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Note: The telco mantra for obtaining state and national franchises has been that "competition" = "lower prices". This line is reflected in astroturf campaigns and free market think tank studies. The reality is areas where telcos have entered the market is turning out to be quite different - both telcos and cable companies are raising rates.

from: Washington Post

Cable War Fails to Offer Rate Relief in Montgomery

By Ann E. Marimow
Washington Post Staff Writer
Sunday, February 18, 2007; C11

Bills for thousands of Montgomery County cable viewers will increase by 4 percent starting March 1, when Comcast Corp., suburban Maryland's largest cable television provider, raises rates throughout the Washington region.

Montgomery leaders had hoped that competition from a new provider, Verizon Communications Inc., would help lower prices. But Comcast said recently that cable bills would climb in line with increases for subscribers throughout Maryland, the District and Northern Virginia.

The announcement comes after the county fined Comcast twice in the past six months for failing to meet benchmarks for customer service.

Comcast officials said the higher rates reflect costs such as adding video titles for viewers and improving customer service. Spokeswoman Lisa Altman said the company plans to hire more than 700 people in the region, including 300 who will serve Montgomery, Prince George's and Frederick counties.

The Montgomery and Prince George's county councils signed off in November on agreements to allow Verizon to begin offering fiber-optic television service. Company officials hailed the "benefits of choice" for customers, including less expensive service.

Verizon has since raised its rates for new customers by 7.6 percent. And RCN, the third company that offers cable television service in Montgomery, raised its base price last month by 15 percent.

Some Comcast customers remain upset about a $2-a-month increase they received in September as part of what the company said was the cost of offering the Mid-Atlantic Sports Network, which broadcasts Washington Nationals baseball games.

So much for the idea that "competition will bring down rates," said Montgomery County Council President Marilyn Praisner (D-Eastern County), who has long clashed with the industry over regulation. "That clearly hasn't happened."

Congress deregulated most cable rates in 1996, opening the door to competition but leaving local jurisdictions with little authority over pricing. County officials can regulate only the most basic service.

Consumer advocates have been encouraged by Verizon's entry into the high-speed cable television market as the company has introduced its fiber-optic service in jurisdictions throughout the region.

Analysts say the rates' continued increase suggests that the companies do not intend to compete on cable prices alone.

"We all need to be very skeptical about the promise of price relief until it is actually realized," said Jeannine Kenney, a senior policy analyst with Consumers Union.

Instead, Kenney expects the companies to compete over bundled services. All three offer customers packages of phone, Internet and cable television service. Comcast, for instance, has improved its Internet speeds four times over the past three years without increasing its prices.

Harry Mitchell, a spokesman for Verizon, said such moves are "purely related to competition" and are signs that "competition is fully engaged."

Cable administrators cautioned that competition takes time to develop and might not reduce prices. Company officials would not publicly discuss subscriber figures. But according to estimates from the county cable office, Comcast has the largest share of the market in Montgomery, serving more than 200,000 households. RCN has fewer than 10,000 customers, county officials said, and Verizon had fewer than 1,000 as of the end of last year.

Under the county's agreement with Verizon, the company's television service will be available to most households within four years. Mitchell acknowledged that it would take time to build the network but said Verizon began with the capacity to serve 75,000 households and will aggressively ramp up over the coming months.

Margie Williams, project manager for the cable office, said Montgomery residents are fortunate to have three options. "We're thinking in a year maybe that Verizon will come around," she said. "That's the goal."

In the meantime, the price for Comcast's basic preferred cable TV service, which includes 150 channels, will increase 4.3 percent, to $58.05. After January rate increases, RCN customers pay $53.95 for full basic cable, and new Verizon customers pay $42.99 for its premier television package, which the company says features 200 channels.

Although customers are being notified this month of Comcast's rate increases, complaints are likely to roll in when the new prices show up next month, said Keith Watkins, the county employee whom customers call with complaints when they have exhausted all options with their providers.

"They get angry," Watkins said. "They want to know why."

Overall, complaints collected by Watkins's office last year about Comcast's multiple services were down to 1,438, compared with 2,125 in 2005. But in the third quarter of last year, Comcast did not meet any of the four cable TV-related customer service standards for answering customer calls, making repairs or installing new services. As a result, the company was fined a total of $13,500 in the past six months.

"People are waiting on the phone too long, and they aren't getting the kind of appointment assistance they deserve for the money they pay," said Del. Jane Lawton (D-Montgomery), the county's cable communications administrator.

Comcast officials attributed the lagging response to weather-related power outages, a system virus and increased customer demand as the company expands its services. With the addition of hundreds of workers, Altman said, the company is "looking at ways to provide the best customer service."