A Weak Argument against Franchise Reform

by on January 4, 2007

I found this post, from our friends over at Public Knowledge, rather puzzling. Art Brodsky thinks that the FCC’s decision to mandate that local franchise authorities approve franchise requests within 90 days “won’t help consumers.” But after reading his post twice, his argument strikes me as underwhelming. He acknowledges that…

There’s general agreement in principle that competition can benefit consumers. In the rare examples so far of competition in video, the over-priced cable services have had to lower their rates to compete with telephone company entrants. A cynic might say that over time, as telephone companies enter the market, that a nice, comfy duopoly will settle in and price decreases will moderate. For now, the idea of cable having some serious competition is good.

So what’s the problem? He notes that the FCC may have exceeded its authority, which is an important point but hardly evidence that the proposal is harmful to consumers. The real meat of his objection seems to be that…

There’s no guarantee competition will take place, or where. Even with the speeded up franchising, there’s no requirement that the newly enfranchised telephone company make certain that an entire county or city have access to the best and latest technology. Some areas, probably affluent ones, will get competition, others won’t.

This argument strikes me as wrongheaded for a couple of reasons. In the first place, it’s not clear to me that the premise is right. For a poor family, cable is an affordable entertainment option when compared to the alternatives. You can entertain an entire family for a month for about $40, which these days will barely buy a family of four a night at the movies, to say nothing of a football game, play, dinner at a nice restaurant, etc. I seem to recall reading (although I can’t find it at the moment) that subscription rates in poor households are about the same or a little higher than subscription rates in richer households.

But even if Brodsky is right that wealthy households will get competition first under franchise reform, how does preserving the status quo improve matters? The alternative isn’t that everyone will get competition instantaneously. The alternative is a drawn-out process of negotiation that more likely than not will lead to almost everyone getting competition more slowly than otherwise. Shafting all consumers equally hardly seems like a laudable goal.

Finally, it seems likely that even those households that don’t immediately get offered a new video option will benefit from the price wars that are likely to break out if their neighbors are offered service. The local cable monopoly won’t know who will get offered the new video service first, so they’re likely to move preemptively, offering everyone in a given market special rates to lock them in before the competition arrives.

The weirdest thing about this is that this is the same organization that’s desperate for new regulation to solve a problem–network discrimination–that’s almost entirely hypothetical. Yet faced with an easy way to solve a real problem that affects consumers right now–the lack of video competition–they aren’t interested. Even stranger, Brodsky himself has lamented the slow speed of US broadband services. Given that the rollout of IPTV services will likely be accompanied by fatter broadband pipes (since both services will require high-speed fiber lines), I find Brodsky’s lack of enthusiasm for franchise reform particularly puzzling.

Comments on this entry are closed.

Previous post:

Next post: