Megan McArdle argues today that "channel bundling" is not the problem with cable television. Instead, she says the problem is "that cable companies have cozy local monopolies because of a
combination of political influence, and the natural reluctance of
municipalities to tearing their streets up."
James Joyner responds that "For many of us, that monopoly advantage is offset by the availability
of multiple cable providers, multiple satellite providers, and the
launching of the long-awaited service from telephone companies via
fiber optic cable."
The situation has improved quite a bit in the last few years, primarily due to the proliferation of direct broadcast satellite (DirecTV and Dish, the former of which I used to subscribe to and the latter of which I currently subscribe to). However, in many respects the cable industry still operates in a monopolistic fashion.
I just moved to Georgia, and there seems to be more availability in the local areas, but for 22 years I lived in Huntsville/Madison Alabama, and in the vast majority of that metro area, you have exactly one choice for cable. It's either Knology or Comcast, but in most areas you can only get one. If you wanted to switch to the other, you simply can't.
Granted, both Dish and DirecTV are available, and they have been for several years. However, until these companies *very* recently started cutting deals with the local phone companies to offer service bundles, they really weren't price-compatible.
The biggest problem is that the FTC simply doesn't measure monopoly status correctly in the cable industry. It looks at what percentage of a given market (say, the Huntsville metro area) has access to a given provider. This is hands down the wrong measure. It doesn't matter that 45% of the population has access to one provider and 55% to the other, thus making them roughly equal (I'm pulling numbers out of my ass). The fact remains that 90% of the population still only has *one choice* for service.
Last time I checked, that's a monopoly.
Granted, in this case it's a rather bizarre monopoly that consists of more than one company. But still.
Not too long ago, congress forced telephone companies to open up their lines to competitors at wholesale rates so that other companies could offer service. The result has been an explosion of local phone companies, and phone rates have dropped through the floor. In 1998, I paid $30 a month for my local phone, plus $0.05 per minute for long distance. Now I pay $15 a month for a phone with unlimited local and long distance calling and caller ID. For another $5 a month I can add voicemail, and for another $10 I can get a second line - all for less than I used to pay for one local-only line.
Unfortunately, cable companies were explicitly exempted from this open access requirement. There's no telling what the steady state for cable rates and services would become if a similar process were enacted for cable, but I can guarantee you that your rates would drop across the board and your service would improve.
I'm not generally a big fan of government regulation, having a strong tendency toward libertarianism, but this is one case where the results clearly show that the regulation is a good thing all around.
