Cable Market Power: The Never Ending Story of Consumer Overcharges and Excess Corporate Profits in Video and Broadband

Abstract

The never ending story of the abuse of cable market power in the multichannel video programming distribution (MVPD) and the broadband Internet access service (BIAS) markets involves the central themes of communications policy over the past fifty years. Public policy must create the conditions for competition and entry. However, the economic characteristics of communications networks make it extremely difficult for workable competition to grow and inevitably lead to the abuse of market power, if regulation is too light or deregulation is premature.

Cable TV needed policies like local franchises and guaranteed access to programming under the compulsory license §111 of the 1976 Copyrights Act to get off the ground. Cable quickly became the dominant video transmission and Congress twice deregulated cable long before competition existed. Cable abused its market power to raise consumer prices and prevent entry of new video distribution systems, like head-to-head (intramodal) competition from overbuilders and intermodal competition from new technologies like satellite (intermodal competition).

Today, cable operators and broadcasters team up to vigorously resist the entry of Internet-based competition and consumers still suffer from the billions of dollars of overcharges as a result. Internet-based cable operators like Filmon, who are the best hope for competition, qualify for the same compulsory license that wireline cable operators have used for four decades.

Keywords: Cable, Broadband, Market Structure, Market Power, Excess Profits