Cable Regulation in the Internet Era

Gregory S. Crawford

Chapter in NBER book Economic Regulation and Its Reform: What Have We Learned? (2014), Nancy L. Rose, editor (p. 137 - 193)
Conference held September 9-10, 2005
Published in June 2014 by University of Chicago Press
© 2014 by the National Bureau of Economic Research

The market for multi-channel video programming (MVPD) has undergone considerable change in the last 15 years. Telephone operators ("telcos") have entered in some parts of the U.S. and online video distributors are a growing source of television viewing. Direct-Broadcast Satellite service, spurred by 1999 legislation that leveled the playing field with cable television systems, has grown from 3% to 33% of the combined U.S. MVPD (cable, satellite, and telco video) market. This chapter considers cable television regulation in light of these developments. It first surveys the empirical record on the effects of price regulation in U.S. cable markets across the four major periods of regulation and deregulation, with particular focus on potential price and quality tradeoffs. The evidence suggests that unregulated periods exhibit rapid increases in quality and penetration (and prices), while regulated periods exhibit slight decreases in prices and possibly lower quality. Consumer welfare estimates, while few, suggest consumers prefer unregulated cable services. The chapter next reviews the incomplete evidence on competition between cable operators, and between cable and satellite or telco providers. It concludes with consideration of four open issues in cable markets: horizontal concentration and vertical integration in the programming market, bundling by both cable systems and programmers, online video distribution, and temporary programming blackouts from failed carriage negotiations for both broadcast and cable programming. While the distribution market is clearly now more competitive, concerns in each of these areas remain.

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