Can Someone Explain The Rationale For Capping Cable Growth?

from the capping-cable dept

FCC Chairman Kevin Martin is looking to reinstate a national cap on cable ownership, which would bar any one firm from serving more than 30 percent of the U.S. subscriber base. (A similar rule was thrown out by the courts back in 2001.)

The rationale for a national cap has always been a bit opaque to me. Because cable is geographically constrained, from a consumer perspective, all that matters is the market power my provider can exercise locally. If I've got three regional cable providers to choose from, it makes no difference whether two of them each hold a 40 percent national share. If I've got only one serving my area, the fact that it only controls 3 percent of the national market is similarly irrelevant. And if I'm in the latter boat, declaring that the largest firms with the most resources are forbidden to expand their operations into my neighborhood scarcely seems calculated to increase my access to alternatives. The FCC cites regional consolidation as a motive for the cap, but if cable providers are gunning for such regional monopolies, then won't they divest first in the regions where they do face competition, and hold on to the areas where they're the lone option?

It also seems a little perverse to introduce such limits just as consumers are finally starting to experience more robust choice in premium video. According to The Wall Street Journal, satellite now holds 30 percent of the pay-TV market. And despite some rocky first steps, phone companies are ramping up to aggressively expand IPTV over the next few years. Racing in to rescue viewers from monopoly now is, if not technically "ironic," then at least close enough to meet the Alanis Morissette definition.

Filed Under: cable, fcc, growth, monopolies

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  1. identicon
    DG Lewis, 4 Dec 2007 @ 7:43am

    Re: Re:

    FiOS can be installed in multi-family dwellings. In townhouses and the like, VZ will pull fiber to the same point at which it currently terminates the copper (an NT on the outside of the unit) and use existing inside wiring (coax and twisted pair) for video, data (using MOCA) and voice. In high-rise apartments and the like, where the copper typically terminates in a basement wiring closet and the inside wiring isn't suitable for this topology, VZ can either cut a deal with the building owner to pull fiber up the riser to a wiring closet on each floor and install the ONT there, or can drop a multi-unit ONT in the basement wiring closet and use VDSL2 and coax to get to the individual units. Just because it's not being widely offered today doesn't mean it "cannot" be offered.

    In many new housing developments, VZ is pulling fiber before the houses go up. In others, it's going back and trenching. Most new housing developments have underground utilities, and once the municipality allows the utility a ROW, it can't prevent them from going back and pulling new plant.

    Private subdivisions (i.e., "gated communities") are a different story; they can limit utility access, sign exclusive deals with a particular provider, etc. And those kinds of deals typically lead to homeowner dissatisfaction (and a decline in housing values) which either leads to changes in the terms of the deal or breaks the deal. Plus, VZ will compete for those exclusive deals as much as will the cablecos and any other provider.

    Most hotels, actually, have satellite service, not cable.

    In the long run, fixed-line communications (telephone, internet, video) will basically be a duopoly, with telcos and cablecos splitting a market roughly down the middle (40%-60% each). Satellite will keep 10%-20% of video, and there will be 10%-20% "cherrypickers" who will pick and choose individual services from the various providers (including second-tier providers like Vonage); but in a given market, FiOS triple-play market share will approach 40%-50% in the long run (10 years).

    On the other hand, VZ is only planning to pass about 47% of their households with FiOS, and VZ only has about 40M households in their service territory (out of about 110M nationwide) -- so even at 50% share of FiOS HHP in-region, that's less than 10% of the national video market.

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