[ NNSquad ] Re: Fight over municipal broadband rules in North Carolina

Jerry -- yes -- my point about exclusive franchises does not change the facts about the market power exercised by the cable and telco incumbents. Cable service was a monopoly almost everywhere until the telephone companies entered. Now it's a duopoly over a fair part of the country, but it's very rare to have more than two providers available to any given customer. As you point out, there are a number of reasons for this, including the various techniques used by incumbents to prevent entry by competitors. (I found Tim Wu's The Master Switch a very illuminating account of the history in this area.) I was concerned to rebut the common assumption, frequently perpetuated by the industry, that local governments are the roadblock. But that doesn't mean we can ignore the incumbents' market power.

Rick

From: Jerry Leichter [mailto:leichter@lrw.com]
Sent: Saturday, March 19, 2011 9:42 AM
To: Ellrod, Rick E.
Cc: nnsquad@nnsquad.org
Subject: [ NNSquad ] Re: nnsquad Digest, Vol 5, Issue 85

From: "Ellrod, Rick E." <Frederick.Ellrod@fairfaxcounty.gov>

Date: March 17, 2011 3:38:52 PM EDT

To: "Richard Bennett" <richard@bennett.com>

Cc: nnsquad@nnsquad.org

Subject: [ NNSquad ] Re: Fight over municipal broadband rules in North Carolina

Richard -- In this case, the authors of The Free Dictionary are mistaken. (As I said, it's a common misunderstanding.) I've worked with local cable franchises for close to twenty years, and I've seen few if any that were exclusive, even among those dating from before 1992.

To be sure, it was a common assumption in those days that cable was a "natural monopoly." The economics of the business, and what the trade press has called a "gentleman's agreement" among the early multiple system operators, generally discouraged competitive entry. But if one looks at the actual documents, one finds that the franchise agreements and ordinances were not written to forbid possible competition....

OK, I'll take your word on the what the franchise language says. The really interesting question is how this works in the real world. What fraction of the US population has a choice of even two cable providers? I've personally never been any place where this is true, but that doesn't mean it isn't happening. But if it isn't happening widely, then we need to treat cable as it actually is, a monopoly (or at best a tight oligopoly, along with maybe one Telco and partial competition - no Internet - from satellite).

Note that we have a long history of incumbents in the cable/Internet industry finding ways to frustrate the entrance of competitors even when they had no legally sanctioned exclusivity. At one time, Telcos were required to allow independent ISP's to use their DSL. There was widespread evidence of foot-dragging in provisioning, of "accidental" disconnections, and of other behavior that made the independents look bad and increased their costs. Many years ago, I lived in an apartment building with a central OTA antenna. One day, the local cable company offered service in the building - and somehow, "by accident", the central antenna got disconnected. (I reconnected it. Many of my neighbors were older retired people who really didn't need the sudden extra expense.) Until the practice was banned not so long ago, cable companies cut agreements with new housing developments to require all residents to sign up for cable - or at least to forbid alternatives, like satellite dishes. Again, one needs to look at the reality on the ground, not just at the legalese.

There was a brief moment of light a couple of years back when Verizon started to build out FIOS service in AT&T (U-verse or otherwise) areas. Where I live in Connecticut, I'm maybe 2 miles from Verizon FIOS territory in one direction, maybe 15-20 miles in another. I hoped I might eventually get FIOS offered. No such luck - Verizon has pretty much completely stopped expanding FIOS. It's U-verse or Optimum. (By the way, the local cable companies fought long and hard to slow down U-verse. They liked their previous monopolies. Cable vs. AT&T: Now there's a clash that brings out the money and the big political and legal hitters.)

-- Jerry