpace inflation, and service remains poor.  84% of communities who recently responded to a Michigan Public Service Commission survey said that they had seen no increase in competition at all, and 3% of the responding communities actually reported a decrease in competition.  The experiment with cable deregulation is failing by every measure, because widespread, robust competition has not developed and municipalities are powerless." 

Residents calling offices: Soon after PA 480 was passed, AT&T began to offer U-Verse video to portions of an estimated couple hundred communities in Michigan -- but the pace of the U-Verse rollout has now slowed dramatically. In the few communities where AT&T U-Verse is available, complaints are that some neighborhoods have it while others do not.

In addition, AT&T has made it costly and difficult for communities and school districts to provide their local public, educational and government (PEG) access channels. Only 18 communities in 3 years have added their signals to the U-verse line-up. There are at least 300 PEG channels in southeast Michigan.

It is impossible to precisely determine where cable competition exists: Lawmakers did not require cable or phone companies to inform any regulator or municipality about where competitive service is actually available. An annual survey conducted by the Michigan Public Service Commission (MPSC) allows providers to keep certain information confidential.

Trends in cable’s prices and customer service disappointing: According to a study published last year by the University of Minnesota, inflation-adjusted cable prices in Michigan rose by 22% -- the equivalent of nearly 1% for each month since cable had been deregulated in the state. Two dominant cable providers, Comcast and Charter, also continue to perform very poorly, including in a study now appearing in the February 2010 issue of Consumer Reports.

“The Detroit Free Press got it right in an editorial late last summer when it looked at the failures of cable deregulation. The promises of the phone and cable companies have fallen short on every level, including jobs,” noted Collins.

To learn more about the deregulation of the cable industry in Michigan, visit www.makeCableBETTER.org.

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Impact of State Legistation

Comparative Study of Outcomes in Texas, California and Michigan

Report PDF

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Cable Competition Falls Short

Editorial, Detroit Free Press

August 23, 2009

Just before Christmas 2006, in the dying days of a lame duck session, the Michigan Legislature passed a law that dramatically reduced government regulation of cable TV in the state.

Written largely to the specifications of AT&T, which wanted in on Michigan's lucrative cable market and had made generous campaign contributions to incumbent legislators in both parties in the previous two elections, Public Act 480 stripped local governments of their authority to negotiate the terms of cable service in their communities

In place of local regulation, legislators established a new, one-size-fits-all franchise agreement that allowed AT&T to challenge Michigan's dominant cable provider, Comcast, in markets across the state.

AT&T said its freedom to offer cable service without having to meet conditions imposed by hundreds of different cities and townships would quickly transform Michigan's video landscape, bringing cable customers lower rates and improved service.

Three years later, the reality is much different. The state can do better by its millions of cable customers.

Where's the beef?

AT&T has rushed to establish its U-verse service in the most affluent zip codes, where it vies to offer the most attractive introductory rates, especially to customers who agree to bundle their telephone, cable and high-speed Internet services from the company. But four out of five communities still lack cable competition, and prices have soared.

Rates vary from one market to the next, but a survey funded by a consortium of local governments found that the cost of basic cable service rose between 9% and 50% last year in 79 communities around the state. Prices for the least expensive digital service jumped 25% in every market surveyed.

AT&T doesn't dispute that prices for many cable packages are rising, but spokesman Joe Steele insists customers are getting more for their money. "What you're seeing is more value-added options," he say. Market analysts note significant price competition on those lucrative triple play bundles, but note that many subscribers cannot afford the $125 to $175 AT&T and Comcast charge for a package deal.

See no evil

The first thing any competent economist wants to know when trying to determine whether meaningful competition exists is what's happening to prices.

But the Michigan Public Service Commission, which is legally obligated to report to the governor and legislature each year on the state of competition for video services, doesn't even collect data on cable rates. Public Act 480 specifically requires cable companies to provide any data the PSC deems useful, but the commission hasn't asked.

"Could we ask? Yes," said PSC spokesman Judy Palnau. "Would they answer? Probably not. ... There would be major pushback from the industry."

