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Comcast defends its local rates for cable TV

City’s FCC plea could have minor effect

By Hiawatha Bray
Globe Staff / May 10, 2011

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Cable television giant Comcast Corp. yesterday defended its local rates as Mayor Thomas M. Menino filed a petition asking the Federal Communications Commission to give the city control over the price of basic cable service in Boston.

Yet, even if he succeeds, the great majority of Boston cable subscribers probably won’t see much of a change in their bills.

Menino wants the federal agency to reverse a 2002 decision that stripped the city of the power to regulate cable rates. “The commission’s decertification of the city, coupled with the failed promise of effective competition, has left the majority of subscribers in the city unprotected from Comcast’s market power,’’ the petition says.

Comcast argued that its rates are fair, saying the market for basic cable service in Boston is “highly competitive’’ due to rivalry from satellite TV services, free broadcast TV, and the city’s second cable provider, RCN Telecom Services LLC.

“Comcast’s basic service in Boston continues to be nearly half the cost of any other provider’s entry level service,’’ the company said in a statement. “We believe we continue to offer the most affordable options and best values for consumers.’’

In Boston, Comcast offers a basic package of 35 channels for $15.80 per month with a $5 discount for senior citizens. By contrast, the cheapest available service from satellite TV provider Dish Network is $34.99 a month, with a $10 discount during the first year of service. Satellite provider DirecTV charges $29.99 a month for the first year, with the price rising to $60 per month thereafter, not counting discounts that can significantly lower the price.

Cable provider RCN last year struck a deal with the city to offer basic service for $17.50 a month.

The city once had high hopes that competition would drive local cable prices down. RCN, for instance, was supposed to serve every part of the city, giving consumers an alternative to Comcast that would discourage price hikes. However, RCN’s network has languished, and today, the company serves just 15,000 Boston residents, compared with Comcast’s 170,000 customers.

Independent telecom industry analyst Jeffrey Kagan said that across the country, efforts to drive down cable prices through competition have generally failed.

“The whole cable industry has been broken for many years’’ when it comes to pricing, he said. “It’s unfair to the consumer.’’

Another potential Comcast rival, telecom giant Verizon Communications Inc., has bypassed Boston. Verizon budgeted $23 billion to install its FiOS network in 16 states. FiOS has been installed in 111 Massachusetts communities, but not Boston.

Verizon spokesman Phil Santoro said the company is now concentrating on marketing the service in communities that have already been wired, and there are no current plans to bring FiOS to Boston.

While Comcast offers the cheapest basic service in town, the company charges much less for similar service in Massachusetts towns that still regulate basic cable television pricing. A study produced for the city by Front Range Consulting Inc. of Castle Rock, Colo., found that residents of cities such as Cambridge, Malden, and Chelsea paid substantially less for basic service than Bostonians.

Menino’s bid to regulate cable prices could have a limited impact in Boston. Federal law only permits price caps on the most basic level of cable service. Michael Lynch, director of the city’s cable TV office, estimated that between 10,000 and 15,000 of the city’s cable users subscribe only to basic service. Most customers subscribe to higher tiers of service, and “the other rates are unregulated,’’ Lynch said.

Even if the government reversed its earlier decision to deregulate rates, that majority of cable subscribers who buy bigger cable service packages may not see any change at all in their bills, since Comcast or RCN could simply raise the cost of their unregulated services.

“It’s not going to impact that many people,’’ said cable industry analyst Mark Kersey, of Kersey Strategies in San Diego.

Hiawatha Bray can be reached at bray@globe.com.

Correction: Because of a reporting error, this story misstated the price the cable company charges senior citizens in Boston for basic service. The correct price is $5 per month.