A new TV technology has been developed that would enable new competitors to offer the full range of cable and satellite TV channels, plus all local TV channel and high speed Internet access. Moreover, this new technology would not only come to consumers at low cost, it would reduce existing cable and satellite TV prices as well through the new competition.
The new TV system, developed by Northpoint Technologies of Austin, Texas, utilizes microwave signals that hop across a network of ground-based retransmitters to a reception dish at your home or office. It is called “Multichannel Video Distribution and Data Service,” or MVDDS.
This new technology is ideal for bringing the full scope of cable TV services and high-speed Internet access to rural areas. It can be installed to cover the entire nation within two years.
But there is one problem. The cable and satellite TV companies don’t want any more competition. So they have prevailed on the Federal Communications Commission to squelch the new technology.
As a result of their furious lobbying, the FCC is demanding that any new MVDDS providers pay for the transmission spectrum bandwith they would use through an open auction. Yet, the technology would only share the same spectrum band that satellite TV providers now use. Most importantly, the satellite TV providers never paid anything for use of that spectrum. They were granted their licenses to use it free of charge.
How can the FCC expect MVDDS to operate if it has to pay a fortune to use the same transmission spectrum band that its satellite TV competitors use for free? Even if MVDDS could operate on this basis, the discriminatory charge for spectrum use would eliminate any cost advantage or cost competition for consumers.
Fortunately, bipartisan legislation now pending in the Senate, spearheaded by Sens. John Sununu, New Hampshire Republican, Maria Cantwell, Washington Democrat, Kay Bailey Hutchison, Texas Republican, and Mary Landrieu, Louisiana Democrat would correct this problem. It would require the FCC to apply the same rules for spectrum use by ground-based transmitters like MVDDS as for satellite TV. This would eliminate the discriminatory and onerous auction requirement for MVDDS spectrum use.
This legislation would liberate MVDDS and free consumers to choose this new TV and Internet alternative if they desire. It would offer these services to consumers at lower costs than are available now. Moreover, the competition from this new technology would force down the current prices of cable and satellite TV, and high speed Internet.
Cable TV rates rose 8.2 percent last year, over 5 times the rate of inflation. The average family now pays over $40 per month, or nearly $500 a year, for cable programming.
The introduction of high cost, upscale, satellite TV has not reduced cable prices. But, according to the General Accounting Office, in the 2 percent of local markets that have competing cable providers, cable prices are 17 percent lower than elsewhere.
Indeed, Thomas Hazlett, former FCC chief economist, estimates competition for the new TV technology would reduce subscription TV prices and high-speed internet access fees by at least 5 percent. That would save consumers $2.78 billion per year. If it reduced prices by 17 percent, that would save consumers more than $10 billion per year.
As Mr. Hazlett says, “FCC license auctions are, in this case, an extremely inefficient way to raise a trivial amount of revenue compared to the vast consumer gains that are squandered.”
In addition to the consumer cost savings, many rural areas do not now have any high-speed Internet access or cable TV options at all. MVDDS would bring those services to these areas for the first time. That has helped to expand bipartisan support for the legislation.
The FCC and the special-interest satellite and cable TV lobbyists have failed to make any argument against the legislation grounded in the public interest. As a result, the Senate Commerce Committee recently voted the legislation out to the floor as an amendment to the FCC funding bill. A vote is expected on this bill within the next two weeks.