I remember a conversation I had with a friend back in 2007. At the time she was very frustrated with her service from DirecTV. She said that every time it’s raining windy, and sometimes for no reason at all, she didn’t get a good picture on her TV. Whenever she calls the company to fix it, she would sometimes have to wait 2 days for a serviceman to come around and would essentially be without TV during that time (tragic, I know). But she paid her bill on time and thought she deserved better service. I can remember this like it was yesterday. She told me that she was so frustrated with DirecTV that she was considering the unthinkable! She was considering a switch over to Comcast!
My guess is that just about everyone reading this thought, “Ok, what’s the big deal? She is changing service providers”. But in her mind this was a huge deal. See, in her mind Comcast was evil. She told me she was having a real moral struggle because Comcast was an overpriced monopoly in the Philadelphia area and she did not want to support them. She’d rather, as she put it, help out the little guy. I had a real opportunity to get her going and really make her mad. But through my experience growing up with 4 sisters, I have a good idea when I shouldn’t push any buttons. So I just said, “Maybe you’ll pay a little more for Comcast, but at least you won’t lose your television every couple of weeks. Well, long story short, I spoke to her a few weeks later and she told me she begrudgingly switched to Comcast, but had to admit, she likes the consistent picture. Well not that long after this conversation took place Verizon released Fios. No one in their right mind would think that Comcast, now Xfinity, has a monopoly in this market, yet no anti-trust lawsuit took place.
What originally got me thinking about cable television and monopolies was an article read earlier today about the Viacom antitrust lawsuit. I’m pretty sure everyone is a little annoyed that in order to have access to a few channels you want, you have to order several you don’t want. I probably watch about 10 channels on TV, yet I pay for well over 100.If I want to watch ESPN and ESPN2, I also have to order the NASCAR channel and Lifetime. Unfortunately, that’s just the product my cable company offers me. I could have paid less, but I wouldn’t have ESPN2 if I did. I, like everyone else who pays for the extra channels, decided the extra money was worth ESPN2.
The other issue that comes up here is that Cablevision, just like Xfinity and Fios, all entered into multi-year contracts with Viacom and their competitors. They knew up front what they were getting into, and suddenly they want to change. How does that make Viacom the bad guy? If you don’t want the raisins, don’t agree to buy the trail mix. But I’ll take it a step further. What if they did offer their TV stations a la carte? What if I order ESPN, but I don’t like all the programs on it? Why should I pay for the programs that are on TV when I am at work and will never watch them? If I don’t like the professional bowling they air on weekends, why do I have to pay for it? We can even go beyond that. What if I don’t like certain personalities on ESPN. Maybe I like Stuart Scott but not Michael Wilbon. Why should I have to pay to list to Wilbon? The answer is the same reason I have to pay for TV stations I’ll never watch. Shouldn’t the owners of TV stations and cable companies be allowed to agree to terms of a contract?
This case will go through the courts and probably take forever and by the time it is all over, there will be no monopoly, just like the IBM antitrust lawsuit in the 1969. That case dragged on forever and eventually the judge dropped the case citing “no merit”. IBM no longer had a monopoly. How could this happen with cable TV?
I’ll add a little more anecdotal evidence. I had similar conversations with two separate people, on two separate occasions. They were both considering dropping cable completely and only using Hulu Plus and Netflix. Both people were tired of paying for channels they do not watch and thought they could save money going with an alternative. The fact that I heard this twice means there are others thinking about it too. It is only a matter of time until the free market finds a way to get the public what they want. Either the cable companies will break up their products, Netflix will come up with a new innovation, or a totally new product will take over.
Does anyone remember RIM’s Blackberry and the monopoly they had on the business cell phone market? How about Samsung making a run at the iPhone? Monopolies that aren’t government-created come about by offering the best products or services at the best prices. Once they get monopoly power, they can charge higher prices. The higher prices bring entrepreneurs and innovation in the market because people believe they can do a better job at less of a cost. That’s the magic of the market. By the time an antitrust lawsuit comes along, it is usually too late.
God Bless Freedom, Liberty, and Personal Property,
Slappy Jones II