Benefits of Video Choice and Competition
Too often, politicians have a difficult time keeping up with changes in the marketplace. Unfortunately, that can wind up being quite costly for businesses and consumers.
Consider cable television/video services, for example. Technological advancements have made competition possible. However, only four percent of U.S. households have more than one choice for wired video services, according to the TV4US Coalition.
What's the problem? Way too much regulation.
More than 33,000 local governmental bodies regulate cable television franchising across the nation. Is there a good reason for this massive regulatory web? It certainly is not about economics. Instead, this is a matter of political power and turf. Municipality-by-municipality franchising best serves politicians seeking to extract payola - in one form or another - from telecom companies looking to compete.
This process naturally delays choice for consumers. Imagine the horror of having to deal with some 33,000 separate bodies of politicians, bureaucrats and regulators in order to expand your business.
Costs, of course, dramatically rise. The Phoenix Center for Advanced Legal & Economic Public Policy Studies has estimated that local government approvals for video services cost consumers $8.2 billion this year, with that estimate rising to nearly $30 billion after four years.
This should be an economic no-brainer for policymakers. After all, competition spurs innovation, promotes quality and better service, and lowers prices.
Fortunately, there are examples of enlightened officials who already have moved to expand video competition. Take California. In late September, Governor Arnold Schwarzenegger signed legislation that eliminated municipality-by-municipality franchising in favor of a statewide permit to deliver Internet and television services to both homes and businesses. Earlier this year, Yale Braustein, an economics professor in the School of Information at UC Berkeley, projected that competition would reduce cable television subscription prices by 15% to 22% in the state.
Reuters reported that Verizon Communications planned to expand its fiber-optic network in California, and AT&T looked to invest up to $1 billion in its network and launch an Internet-protocol video entertainment service. The Los Angeles Times noted that both companies will start competing to sell pay television services next year.
Consider what the Asbury Park Press editorial page had to say on November 25 about developments in New Jersey: "Cablevision's announcement last week that its telephone and Internet service prices will remain unchanged for the second straight year and its cable television prices will rise just 1.1 percent in 2007 proves that competition works for the consumer... With a state law approved in August designed to boost cable competition and reduce rates, Verizon is set to give consumers their first opportunity to choose cable companies. It's about time."
The Savannah News in Georgia noted last week (November 28) that lawmakers in South Carolina, North Carolina and Virginia moved to statewide video service franchising earlier this year, and the same is under consideration in Georgia. A spokesman for BellSouth noted that to roll out television service in Georgia under the current city-by-city system, the company would have to get franchises from 690 governments, which could take up to 15 years.
James Glassman reported in the September 28 Wall Street Journal that the American Consumer Institute found that statewide franchising in Texas last year resulted in 22% of consumers switching cable TV providers, with savings averaging $22.30 per month.
In the end, competition works. Therefore, removing government regulatory barriers to competition benefits consumers - including countless small businesses that use various broadband services - and the economy.
However, there are efforts under way to muck up even this straightforward pro-competition, deregulatory reform effort by mixing in new regulations. In Michigan, for example, a pro-competition effort to streamline cable television franchising could be spoiled by an effort to add-in "net neutrality" regulations.
Net neutrality often sounds nice, but it is nothing more than government dictating how Internet service providers, content providers and consumers interact. Has government intervention in setting prices and terms of business ever turned out well? No. So, an effort to boost competition and services, and reduce costs, would be undermined by net neutrality regulations that inhibit innovation.
It's best to let businesses compete, and consumers decide what works and what does not. That means a big thumbs up for streamlining the regulatory process to expand video/cable television competition and choice - preferably at the federal level to reflect the national nature of the telecommunications market - and a big thumbs down to government interference through net neutrality regulation.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
