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Cable Companies' $46+ Billion Robbery -- Subscribers Have Been Ripped off for $5 a Month Since 2000

The cable companies are diverting money that is intended to improve infrastructure, creating a perpetual cash machine for greedy execs.
 
 
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When cable television subscribers open their monthly bills they will not see a charge for the “Social Contract.” Since the mid-1990s, it appears that every cable subscriber has shelled out $1 per month increasing to $5 a month by 2000 to subsidize cable companies’ system upgrades. There has been no accounting for the total monies raised through this subsidy nor a thorough assessment of whether the cable operators fulfilled the system upgrades (including wiring and services to public institutions) the subsidy is suppose to underwrite.

We estimate that the total Social Contract or “social con” ripoff has cost American cable subscribers $46 billion. But the true costs of the social con could be much higher, as the cable companies may have “double billed” on their construction upgrades. These new construction payments underwrote cable operators implementing multiple revenue streams and a monopoly on their wires. This helped cable companies to now offer broadband, Internet, telephone and other services.

As of this writing, the Social Contract is a black hole, with no audit trails, no removal of a charge that seems to have ended up a perpetual cash machine. We call upon the Federal Communications Commission (FCC), the Congress and state Public Utility Commissions (PUCs) to provide a thorough, complete and transparent assessment of the Social Contract.

On September 24, 1997, the FCC’s then-chairman Reed Hundt testified before Congress on the Social Contract. As he reported, “The Commission has found social contracts to be a useful tool for providing for the upgrade of cable facilities allowing operators to expand service offerings.” And added, “the Commission's social contracts have allowed recovery for upgrades only through adjustments to rates charged for cable programming services tiers, the tiers that are within the Commission's exclusive jurisdiction.”

Surely, Jean-Jacques Rousseau is turning in his grave over the systematic misuse of his coveted concept of political freedom. Over the two-and-a-half centuries since his classic work, Of The Social Contract, Or Principles of Political Right, was published in 1762, the concept has been appropriated for all manner of misuse. From a concept that acknowledged the human relations that underwrites modern democracy, this Social Contract has become just another scam through which huge corporations rip off the public.

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The FCC adopted the concept of the “Social Contract” on November 30, 1995. It is intended “to provide rate stability, improved quality of service, and incentives for upgrades and system improvements.” Under the contract, cable operators agreed to commit significant capital to upgrade their cable systems and offer what is known as a “cable programming service tier” (CPST), which are basic services and allow subscribers either to rent or purchase a converter box. In return, the FCC gave cable operators guaranteed subscriber rate increases and new programming tiers at higher rates. The rate increase was, in effect, a $1 tariff per month per subscriber to recover the capital investment, and that appears to have increased each year to $5 per month by 2000.

The Social Concept was formally institutionalized with the passage of the Telecommunications Act of 1996. This landmark act, which was created through a Republican Congress and signed by President Clinton with much fanfare, was intended to end (in Hundt’s words) “nearly 100 years of monopoly and restricted entry in communications and replaced them with a national commitment to open markets, competition and deregulation.” In the decade and a half since its passage, “deregulation” has led to the re-monopolization of the communications industry, the establishment of the telecommunications trust. Ironically, this deregulation was also given to the cable monopolies with the idea that they would compete with the phone companies.