Although competition from DBS hasn’t restrained cable price increases as much as consumer activists would like, a new FCC study concludes that the threat of losing subscribers to satellite TV somewhat dampens operators’ price hikes.
“Even for basic cable services, consumers appear to turn to DBS as a substitute for cable” when facing large price increases, wrote FCC economists Andrew Wise and Kiran Duwadi.
The economists did not suggests a specific rate of increase that would trigger cable customers to dump their cable company. They noted that cable price hikes typically have outpaced inflation on a total-cost basis, but cautioned that on a per-channel basis, the pricing is essentially stable.
The typical cable price hikes have not been sufficient to push cable subscribers to flee to DBS because long-term contracts, installation and equipment fees create “switching costs” that discourage customers from dropping their services after moderate price changes.
The study found that DBS customers are less likely than cable customers to drop satellite TV and sign on with cable after a big price jump.