The cable television industry in the United States is highly regulated by the federal government. Regulations, and lack of regulations, affect company ownership, rates and types of programming. The regulations remain in force because the government considers cable TV to be a "natural monopoly," and because of the importance of communications technology to national security.
Regulations
The Federal Communications Commission (FCC) guidelines state that local governments can set the rate for the most basic cable service, but rates for other types of service are not regulated. To provide service, a company must acquire franchise permission from each local government in each region it wants to begin business, and the local government has the right to deny permission. Municipalities usually grant exclusive franchise rights in return for a 3 to 5 percent commission of revenue.
Pricing Issues
Many people complain that the government regulations force Americans to pay exorbitant amounts for cable television because there is almost invariably only one cable franchise per community. The situation is compared to long-distance telephone companies which once held a monopoly. Long-distance telephone pricing has declined over 30 percent since 1999, while cable TV rates have increased almost 60 percent.
Lack of Competition
Although thousands of cable TV companies exist, about 25 companies have over 98 percent of the business. In addition, the Telecommunications Act of 1996 lifted some regulations regarding ownership, which allowed companies to merge with and acquire other companies, leading to increasing consolidation.
Satellite Competition
These regulations gave satellite television a boost even in areas where cable is available. For a similar monthly charge, viewers receive more channels than cable provides. Direct broadcast satellite service grew from around 2 million subscribers in 1995 to over 17 million in 2001.
Indecent Content Controversy
The FCC bans indecent content from broadcast stations, but these regulations do not apply to cable and satellite television because people pay for the service, and cable is not part of the government-licensed broadcast spectrum. Cable and satellite companies state that regulating content would be an infringement of First Amendment rights. They say that technology such as the V-chip allows parents to shield children from inappropriate cable content. In 2005, the FCC considered extending the indecency regulations to basic cable service, as well as requiring cable companies to provide an "a la carte" service for consumers to purchase each cable station separately rather than as a package. These ideas were later shelved, but some of the largest companies did agree to offer a family-friendly basic cable option.
