Regulation Fosters Market Inequities; Competition Fosters Innovation and Price Competitiveness
The Senate recently debated the effectiveness of the long-standing 1992 Cable Act, resulting from continued high-profile disputes over broadcaster and cable company carriage fees. These disputes have become increasingly uglier, leaving consumers program-less, trying to find alternatives in the midst of notorious blackouts. Most are ultimately resolved, but with a cost to consumers caught in the middle. Programming costs have continued a meteoric rise over the last decade as forced bundles and rate increases have impaired cable companies in efforts to stem overhead that must be passed on as consumer rate increases. (Senate Commerce Looks at Cable Act Overhaul)
As with any well-meaning regulatory action looking to off-set market inequities, most seem ill-fated to causing non-intended consequences in the balance of power from one market to another. Telecommunication markets have borne the brunt of legislative acts over the last two decades in creating some historical blunders. Both the Cable Television Consumer Protection and Competition Act and the more recent Telecommunications Act of 1996 have done the opposite to market dynamics as originally intended by congress. Instead of creating competition, as these legislative acts intended, the opposite occurred. Broadcasters realized retransmission fees were an alternative to ad revenues. CLEC’s seen that mergers were an answer to forced access to their telephone lines to eliminate competition.
Due to increased regulatory laws concerning telecommunication markets, as mentioned above, most companies seen an answer around those laws. Merge with competitors to become dominant market players. The result of becoming very large gives advantages in both product costs and consumer pricing metrics. Being dominate means demanding lower fees from suppliers and less competition results in higher retail pricing. This scenario is what lawmakers have inadvertently created as a direct result of regulating markets rather than supporting competitive entry into markets.
“These new methodologies became particularly useful for analyzing the loss of localized competition among sellers of differentiated products, the most common unilateral theory of adverse competitive effects of mergers,” Why Did The Antitrust Agencies Embrace Unilateral Effects? (Jonathan B. Baker, Mavericks, Mergers, and Exclusion: Proving Coordinated Competitive Effects under the Antitrust Laws)
In their latest effort to rein in large mergers, the rejection of AT&T-T-Mobile by the Department of Justice, along with the FCC has only moved dominate market companies to use alternative means to thwart competition. That is, create marketing partnerships along with critical asset sales to strengthen both parties in market dominance. It is a proposed merger without the actual signed documents and funds transfer.
Accordingly, the mandate for market oversight by regulating authorities, which should also include the FTC, must be a focus on creating fair and balanced equities, not inequities, which foster new market entrants. Its best bet is to provide those opportunities in broadband programming alternatives. It must also look into the strangle-hold of program access by incumbent service providers and programmers. Without access to adequate and equal program access by alternative service providers or OTT’s, any hopes of real competition will have little effect.
Oversight, Not Regulation
Regulation does not cure-all market ills, in and by itself. There must be true market oversight by regulators, who given the proper authority and resources, can foresee and correct market inequities before those inequities become insurmountable. This can be done without strenuous regulations which usually end up miserable failures. This must be done by controlling company market size and collusion, allowing competition to effectively foster market innovation and natural price controls.
photo courtesy: American Morning CNN HD screencap by mroach, on Flickr