Why the Government Won't Protect You from Getting Screwed by Your Cable Company

You hate your cable company, right? Seems like everyone does. Cable television routinely scores lower in customer satisfaction than just about anything else—including congress. So why don't you just switch providers? Oh yeah, you can't. You're so screwed!

The sad truth is, most Americans don't have a choice of cable providers. Sure, there are a lot of cable companies out there, but odds are there's only one you can use. While no one cable company dominates the nation, there are a lot of regional cable fiefdoms. Live in San Francisco? It's Comcast for you. New York City? Time Warner. That matters because it translates into high prices and crummy service.

Nationally speaking, there's plenty of competition. But locally, that's just not true. For the overwhelming majority of us it's the local cable-opoly, or get bent. Which means we pay exorbitant bills, suffer four hour install time windows, and just suck it up when our cable provider throttles our download speeds or caps our bandwidth.

The only way this changes is with competition. When a competing cable company is present, your cable bill typically goes down by 15-percent, and service generally improves. But almost nobody has a competing cable company.

Simply put, you're paying way too much for Nickelodeon.

The cable industry is a patchwork of micro-monopolies. Or more accurately, natural monopolies: situations of little or no competition that doesn't break enough laws to get regulated. A natural monopoly occurs when it's so expensive to enter a market that it doesn't make sense for a competitors to come in. With cable TV, there's a massive fixed cost to enter a new market—putting in new cable lines. So, basically, whoever showed up first—or the company that bought them—has the legacy right of being the local cable company.

For decades, cable operators were allowed to set up exclusive regional franchises. A cable company would come into an area, and more or less tell the municipal area in charge of franchising that it needed an exclusive for the next, say, 12-15 years if it was going to build out lines. That ended in 1992 with the Cable Television Consumer Protection and Competition Act, but the damage was done.

Cable companies had already divided up the nation like Europe colonizing Africa. By the time regulation arrived, the land grab was already over.

The last reliable statistic shows that a mere 2-percent of American markets had a choice of cable providers. That's from 2003, the last time the FCC produced a statistic. (At least that they could supply us with.) You may be surprised to learn that the FCC doesn't have anything to do with cable franchising. Nor does the FTC. An FTC spokesman told Gizmodo that "we don't look at industries considered common carriers, like airlines, phone companies and utilities."

Throughout most of cable's history, it's been regulated at the local level. Counties and cities were the agencies responsible for allowing cable franchises. That is changing, slightly. More than 20 states now have franchise authority, due largely to intensive lobbying by telcos like Verizon and AT&T.

You know you're fucked when you're relying on AT&T to make things better.

Ultimately, this patchwork of local regulation means cable companies themselves are often more powerful than the body overseeing them. And as long as none of the micro-monopolies grows too large nationally, it can continue to control the local weather.

But what about those second cable companies that some people have? They're typically overbuilders, a company that builds new lines in an area where one cable company already exists. They tend to be quite small. The best known, for example, is probably WideOpenWest Networks, or WOW. WOW has just 410,000 subscribers. And that's because it's really, really hard for a second company to come into an existing market.

While everyone has a right to access the poles, the same isn't true of the wires that hang from them. In short, if you're an upstart cable company coming into a new area, you have to run your own lines. It's very expensive, and it also means you can easily be crushed by the existing monopoly.

One cable industry insider, who would only speak on background, explained how it works:

First you have to overcome a mishmash of local regulations. You have to get a permit to come in, which can be a legal hassle, with a wait time of many months just to get approval. Then its time to build.

To build a new network and make it price-competitive, you have to reach 100-percent of customers in that area. Which means building an extensive network of lines, all the way to the door. If you're very lucky you may capture 10 to 20-percent of the market. You do that by offering steep discounts on bundled services. This gets you new customers, but at a loss.

Then, Comcast, or Cablevision, or Time Warner—or whichever provider is dominant in the area—comes along behind you with sweetheart deals for any of its customers who were leaving. They offer discounted packages and teaser rates. Poof. They're gone. That's five percent of the market. Now you've spent a fortune on new lines and infrastructure, for very few new customers.

So there's very little financial incentive for a competitor to try to build. It's just too damn hard to build a customer base. To do that, you need to be a giant company to begin with. Like, say, a telco.

If you're lucky, you may have the option for Verizon FiOS or AT&T U-Verse. But probably not. Verizon only passes (cable lingo for is available at) 15 million premises nationwide, and has just 3.7 million video subscribers. AT&T is even smaller, at 3.4 million. Comcast, by comparison, has 22 million video subscribers.

What's more, there's no evidence that telcos are having a positive effect on pricing. In fact, in some areas where AT&T managed to get the laws changed, like Michigan, prices have gone up.

But wait! What about satellite? Doesn't satellite fix everything? No.

According to the Government Accountability Office, satellite services have little-to-no effect on cable prices. (And besides, satellite service is terrible. Who doesn't want to watch TV when it's overcast outside?)

Ultimately what all of this means is that consumers are left with little recourse. Because there's plenty of competition nationally, nobody is looking out for you locally.

Except us.

All this week, Gizmodo is going to take a long-hard look at the cable industry, and how to improve it. We want to fix cable, and we need your help to make it happen.

We want to hear your horror stories of bad cable experiences, and your ideas of how to make things better. We'll collect the best of these and publish them on Friday. Tweet us with the hashtag #fixcable, email us at tips@gizmodo.com with #fixcable in the subject line, or just fill in the form at the bottom of this page.

Come on. We are totally going to do this thing.


You can keep up with Mat Honan, the author of this post, on Twitter, Facebook, or Google+.