COMMENTARY ON CABLE TV : Market Competition Will Keep Rates Down for Consumers : Subscribers should lobby their city councils to put an end to the franchise monopolies currently held by many firms.

An order by the Federal Communications Commission on April 1 has temporarily halted the rapid escalation of rates for cable television services throughout the nation.

Since August, nearly every cable company in Orange County either raised its rates for basic cable services or moved popular channels to higher-priced service packages. It’s easy to explain why: There is no cable competition anywhere in Orange County to keep rates down and service quality high.

Furthermore, cable companies wanted to raise rates before the FCC and cities asserted new authority to regulate rates pursuant to the Cable Television Consumer Protection and Competition Act of 1992.

If the FCC’s order becomes permanent after the 120-day review period, it will erase all recent rate hikes and will roll back rates by 10% from what they were before last fall. The FCC decision is obviously very good news for cable consumers. However, rate regulation by the FCC or any municipality is a weak substitute for market competition and will do little to remedy the decline of service quality and programming options.

To bring cable rates down even further, enhance service quality and increase programming options, there’s only one certain answer: market competition.

All we need are elected officials with the courage to take market competition seriously. As experience shows, this won’t be easy. The FCC’s decision notwithstanding, citizens throughout the county must begin lobbying their elected city officials to promote cable competition.

Competition works to lower cable rates without rate regulation. Independent studies released last year by the U.S. Department of Commerce and the Senate’s Commerce Committee showed that cable rates in cities with competitive systems are at least 20% lower than in comparable cities with only one franchise.

The Senate study also showed that per-channel prices can be as much as 50% lower in communities with competing cable systems.

Unfortunately, due to the presumption of renewal guaranteed to cable companies by the 1984 Cable Communications Act and the propensity of municipalities to grant exclusive franchises to companies, only 53 communities in the United States are wired for two cable systems.

The absence of cable competition in any Orange County city is especially surprising given the abundance of pro-market rhetoric coming from local and state elected officials. Pro-market talk is plentiful and easy at City Hall, but pro-market decisions are few and far between.

Every city council in Orange County should revisit the issue of cable competition. Three specific steps can be taken by most city councils to make cable competition a reality.

First, city councils should investigate the legal status of their current cable franchise and ask two questions: A) Is the franchise granted on an exclusive basis, and B) If it is, when is the franchise up for renewal?

Irvine’s cable franchise, for example, is non-exclusive. This means the Irvine City Council could franchise another cable system without violating the rights of the current franchisee. To do so, the city must aggressively invite other cable systems to consider wiring all or some portion of the city.

Where the franchise is exclusive, cities should begin building a case for cable competition in anticipation of the renewal process so they are not forced to simply sign off on another lengthy franchise to a single-service provider.

Second, should a council not want another company wiring the city or should an exclusive franchise prevent it from doing so immediately, competition can still be encouraged by promoting the development of wireless cable services.

Wireless systems of many different varieties have numerous advantages over a wired cable system: They are 20% to 50% less expensive than a wired cable system to install; subscription costs tend to be lower; there are fewer service problems, and the picture quality of wireless cable is equal to or better than wired cable.

Third, city councils that refuse to consider either of the previous alternatives should at least help individual homeowners utilize contemporary technology to compete with wired cable.

Direct Broadcast Satellites or DBS will soon make it possible for individuals to install a 12-by-18-inch satellite dish capable of receiving upward of 100 channels of programming. But many homeowner association restrictions prohibit the installation of conventional satellite dishes and even a DBS system. Moreover, the restrictions are nearly impossible to amend. To promote competition, city councils should enact local ordinances to override all homeowner association restrictions on the utilization of alternative telecommunications technologies.

What the FCC giveth it can just as easily taketh away. Only market competition will provide a lasting solution to the abuses of cable monopolies.

Thanks to advances in technology, there are now many alternative ways for cities to permit competition with current cable providers without the inconvenience (and cost) of tearing up the streets and laying more cable. But it’s up to cable subscribers in each city to push for competition.

Let your city council know it’s time to match lofty pro-market rhetoric with decisive pro-market action.

DR, B.D. CUMMINGS