Survey Reports Results of Texas TV Competition

The American Consumer Institute released a study today finding that cable television subscribers in Texas are already saving money as a result of wireline competition (mostly by Verizon) introduced in the state subsequent to state legislation that helped competitors bypass slow local franchising processes.

The report, called "Does Cable Competition Really Work? A Survey of Cable TV Subscribers in Texas," is based on a survey of 883 cable customers in three towns in Texas where competing services have penetrated within the last six months -- Keller, Plano and Lewisville. (Go here for a full PDF version, go here for a summary.)

The survey found that new competitors have claimed almost 20% of market share in the short time since the markets opened up. 22% of respondents say they have switched TV providers within the past six months. 48% of those who switched to a competitor reported that they saved money, an average of $22.50 per month. But that 48% figure indicates that many switched for reasons other than cost savings. Besides pricing, respondents pointed to better quality and better packages as reasons for switching.

Not only did those who switched save money, but the survey found that those who did not switch saved money as well, as incumbents reduced prices because of competitive pressure.

The study's authors say competition increases overall demand for TV services: "The survey finds that 23% of Verizon's customers did not have cable TV service prior to Verizon's entry." This could be due in part to falling prices, but the authors also think that greater consumer choice might have an 'invigorating' effect on the market, bringing in first-time customers and bringing back those who had dropped out previously because of poor service on the part of the incumbent.

The authors describe the consumer benefits of increased competition in these Texas video markets as "immense" and say:

"Currently, the competitive portions of these communities are realizing $2.4 million in consumer benefits per year as a result of lower cable TV and video prices. That number will likely increase to $14.1 million per year as competition continues to develop in these areas, and as consumers become more aware of competitive choices and prices. If these estimated consumer welfare benefits could be replicated across the U.S., this study finds that consumers would receive $23.0 billion in benefits per year, or approximately $19 per month per household."

AB -- 3/2/06