NCTA: Don't Overdo Overbuilders

The $5mln question at today’s Sen subcommittee hearing on cable rates will be how lawmakers view a GAO study that examines a tiny sample of overbuilders. It’s possible lawmakers may use it as reason to rush out and give overbuilders some breaks. (Heck, they’ll see some tempting factoids in the report: monthly cable rates being 41% lower in one overbuilder market vs a non-overbuilder market.) The report doesn’t make recommendations, but Subcommittee on Antitrust ranking member Herb Kohl (D-WI) already has ushered out a statement declaring it’s "essential that these new competitors do not have to contend with unfair obstacles to competition." (The report never establishes such impediments to competition, Senator.) The overbuilders GAO examined (Knology [KNOL], Grande, Everest, RCN [RCNC], Astound and Prairie Wave) overstated claims of program access concerns and local franchising conditions that they say hinder their ability to compete, NCTA said about a draft of the report. GAO admits it didn’t evaluate the veracity of the claims: it’s "simply reporting the views of these providers." NCTA also said the study is not statistically significant because of its extremely small sample (6 markets with and 6 without overbuilders). The report likely will generate cable rate heat. CableFAX columnist Steve Effros provided rebuttals in his column last week (Cfax, 02/05). Effros argues lower prices in overbuilder markets don’t automatically mean the consumer wins. Price wars may push overbuilders to skimp on new services, upgrades and maintenance. They may also force them out of business. NCTA said as much Tues. The report "reinforces the fact that overbuilder prices are either not economically sustainable or are sustainable only because of artificial cost advantages and subsidies that are not available to incumbent cable operators," NCTA said. — (C-SPAN will provide a live, Webcast of the cable rates hearing at 10:30am ET at www.c-span.org) — Busy Hill Day: Viacom [VIA] pres/COO Mel Karmazin heads to the Hill today for a House hearing on the proposed Broadcast Decency Enforcement Act. C-SPAN 3 has live coverage at 10:30am ET. Others on hand: NFL commish Paul Tagliabue and FCC chmn Michael Powell. Sen John McCain (R-AZ) convenes a hearing on protecting children from indecency and violence 1 hr earlier.