Friday, October 16, 2015

The Monopolies of Cable TV

Bloomberg (October 15, 2015) "There is little intelligent discussion about the costs of too much regulation on the one hand, and the excesses of capitalism on the other. That is a shame, because both sides of those issues create real economic frictions with substantial societal costs ... The U.S. does a poor job in regulating industries to which it grants monopoly or oligopoly status ... and a very poor job of managing competition and adopting the needed standards to improve market efficiency."

Consider the following chart:

Long-term Price Trends for Electronic Goods and Services

It raises the question of why prices for every major tech product and service have fallen, except cable and satellite television. The answer comes to us from Economics 101: it is a function of competition, of which there is very little in that industry. Add to that the cost in time and energy of switching providers; it's so aggravating to drop Comcast as your cable provider that a new service will spare you the pain and charge $5 to do it for you.

Television services are just one example ... It seems impossible, however, to have a serious conversation about this as long as rich companies buy off elected officials who grant special tax breaks, dispensations and exemptions. You can pretty much name any intractable problem in the U.S. and trace it back to the money corrupting the political process.

(Comment) "And do we have the quality of US cable television to go along with the high price? Substandard. Very interesting case for breaking up the cable cartel.


  1. Center for Public Integrity

    U.S. Internet users pay more and have fewer choices than Europeans

  2. UPDATE: Jamuary 2016

    Big Cable Owns Internet Access. Here’s How to Change That.

    We know that Big Cable’s plan for high-speed internet access is to squeeze us with “usage-based billing” and data caps, so as to milk ever-growing profits from their existing networks rather than invest in future-proof fiber optics. We are also seeing that Big Cable has won the war for high-capacity, 25Mbps-download-or-better wired internet access, leaving AT&T and Verizon to concentrate primarily on mobile wireless. Indeed, Big Cable’s share of new and existing wired-access subscribers has never been greater — cable got both all new net subscribers in the third quarter of 2015 and captured millions of subscribers fleeing DSL — and its control over this market is growing faster than ever.

  3. UPDATE: January 2016

    [Study favors cable companies to keep ripping us off.]

    Senator John McCain recently proposed a bill that would force cable television providers to offer consumers the opportunity to purchase TV channels individually, rather than being forced to buy the bundled packages: “When I go to the grocery store to buy a quart of milk, I don’t have to buy a package of celery and a bunch of broccoli. I don’t like broccoli!”

    Prices for cable service have risen far faster than inflation for decades, despite the nominal growth of competition from satellite and telephone company entrants. At the same time, Nielsen has found that the average household watches only 16 of the more than 100 channels available to them.

    Might not letting households buy only those channels they are interested in lead to lower consumer bills? while à la carte at fixed costs offers benefits to consumers, it may also lead to higher costs and higher prices per channel, leaving the net benefits uncertain.

    Based on the analysis in our paper, we would not advocate for it. We find that some households would win and others would lose, but that on average they would be no better off in an à la carte world.