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The Honolulu Advertiser
Posted on: Saturday, March 18, 2006

Phone industry takes on cable TV

By Arshad Mohammed
Washington Post

WASHINGTON A group backed by telephone giant AT&T Inc. hit hard at the cable industry this week with newspaper ads blasting TV rates as too high. Cable companies fired back by issuing a nine-page, footnoted rebuttal.

A full-fledged public relations war is gearing up between two industries that used to have little to do with each other, as Congress considers legislation that would make it easier for phone companies to offer TV service to consumers.

Earlier this week, a group called TV4us that says its largest financial backer is AT&T ran eye-catching ads in Roll Call, the Hill, The Washington Post and the Washington Times touting the benefits of phone companies entering the TV business.

The ad which erroneously called the agency the "Federal Communication Commission," dropping the "s" from the second word in the agency's name, and gave the wrong document number for one FCC study it cited said "96 percent of families have only one choice of cable TV provider."

That statistic, however, refers only to people who get cable TV over wires and does not include those who subscribe to satellite TV services.

"That statistic is a selective reading of the FCC's report," said Paul Gallant, a former FCC official who is an analyst with the Stanford Washington Research Group. "Most people would consider satellite service an alternative to cable, and satellite is available to the vast majority of homes today."

Satellite providers serve 27.7 percent of Americans who pay for TV service, according to an FCC report released March 3.

The advertisement also states that cable TV prices rose 86 percent between July 1995 and January 2004. That reflects FCC figures but is not adjusted for inflation, which amounted to 20.4 percent during that period.

The cable industry argues that the appropriate figure would take into account the increase in the number of channels offered since 1995. On a per-channel basis, prices have risen by 9.3 percent since 1995 and, adjusted for inflation, they have declined.

Independent analysts said that perspective was also flawed.

"It's a game of statistics, but the truth is they are both deeply flawed statistics," said Blair Levin, who analyzes regulatory developments for Stifel, Nicolaus & Co., a financial services firm. "It is a dynamic product. The per-channel number does not capture that because it values all channels the same, when they are not, and the nominal price really doesn't capture it either."

Gene Kimmelman, senior policy director at Consumers Union, said the statistic that best reflects the price increase is the government's cable consumer price index, which takes into account the increased number of channels and still shows a 56.7 percent rise over the period.

The battle over statistics has heated up because Congress is taking a serious look at passing video franchising legislation, which could relieve telephone companies from having to get clearance from thousands of local governments to install TV service. Cable companies had to undergo such a process and say phone companies should do the same.