Could Government Regulation Actually Help the Terrible Cable TV Market?

Guy watching cable television

My previous article discussed the most recent federal subsidies for home Internet service. This one outlines how local governments can increase broadband competition -- there’s quite a bit they can do -- and discusses whether the federal government could encourage better service with an “X-Prize.” An upcoming article will discuss wireless connection options and government activities around it.

Local Governments Can Encourage Competition

Cable TV may not be a natural monopoly, but they are granted government monopolies, as an exclusive license, in most cities or counties. Cable Internet uses the same rights-of-way as cable TV, so that same monopoly for cable companies extends to broadband, too.

The taxes associated with that exclusive license are very addicting for governments: if you can stand the sticker shock, look at your cable bill and see just how addicting. (Here in Los Angeles, it’s a 5% franchise fee plus a 1% PEG fee, though there’s a certain tension.)

There’s often a cozy relationship between the government regulators and the cable “government affairs” types. Unsurprisingly, legal and regulatory barriers spring up for would-be competitors: private power companies running fiber to homes; dark fiber companies who want to “overbuild” an area (power poles or underground); and others. The FCC cited this in their March 2015 “net neutrality” ruling.

There’s an important distinction to be teased out from the net neutrality oeuvre. The FCC conflated barriers for private-only buildouts with barriers for “public/private partnerships” -- municipalities, municipal utilities, non-profits who wish to partner with private companies (or, do the same with public or ratepayer monies only). Public/private is different from private, a distinction missed by most conservatives arguing about the “net neutrality” ruling. Some cities truly do have laws, impractical building permit requirements, foot-dragging, or other barriers to private investment in fiber buildouts.

Sunlight and actual competition are the best answer.

There are some movements countering this cozy arrangement. Gig.U, a non-profit concentrating on gigabit-to-the-home, encourages broadband competition at the local level. Their most recent report lays out details on how; this includes “Dig once”: some cities require all major underground projects to include fiber or conduit, some reserved for the city itself, and some for sale/lease to companies wishing to connect businesses or homes.

Right alongside, Gig.U talks about requiring accurate maps of all underground utilities; during the go-go dot-com fiber boom, hundreds of route-miles of fiber were installed and then lost when the installer (or a whole series of companies) went bust. Some have been re-discovered, others were trenched through during the next dig and destroyed.

Gig.U also talks extensively about public/private partnerships -- a good portion of their mission -- but don’t ignore this very readable report, or the underlying movement, as being entirely pro-government or cronyist.

Smart local regulation and deregulation can encourage competition for the cable companies and should be encouraged, often despite the anti-capitalist intentions of the regulators. Details matter on this, as does consumer involvement.

X-Prize for Linking Homes?

X-Projects and X-Prizes have reaped enormous benefits for America: post a reward or a contract for a well-defined goal, step back, judge the results, reward. That includes both public and private incentives, such as the Google Lunar X-Prize. Some have indisputable benefits: the DARPA Grand Challenge advanced the technology behind autonomous-drive vehicles by a decade at little cost to the taxpayer. Only the most capital-L Libertarian could object to that government expenditure.

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