The Entrepreneurial View #464
Gradually Unleashing Competition in Video Services
by Raymond J. Keating
Competition is a wonderful thing. The free market drives invention, innovation and efficiencies, which translate into increased value for consumers.
That's been the case in the telecommunications industry. Unfortunately, a key obstacle to expanded opportunities has been government regulation failing to keep up with technology.
For example, cable television, or video choice is at hand for businesses and residential consumers in technological terms, but local cable franchising requirements restrain competition and raise costs.
The process of gaining cable franchises municipality-by-municipality is a daunting and costly endeavor. And the first concern for many local politicians is not always the consumer, but instead, is to squeeze video providers for more revenue and other proceeds.
Indeed, the costs of such political delays are significant. In early 2006, the Phoenix Center for Advanced Legal and Economic Public Policy Studies estimated that for each year that local franchise requirements delay video competition costs U.S. consumers $8.2 billion.
The good news is that there has been positive movement in a good number of states. The TV4US organization reported in early December: "Seventeen states across the nation have passed video reform legislation in the past two years and are beginning to reap the benefits of competition - cost savings, technological advances, better customer service and increased investment in their states. A survey by Bank of America Equity Research in 2006 found that in areas where cable companies have to compete, prices for video service are between 28 percent and 42 percent lower than they are in areas without competition."
That makes sense. Competition works.
On December 21, Wisconsin joined the states that have replaced local cable franchising with a statetwide video franchising process when Governor Jim Doyle signed legislation passed by state lawmakers. Doyle correctly noted: "By opening the door to cable competition in Wisconsin we should see expanded services to consumers and more investments in communications technologies and infrastructure in the state." Both residential and business customers will reap the rewards of expanded video competition.
However, in Tennessee, the 2007 story was different. Lawmakers were unable to pass the "Competitive Cable and Video Services Act." But in a November 29 Chattanooga Times Free Press article reporting on a cable price hike also noted that the fight for statewide video franchising should "resume in the General Assembly in January."
It is a straightforward choice for lawmakers in Tennessee, as well as in some thirty other states. Either leave the burdensome costs of municipality-by-municipality cable franchising in effect, or pass legislation for statewide franchising that will spread the benefits of competition. The quicker the move to video competition, the better it will be for consumers, businesses and the state's economy.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
This article may be reprinted with appropriate citation and credit.