But what about pushback from consumers? Both the PSC and the state Attorney General's office report sharp increases in the number of cable service complaints since the industry was deregulated on Jan. 1, 2007. Cities and townships also continue to field large numbers of cable complaints, although they are no longer authorized to intervene on a subscriber's behalf.

Competing for the cream

Municipalities also complain that, under the standard franchise deal, cable providers are no longer obligated to make their services available to everyone. Until 2007, most local franchise agreements mandated universal access.

Public Act 480 requires AT&T to make its cable service available to at least 30% of its telephone customer base by 2012. AT&T says it has already met that goal, but the PSC doesn't even know how many households fall within AT&T's phone service area, so it's hard to confirm the company's assertion.

Jon Kreucher, an attorney who represents the Michigan chapter of the National Association of Telecommunication Officers and Advisors, says the PSC is helping cable companies to disguise the failure of Public Act 480.

"If the commission staff were to look at this closely, they would have to conclude that deregulation isn't working the way legislators intended it to," Kreucher says. "As regulators responsible to the legislature, that would put them in an awkward position."

The secret complaint line?

David Bertram, a lobbyist for the Michigan Township Association, adds that the PSC is keenly aware that complaints about cable service are rising but has resisted the suggestion that the PSC's complaint line (866-552-7725 or 517-241-6911) be listed on every Michigan cable subscriber's bill.

The MTA and the Michigan Municipal League, which represents municipalities throughout the state, are encouraging legislators to revisit the cable deregulation issue, but both say their political influence is no match for the lobbying and campaign spending clout of AT&T and Comcast.

Both companies have, in fact, ramped up contributions to lawmakers on both sides of the aisle. Comcast was the top contributor to the political action committees of both Republican Senate Majority Leader Mike Bishop and Democratic House Speaker Andy Dillon for the 2008 elections.

Rearming subscribers

In hindsight, it seems clear that legislation that was supposed to bring lower prices and better service to cable subscribers has served mainly to allow both incumbent powerhouse Comcast and would be-rival AT&T to shirk their obligations to customers and carve up the Michigan cable market to their mutual advantage. Federal regulatory decisions preclude state and local governments from setting cable subscription rates, but there is much the state can do to improve service and promote price competition.

For starters, legislators should establish reasonable standards for customer service and empower local governments to enforce them. Providers should be required to assure easy access to public, educational and government programming (such as city commission and school board meetings and emergency alerts from local police), an obligation they have been trying to weasel out of since deregulation.

Lansing should also require providers to provide more detailed information to the PSC and the public. Minimally, that should include where a company provides cable service, what price increases it has levied, and how successfully it's meeting service standards established by the state.

Ultimately, the Legislature must consider repealing Public Act 480 if a majority of Michigan subscribers don't have at least two wire-line cable providers within the next several years.

Cable subscribers should ask their elected representatives in Lansing to explain why deregulation has fallen so short of its promises and demand that providers be held accountable for their glacial build outs and poor customer service. That's the public right of way the Legislature has parceled out to cable providers, and lawmakers who still aren't getting the picture need to hear from their constituents.

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Change Isn't Always For The Better

