July 23, 2005

In HBO We Anti-Trust

by Armen

The formerly Christian cable company Adelphia is about to be gobbled up by Time-Warner and Comcast. (I say formerly because the Rigas family, which removed Playboy and Spice on account of its religious beliefs now sits in prison for robbing millions of people). There are some who object to the deal. The basis for their objections is that Time-Warner (co-parent company of Earth, along with Microsoft) and Comcast would have monopolistic powers and harm consumer choice...blah blah blah.

My question is, how the hell can a cable company have monopolistic powers when the entire industry operates AS A MONOPOLY. There may be some ardent libertarians who can find choice of cable company providers in where someone chooses to live, but I really don't think anyone seriously considers moving out in order to save $3 on their cable bill. More specifically, neighborhoods are carved up and served to the Big Three Two with one cable company devouring each region, thereby depriving everyone in that region of choice (of which predator to succomb to). The only meaningful choice comes from satellite providers, but that tells me nothing about monopoly among cable carriers...or how the creation of one on the macro level will be any different or change anything in an enviornment that's built on a monopoly at the micro level.

I just hope I get HBO 5,388 for less than the price of a mob hit.

July 23, 2005 12:56 AM | TrackBack

"My question is, how the hell can a cable company have monopolistic powers when the entire industry operates AS A MONOPOLY."

You're forgetting about vertical integration (e.g., Time Warner is both the cable company AND HBO) and monopsony power (i.e., not only few sellers, but also few buyers -- of content, for example).

Not that I'm a fan of antitrust, mind you...

Posted by: KipEsquire at July 23, 2005 07:38 AM

The consumer choice in this industry, such as it is, is made at the city or county level, when the local authority decides which company will receive the franchise for that area. I can't imagine that that's a terribly competitive process even now, but cutting out one major player and giving its markets to the two biggest survivors arguably narrows that choice.

Posted by: Tom T. at July 23, 2005 10:41 AM

I approached the HBO thing in a very snide way in the title and the last line, but didn't really consider the implications. Good point. Though I confess, I fall on the other side of anti-trust. I think I should be able to get either comcast or time-warner in any neighborhood.

Oh and I don't understand (and this is the libertarian in me peaking out) why they don't offer a per channel service. Clearly they can do this with premium channels, why not with all the others? I really don't want Discovery Health...but Court TV????

Posted by: Armen at July 23, 2005 10:45 AM

As always in Antitrust, the relevant market is the key. And the relevant market here is _not_ "cable TV providers." It's the market of providers of Video Broadcasters -- cable _and_ satellite providers.

Also, you must not be aware of this, but several larger cities have "overbuilders," upstart cable companies that build their own cable lines in certain neighborhoods & then compete with the big guy -- Starpower/RCN in DC does that (I used them for two years, getting my digital cable, phone & internet from there, and they were great).

So the nationwide market for Video Service providers goes from X to X-1. I can't say what X equals, but it's probably about 5 or 6 -- Dish & DirecTV as the two satellite options, and then Comcast, Time Warner, Adelphia & whatever other cable companies still remain (overbuilders like Starpower are not, as yet, a true competitive threat, but they do exist & help keep the market competitive at the margins).

Also, probably the important market here from the Antitrust perspective is that for the buying of programming/content -- _not_ the provision of video services to consumers. Suddenly the providers of content have only X-1 (say, 4) instead of X (5) potential buyers of their product (a new channel, or whatever). Collusion among the remaining providers is much easier and more likely. Legally sufficient to support a blocked merger? Well, when the Dish Network wanted to buy DirecTV in 2002, the DOJ moved to block & succeeded, arguing mostly on a 3-to-2 market player reduction in markets nationwide (cable co vs. 1 Satellite broadcaster, where there had been 2).

Posted by: J at July 23, 2005 10:29 PM

The cable providers claim that per-channel pricing would end up being more expensive and would kill off the smaller channels. On the other hand, the channel that costs the providers (and thus the viewers) the most by far is ESPN, so it's not clear whether the big-station viewers are subsidizing the small stations or vice-versa. Who knows what's accurate; it's in every player's interest to keep their pricing opaque.

And Discovery Health has great stuff on it lately, like Medical Incredibles, or Strictly Sex with Dr. Drew. It's not all plastic surgery and pregnancy any more.

Posted by: Tom T. at July 25, 2005 12:21 AM

Yeah but Court TV has "Cops" and NO MORE NANCY GRACE!!!!!

J, I appreciate the remarks, though I need time to digest.

Posted by: Armen at July 25, 2005 12:28 PM
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