Date posted: April 15, 2014
The proposed merger between Comcast and Time Warner has rekindled questions about competition in the cable provider industry, says host Mary Walden. She asks her husband, N.C. State University economist Mike Walden, “What are the key issues?”
Mike Walden: Really, the key issue is whether there is effective competition in the cable provider industry. And, Mary, this has been an issue we’ve been talking about and the federal government’s been dealing with for decades, since the cable industry started. We’ve gone through phases where we’ve actually had cable rates regulated and then de-regulated and back to regulation, etcetera. And it really does come down to whether you can have effective competition. Now, on one side are those folks who say you can’t, because, once a company, let’s say, lays cable wires, no other company’s going to come in there and do it, because that’s a bigger expense upfront. The first company that gets there is going to become dominant. That’s the so-called natural monopoly argument, and therefore these folks say that cable rates and the cable industry must be heavily regulated because there is no effective competition. On the other side of the spectrum you have people saying, no, no, since we’ve had the development of the satellite, internet and TV provision — where you can catch satellite signal and obviously bring in your internet, your TV signals — that provides, they say, effective competition to the hard-wire cable, and therefore we don’t need regulations. So we’re going to hear this debate, I think, rekindled as the Comcast/Time Warner proposed merger is discussed. Again the federal government will have to sign off on that, and so we’re probably going to have a year of discussion back and forth. But this is a fast-changing market. There may be technologies out there that are going to cause this all to be different five or 10 years down the road. But this is really the source of the argument: How effective can we expect competition to be in cable provision?
Category: Economic Perspective