The FCC voted along party lines, 3-2, to treat service providers differently in video franchising. The Commission didn’t release an order, and likely won’t for several weeks, so we can’t comment on all of the details. But based on what has been reported, it’s a disappointment that the FCC appears determined to create an uneven, unfair playing field slanted decidedly in the telcos’ favor. Of course, it’s far from a done deal, with lawmakers questioning the FCC’s authority on the matter and cities likely to sue. (Here’s the official NCTA response.)

The other matter on the FCC’s meeting agenda was release of the 2005 cable pricing survey. No surprise there, since details had been leaked for months. NCTA head Kyle McSlarrow on Tuesday called the study “almost entirely useless as a foundation for any policy decision.” Although we haven’t seen the full report, based on the data that have been released, the conclusions of the study just aren’t true for Cox Communications. The FCC’s chief contention is that speeding the entry of AT&T, Verizon and other large telcos into the cable business will reduce prices. Truth is, Verizon and AT&T’s video services are already priced well above $35.94, which is the FCC-reported average price of cable in markets with at least two wireline competitors. Verizon’s FiOS service is $47.98 ($42.99 + $4.99 for a required converter) and AT&T’s U-Verse starts at $59. The FCC’s report claims that cable prices in markets with video competition from the telcos are about 20% lower (or $7) than in markets without telco video. Again, in Cox markets at least, that’s just not the case. Our prices in competitive markets aren’t distinctly different – only about 3% lower than in other markets. So, our prices are essentially the same whether we’re competing directly against satellite or telco video.

Another issue with the FCC pricing survey is that the data are nearly two years old. This outdated info just doesn’t reflect today’s competitive environment. Nor does it reflect the fact that over half of our cable customers subscribe to digital cable (the FCC survey addresses only analog basic and expanded basic prices). Furthermore, when over 60% of cable customers (at least in Cox’s markets) subscribe to multiple services and get the convenience and value of the bundle, focusing only on analog cable is outdated and increasingly irrelevant.

Another problem is that no analysis of the cost of cable is complete without looking at the price cable companies must pay for programming. The retail price of cable is directly tied to the wholesale cost of cable networks, which is rising dramatically. Every provider—cable, satellite or telco—purchases content from the same providers and faces the same serious pressures from rising programming costs. In fact, the satellite companies have increased their prices every year for the past 5, which the FCC study apparently ignores. Verizon, which benefits greatly from the FCC’s actions, recently raised its video prices by about $3 (or 8%). Until content providers drop their prices, or at least reduce their cost increases, it is unrealistic to expect that video prices will drop significantly. And this dynamic will hold true regardless of the level of competition in a given market.