Kalamazoo Gazette/ Mlive.com

July 1, 2009

Approximately two million people subscribe to cable television in Michigan. When changes happen within the cable industry, it can have a huge impact on state residents. And not all changes are good ones. A case in point is the deregulation of cable that happened just over two years ago (Public Act 480 of 2006). This law promised better customer service, lower cable rates and increased competition in the industry. The reality of the past two years is a serious issue since these promises were never met. The residents of Michigan are now having to pay higher cable prices, have seen only slight new competition and are losing valuable resources they once had at their fingertips. As a member of the Michigan chapter of the National Association of Telecommunications Officers and Advisors, I am working on this issue. In fact, we recently released a report outlining the 10 disappointments of cable deregulation in Michigan. It can be viewed at www.makeCableBETTER.org. Our research found that the supposed increase of cable competition is actually only an increase of one cable company -- the very company that pushed for passage of PA 480 in 2006. Prior to PA 480 there were 36 video service providers statewide. Now there are 37, and two are facing serious financial challenges. This is not the new competition that was touted to Michigan residents. Also, since local cable deregulation became effective, the promises of decreased prices and increased customer service have also failed to meet the expectations of the consumer. When the economy is struggling and consumers have to cut back, you would think that cable companies would want to keep their customers, not drive them away with higher prices and worse service. Of great concern to many cable viewers, is the threat to public, education and government channels. Without PEG, residents lack a public asset that is a valuable medium for getting information about their communities. If PA 480 continues, you could lose PEG programming, the same programming that increases the transparency of local governments, showcases the uniqueness of individual communities and allows parents to better connect with their children's schools. PEG channels are a common avenue used to preserve and promote local awareness at the neighborhood level with every township meeting, school band concert and sporting event they cover. Prior to the passage of the state law, local governments had more of a say in how customers were treated, in the availability of cable customer service storefronts, in the existence and ease of locating PEG channels, and in the timely resolution of consumer issues. By rendering invalid local franchise agreements to make way for Michigan's uniform statewide franchise law (similar laws exist in only a minority of states), the Michigan Public Service Commission in Lansing now takes cable disputes for a long and potentially costly resolution process, and many more problems have come to pass. The Legislature has the power to change Public Act 480 and reinstate local oversight of cable issues, which never barred cable competition, but recognized that the cable industry, using public land to deliver its product to market, ought to give back to the community, as it did for more than a generation prior to 2006. We encourage you to contact your state lawmakers to voice concern over Public Act 480 of 2006. This is an issue not only affecting the local community cable channels, but you, the consumer, too. The promises from two years ago have not become reality. Change is needed. Caren Collins is the president of the Michigan chapter of the National Association of Telecommunications Officers and Advisors.

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University of Minnesota Report

Comparative Study of Outcomes in Texas, California and Michigan

Report PDF

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Tangled Up In Cable

Sandra Svoboda/ Metro Times

http://www.metrotimes.com/news/story.asp?id=13950 

 

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Cable Deregulation Promises Go Unmet

Caren Collins / Hometown Life.com

Approximately two million people subscribe to cable television in Michigan. When changes happen within the cable industry, it can have a huge impact on state residents. And not all changes are good ones.

Case in point, the deregulation of cable that happened just over two years ago (Public Act 480 of 2006). This law promised better customer service, lower cable rates and increased competition in the industry.

The reality of the past two years is a serious issue since these promises were never met. The residents of Michigan are now having to pay higher cable prices, have seen only slight new competition and are losing valuable resources they once had at their fingertips.

As a member of the Michigan chapter of the National Association of Telecommunications Officers and Advisors (MI-NATOA), I am working closely on this issue. In fact, we recently released a 12-page report outlining the 10 disappointments of cable deregulation in Michigan (which can be viewed at www.makeCableBETTER.org).

Our research found that the supposed increase of cable competition is actually only an increase of one cable company — the very company that pushed for passage of PA 480 in 2006. Prior to PA 480 there were 36 video service providers statewide. Now there are 37, and two are facing serious financial challenges.

Also, since local cable deregulation became effective in Michigan, the promises of decreased prices and increased customer service have also failed to meet the expectations of the consumer. Of great concern to many cable viewers is the threat to public, education and government (PEG) channels by cable providers. Without PEG, residents lack a public asset that is a valuable medium for getting information about their communities.

The state legislature has the power to change Public Act 480 and reinstate local oversight of cable issues, which never barred cable competition, but recognized that the cable industry, using public land to deliver its product to market, ought to give back to the community, as it did for more than a generation prior to 2006.

The Michigan chapter of NATOA is urging you and fellow residents to log onto www.makCableBETTER.org and click the “Join Now” button at the top right of the page to join our cause. We also encourage you to contact your state lawmakers to voice concern over Public Act 480 of 2006. This is an issue not only affecting the local community cable channels, but you, the consumer, too. The promises from two years ago have not become reality. Change is needed.

Log onto www.makeCableBETTER.org for more information.

Caren Collins is president of the Michigan Chapter for the National Association of Telecommunications Officers and Advisors.