Study: Franchising costs consumers over $10 billion annually

by on February 14, 2006 · 6 comments

Jerry Ellig and I have been working on a study of cable franchising for the Mercatus Center that looks at the cost of franchising to consumers and what the FCC, Congress, and the states can and should do about it. Yesterday we released the bulk of it as a comment to the FCC’s franchising proceeding and as testimony to the Senate Commerce Committee, which will hold a hearing on the issue tomorrow. So if you’d like a sneak peek at the full study, check out our FCC comment as well as our Congressional testimony (PDF), which has legislative recommendations that aren’t in the comment. Our main conclusions:

  • Cable franchising costs consumers over $10 billion annually in higher prices and forgone benefits. By constraining competition, local video franchising imposes significant costs on two groups of consumers. Current cable subscribers pay higher prices than they would pay if there were competition, and potential customers forego cable TV service because they believe it is too expensive at current prices.
  • The FCC has the authority to preempt local franchising authority practices that act as barriers to entry and should do so.
  • An even better solution would be for Congress or the states to get rid of franchising altogether or streamline it as Texas has done.

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