Are you tired of having the option of only one cable Internet provider and needing to pay $49.95 a month for services? There's no other choice for many homes in the country, but yesterday's ruling by a San Francisco court could change this, increasing cable Internet competition and bringing lower prices. Eventually.
A U.S. Court of Appeals ruled against the Federal Communications Commission (FCC) and its plan to allow cable companies to exclude competition from cable networks. The new ruling demands that cable operators allow competitors on their networks, something many Internet service providers (ISP), including Earthlink (Nasdaq: ELNK), have long sought.
Five companies control 75% of the cable Internet subscribers in the country. That doesn't sound anti-competitive until you realize that, in most cases, consumers had no choice but to go with one of the five and no other. Much like past telecommunications rulings, opening lines to competitors would introduce lower prices along with additional choices.
The FCC is not trying to prevent this out of cruelty. Its argument for keeping cable lines in the hands of owners is simple (if unproven): It believes exclusivity encourages more spending for cable buildout and network enhancement. If competitors are allowed access, the FCC argues, cable owners are less likely to spend money on networks.
Thing is, this argument has at least one big hole. Even if a cable company allows competitors on its network, it will maintain the network just the same to keep and increase customers. Competitors will pay the cable owner for usage, and providing consumers a choice in service providers should bring additional subscribers to the fold.
The country's largest cable provider, Comcast (Nasdaq: CMCSA), already allows six competitors -- including AOL Time Warner (NYSE: AOL) -- on its network in some markets. Time Warner also shares some of its cable.
Changes will not come about -- not by law -- anytime soon, however, because the FCC vows to appeal yesterday's decision, saying the ruling damages the country's ability to develop a nationwide broadband policy. Additionally, the FCC is not required to enforce a ruling if it deems it more harmful than beneficial, and in this case it does.
Legalities aside, yesterday's ruling is a positive public relations step for ISPs seeking access to cable, and it may encourage cable owners to start accepting more competitors, setting up their own partnerships rather than risk being told later what to do.
According to Leichtman Research Group, the largest cable Internet operators are Comcast with 4 million cable modem subs as of March 30; AOL Time Warner, 2.6 million; Cox (NYSE: COX), 1.6 million; Charter (Nasdaq: CHTR), 1.3 million; and Cablevision (NYSE: CVC), 850,000.
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