BUSINESS
05/20/2014 07:35 am ET | Updated May 20, 2014

Your Ridiculously High Cable Bill Could Go Up Even More

The cost of TV has been rising at a breathless pace. And thanks to a couple of pending mega-mergers, it could get even worse.

The price for basic cable went up by 6.5 percent during 2012 -- a whopping four times the rate of inflation, according to a new report from the Federal Communications Commission.

The price of basic cable, the entry-level tier of service, increased by 6.5 percent through that year. The price of expanded basic cable increased by 5.1 percent. Equipment prices -- what you pay to rent the cable box or an HD converter -- also went up at a higher rate than inflation, 4.4 percent for basic service and 4.2 percent for expanded basic service.

The FCC report comes amid a huge wave of consolidation among telecommunications giants. On Sunday, just two days after the FCC released the report, AT&T announced its intention to buy DirecTV in a $48.5 billion deal. If approved by regulators, the two companies would combine to become the second-biggest TV provider in the U.S., serving 26 million customers.

The largest would be the combined Comcast and Time Warner Cable, the result of a $45 billion deal that was announced in February and is currently undergoing regulatory scrutiny. If that deal proceeds, the post-merger company is expected to have roughly 30 million video subscribers.

While company stockholders and executives are likely to benefit from the mergers, consumers would be left with fewer choices, and that could lead to even higher prices.

"AT&T is proposing to buy a player that it directly competes with in a number of markets," said Delara Derakhshani, policy counsel at Consumers Union, the policy and action division of Consumer Reports, "and eliminating a competitor in these markets is likely to result in higher prices for consumers."

If the AT&T-DirecTV deal goes ahead, roughly a quarter of U.S. households would see their options for video providers cut from four to three, according to the Associated Press.

"Weakness in competition in some parts of the country is a contributing factor as to why prices go up," said Martyn Roetter, an independent telecommunications consultant. "I'd call it a cartel, in which you have a few very large organizations ... who really can exert enormous market power."

But just because you have more choice doesn't necessarily mean you're going to pay less: Areas of the country that have "competing" cable companies, at least by the FCC's definition, still saw rates increase.

ArsTechnica's Jon Brodkin explains:

Technically, a community isn't considered to be competitive unless the incumbent operator has successfully petitioned the FCC for a finding of effective competition. Getting this finding relieves the company of price regulation, which helps explain why customers don't necessarily pay less when they have choices.

Roetter, the independent analyst, suggested in an email that in markets deemed areas of effective competition, "If there are only 2 or 3 competitors it is relatively easy for them to collude tacitly by watching each other and making sure that the market is not 'disrupted' by any one or either of them stepping too far out of line in terms of pricing."

He added, "The same players operate in both non-competitive and 'effectively competitive' markets. Why rock the boat?"

[H/T ArsTechnica]

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