Clash Of The Titans

[August 8th, 2007]

Cable giant Comcast is about to find out what real competition looks like in the Portland metro area. And that may mean customers are about to experience a new phenomenon—lower bills.

Starting next year, Qwest plans to offer cable television in Portland using its existing telephone land-line networks, beefed up with more fiber-optic cable. And regulators say that competition means customers can expect to see a decline—for the first time in memory—in an average monthly bill of $50.89 for standard cable.

"We're trying to steal their customers," Qwest attorney Jim Campbell told the Mount Hood Cable Regulatory Commission. "I don't know how many we can steal. We hope a whole bunch."

When direct competition came to Tacoma, Wash., and other cities, cable rates fell by 20 percent or more, says David Olson, Portland's chief cable regulator.

Comcast spokeswoman Theressa Davis says Comcast already has competition, citing the Dish and DirecTV satellite networks. But satellite networks have technical limitations and have never won more than a small slice of the paid TV market in urban areas.

About 60 percent of households in Multnomah, Clackamas and Washington counties pay Comcast for cable TV. About 20 percent subscribe to satellite TV, and 20 percent don't pay for TV.

"In this market, Comcast is totally dominant, by a mile," Olson said. "If you don't believe it, look at how they've been pushing up their rates—three to four times the rate of inflation for 10 years. You can't do that if you don't have a captive market." Comcast has increased its standard cable rate 117 percent since 1996, when it charged $23.40 a month.

Now Qwest is laying down more fiber-optic cable to increase its bandwidth for higher-speed Internet access and for cable, letting it compete with Comcast on a more equal footing than it does in its current partnership with DirecTV.

"We welcome competition," says Davis, "but regulators have an obligation to make sure that all competitors can compete fairly."

Comcast wants regulators to require Qwest to roll out the new service quickly. That would include benchmarks for where and when service would become available, and fines if the company misses the deadlines. Qwest says it wants to build gradually, so that its build-out can be supported by new revenues. Laying fiber-optic cable is expensive, and Qwest has had its own larger financial problems.

In Phoenix, Qwest was fined $1 million for failing to meet roll-out benchmarks. In Seattle, when regulators said Qwest would have to enter the whole market at once or not at all, the company decided not to enter.

The Mount Hood Cable Regulatory Commission, which pools regulation across several local jurisdictions in Multnomah County, is expected to approve Qwest's proposal Sept. 17. It would then go before Portland City Council on Oct. 10.

If Qwest ends up being the "good guy" for offering lower rates, it would be quite a change from 2001, when the company stopped paying telephone franchise fees to all Oregon cities. Qwest filed an ultimately unsuccessful lawsuit challenging the requirement to pay, even while continuing to collect the fees from customers.