Deregulation Spurs Variety in TV Content and Price

From Mercatus.

"It is common for tech journalists and media scholars to decry so-called cable monopolies. Few, however, acknowledge the source of competitive problems for TV and Internet service: poor government policy. For decades, city, state, and federal governments encouraged local cable TV monopolies with restrictive regulations that kept competition out. Despite that, there is now an abundance of content in television programming for subscribers, as policies have changed and competition has increased. Today, TV distributors like phone companies (telcos), cable companies, and satellite companies spend billions annually to purchase content and improve their networks. Pay TV or “multichannel video programming distributor” (MVPD) are the regulators’ terms for what most consumers call cable or satellite television.

The chart uses Federal Communications Commission data for the years 1994 to 2003 and industry data from 2004 to 2014 to show market share of the three major types of MVPDs—cable TV, satellite TV, and telco TV. Satellite TV providers like Dish Network and DirecTV have slowly eroded cable market share since the early 1990s and now possess over one-third of pay TV subscribers. Telephone companies in the mid-2000s began to upgrade their phone networks to support TV viewing and now, a decade later, serve over 13 percent of TV subscribers. Market share of cable companies has declined to 53 percent today from over 95 percent in the mid-1990s as consumers choose to switch to cable’s competitors.

For decades, regulators believed that pay TV was a natural monopoly. Therefore, cities across the country gave exclusive construction contracts to cable TV companies in order to ensure networks were built and to extract favors like public access channels. Further, Congress largely prohibited telephone companies from providing TV service even though phone companies had already wired most US homes for voice service. In the 1990s, satellite TV started attracting large numbers of TV subscribers owing to a combination of deregulatory satellite policy and improvements in technology. Theories of natural monopoly fell away and in 1996 Congress finally permitted phone companies to provide TV. Telco TV did not gain measurable market share until the mid-2000s, however, when the FCC freed telephone companies from regulations like “unbundling” rules that forced phone companies to sell their lines to competitors at regulated rates. In the investment-friendly regulatory environment after deregulation, telcos upgraded their networks and began to offer TV. Verizon’s FiOS, AT&T’s U-verse, and CenturyLink’s Prism TV are all examples. Today, consumers benefit from an increasingly competitive TV (and Internet) marketplace, both in variety of content and in competition over price.

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