A Little Competition Might Help LA’s Cable TV Prices

But there is one monopoly that's become so entrenched that we take it for granted. We've forgotten how we lost the battle to regulate -- and thereby control prices -- on cable television providers. 

Back in the 1980s and '90s. there was a lot of discussion about the development of the new cable television industry. In a large part of the American land mass, there weren't many television stations available to the average viewer using an average roof-top antenna. If you lived in a mid-sized midwestern city or somewhere in eastern California, you might have one local station and, with luck, you might also be able to pick up a station in Indianapolis or Bakersfield or Oklahoma City -- if there wasn't a thunderstorm in between. 

The advent of local cable companies offered some improvement. I know that some philosophers will challenge the idea that offering more television is an improvement, but I'll go with consumer demand as the metric for the purpose of this discussion. All of a sudden, the consumer could pay $5 a month and get stations from Chicago, Indi, and perhaps even Cincinnati, not to mention a home page with the current temperature and weather prediction. 

The important point in that era was that the local governing body (the City Council or the county Board of Supervisors) could negotiate with the company for the franchise rights. Some franchise agreements provided for the possibility that a second company could put up its lines in direct competition, but I think everybody understood that this wouldn't happen. After all, there were lots of towns without cable service, so it made more sense from the business standpoint for each company to find and develop its own geographic monopoly. No other company was going to attempt to horn in, as it would be financially ruinous for the newcomer and damaging to the existing company. 

That left the customers at the mercy of the cable company except for one thing. At that point in time, local governments had some say over pricing. If nothing else, they could threaten to refuse to renew the franchise contract if the customers were abused. At the least, there was some give and take as the franchise contract came up for renewal. 

Within a few years, the congress rescued the cable industry from even this level of local control. The industry was effectively deregulated, and everyone knows how that turned out. Cable bills went from a few dollars a month to dozens and then nearly a hundred dollars a month. 

With this deregulation came another issue. Maybe you wanted HBO but didn't really want a full package of lacrosse and minor league soccer. Too bad. You were offered set packages (tiers) and it was take it or leave it. That's one way for the cable company to increase its gross income across the board. 

In short, the cable companies held monopolies, and it was either take the whole expensive package or go without. This was before the advent of rooftop satellite dishes. 

Nowadays there is a minimal sort of competition, what with satellite dishes and the phone company's internet lines. But for the most part, the bulk of the customer base belongs to the cable tv companies, and they have pretty much of a strangle hold on the pricing side of the business. Sure, you can leave cable and go to a dish system, but the cable monopoly does not provide a lot of price competition for the dish side of the equation. Instead, the dish providers seem to be taking advantage of the level of cable prices to keep their own prices fairly high. 

Suppose we could go back to the days when the City Council or the Board of Supervisors held sway (or whatever other governing authority we were to create by ballot measure)? Suppose we could have some bargaining authority in what we pay. 

We ought to have that ability. A newly elected congress and president dedicated to consumer rights would treat this subject differently than the current Senate. OK, I'm not that optimistic about how even a Democratic government would stand up to the telecommunications giants. We all know that Democrats take campaign contributions and meet with lobbyists too. But a gradual shift in the way that the American people view government would ultimately lead to some shift in the balance of power. 

How would this work out in practice? One possibility is that the city of Los Angeles could offer cable tv franchises through a bidding process. Let the cable tv companies -- the giants and startups alike -- bid against each other for the right to our business, with price and quality being coequal. 

In the same way that workers ought to have bargaining power when dealing with their employers, consumers of public goods ought to have somebody bargaining on their behalf. Whether a new generation of trust busters would do the job, or whether some other form of renewed regulation of the cable tv industry would provide for consumer relief, it's long since time to take action. 

(Bob Gelfand writes on science, culture, and politics for CityWatch. He can be reached at [email protected])

-cw