Telecom competition

Dear SF Chronicle Editor –

Telecom companies will compete head-to-head with cable and satellite companies in California. Unfortunately, in his recent opinion piece in your paper, the Foundation for Taxpayer and Consumer Rights’ Jamie Court quotes me to support his view that video competition will not lead to lower consumer prices (“Bad deal for cable customers,” Insight, June 26). I did not say that. To make his point that “industry analysts say prices will be high,” Court quotes me as saying “none of these players wants to enter into a price war.” That’s true. No business likes a price war.

But Court misses two key points. First, I did not say prices would be high. I merely stated that none of the multichannel players will want to enter into a traditional price-for-a-package price war.

Second, significant data shows some cable companies are already cutting their rates to fend off competition. Additional data show it’s happening around the country. Empirical evidence shows that cable prices typically drop 15 percent to 20 percent when video competition comes into an area. Telecom companies will inevitably have to offer new products and lower prices themselves to get a foothold.

In the end, this telecom competition is very complex stuff, which is all the more reason why those engaged must be particularly careful (and accurate), when taking positions.

JIMMY SCHAEFFLER
Chairman & CSO
The Carmel Group
Carmel-by-the-Sea

Industry analysts say prices will be high, in part because telephone companies will have to invest billions in a parallel infrastructure. “None of these players wants to enter into a price war,” said Jimmy Schaeffler, an analyst for the Carmel Group.

“The winners of that DVR surge are likely to be TiVo Inc., the San Jose firm that currently has the most recognizable DVR brand name, and Metabyte Networks Inc., a Fremont technology company that is largely unknown now, said Sean Badding, one of the authors of the report by the Carmel Group.”